Genworth Financial

2020 
Annual 
Report

Genworth Financial, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended December 31, 2020
OR

For the transition period from

to

Commission file number 001-32195

GENWORTH FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
6620 West Broad Street
Richmond, Virginia
(Address of principal executive offices)

80-0873306
(I.R.S. Employer
Identification No.)

23230
(Zip Code)

(804) 281-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act

Title of Each Class

Class A Common Stock,
par value $.001 per share

Trading
Symbol

GNW

Name of each exchange
on which registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes È No ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Non-accelerated filer ‘

Accelerated filer
‘
Smaller reporting company ‘
Emerging growth company ‘

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. È

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
As of February 17, 2021, 505,794,485 shares of Class A Common Stock, par value $0.001 per share were outstanding.
The aggregate market value of the common equity (based on the closing price of the Class A Common Stock on the New York Stock
Exchange) held by non-affiliates of the registrant on June 30, 2020, the last business day of the registrant’s most recently completed second fiscal
quarter, was approximately $1.2 billion. All executive officers and directors of the registrant have been deemed, solely for the purpose of the
foregoing calculation, to be “affiliates” of the registrant.

Certain portions of the registrant’s definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 in connection

with the 2021 annual meeting of the registrant’s stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

Table of Contents

Cautionary Note Regarding Forward-looking Statements

PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

4
47
85
85
85
85

86
87
88
179
185
328
328
330

331
335

335
335
335

PART IV
Item 15. Exhibits and Financial Statement Schedules

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

336

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial

Condition and Results of Operations, 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 our future business and

financial performance. Examples of forward-looking statements include statements we make relating to the

potential termination, extension or closing of the transaction with China Oceanwide Holdings Group Co., Ltd.

(together with its affiliates, “China Oceanwide”), China Oceanwide’s funding plans and regulatory approvals in

the event an extension is pursued, actions we may take to align our expense structure with anticipated business

needs and transactions we are pursuing to address our near-term liabilities and financial obligations, which may

include additional debt financing and/or transactions to sell a percentage of our ownership interests in our

mortgage insurance businesses, as well as statements we make regarding the potential impacts of the coronavirus

pandemic (“COVID-19”). 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 from those in the forward-looking statements due to

global political, economic, business, competitive, market, regulatory and other factors and risks, including but

not limited to, the items identified under “Part I—Item 1A—Risk Factors.” We therefore caution you against

relying on any forward-looking statements.

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new

information, future developments or otherwise.

2

3

Table of Contents

Cautionary Note Regarding Forward-looking Statements

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Item 3.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 8.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . .

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . .

Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART I

PART II

PART III

PART IV

Page

4

47

85

85

85

85

86

87

88

179

185

328

328

330

331

335

335

335

335

Item 15. Exhibits and Financial Statement Schedules

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

336

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial
Condition and Results of Operations, 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 our future business and
financial performance. Examples of forward-looking statements include statements we make relating to the
potential termination, extension or closing of the transaction with China Oceanwide Holdings Group Co., Ltd.
(together with its affiliates, “China Oceanwide”), China Oceanwide’s funding plans and regulatory approvals in
the event an extension is pursued, actions we may take to align our expense structure with anticipated business
needs and transactions we are pursuing to address our near-term liabilities and financial obligations, which may
include additional debt financing and/or transactions to sell a percentage of our ownership interests in our
mortgage insurance businesses, as well as statements we make regarding the potential impacts of the coronavirus
pandemic (“COVID-19”). 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 from those in the forward-looking statements due to
global political, economic, business, competitive, market, regulatory and other factors and risks, including but
not limited to, the items identified under “Part I—Item 1A—Risk Factors.” We therefore caution you against
relying on any forward-looking statements.

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new

information, future developments or otherwise.

2

3

In this Annual Report on Form 10-K, unless the context otherwise requires, “Genworth Financial,”

“Genworth,” the “Company,” “we,” “us” and “our” refer to Genworth Financial, Inc. and its subsidiaries.

PART I

Item 1. Business

Strategic Update

We continue to focus on evaluating and executing alternative strategic plans to raise liquidity to address our

September 2021 debt maturity, other near-term liabilities and financial obligations and maximize shareholder
value. Our plans build on actions we have taken over the last several years to strengthen our financial position,
including the sale of Genworth MI Canada Inc. (“Genworth Canada”), our former Canada mortgage insurance
business, the completion of a debt offering through our wholly-owned U.S. mortgage insurance subsidiary,
Genworth Mortgage Holdings, Inc. (“GMHI”), and the settlement agreement reached with AXA S.A. (“AXA”).

We remain focused on preparing for a potential partial initial public offering (“IPO”) of our U.S. mortgage
insurance business, subject to market conditions as well as the satisfaction of various conditions and approvals.
We also remain open to other potential strategic alternatives pertaining to our mortgage insurance businesses and
other alternatives to address our upcoming holding company debt and financial obligations in 2021 and 2022. In
assessing our strategic options, we are considering, among other factors, the level of, and restrictions contained
in, our existing indebtedness, tax considerations, the views of regulators and rating agencies, and the
performance and prospects of our businesses. In addition, we are taking steps to align our expense structure with
our reduced business activities. Expense reduction initiatives completed to date are anticipated to result in
annualized savings of approximately $50 million.

China Oceanwide Transaction

On October 21, 2016, Genworth Financial, Inc. (“Genworth”) entered into an agreement and plan of merger

(the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company
incorporated in the People’s Republic of China and a subsidiary of China Oceanwide, and Asia Pacific Global
Capital USA Corporation (“Merger Sub”), a Delaware corporation and a direct, wholly-owned subsidiary of Asia
Pacific Insurance USA Holdings LLC (“Asia Pacific Insurance”), which is a Delaware limited liability company
and owned by China Oceanwide, pursuant to which, subject to the terms and conditions set forth therein, Merger
Sub would merge with and into Genworth with Genworth surviving the merger as a direct, wholly-owned
subsidiary of Asia Pacific Insurance (the “Merger”). China Oceanwide agreed to acquire all of our outstanding
common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special
meeting held on March 7, 2017, Genworth’s stockholders voted on and approved a proposal to adopt the Merger
Agreement.

On January 4, 2021, Genworth and China Oceanwide announced that an extension of the then current
December 31, 2020 Merger Agreement end date would not be sought given uncertainty around the completion
and timing of the remaining steps required to close the transaction. The Merger Agreement between Genworth
and China Oceanwide remains in effect, although either party is able to terminate the Merger Agreement at any
time. The China Oceanwide transaction previously received all U.S. regulatory approvals needed to close the
transaction. If China Oceanwide is able to secure the required funding to close the transaction, the parties would
need to re-engage with their regulators to determine the re-approvals or confirmations that would be necessary to
close the transaction.

Ongoing Priorities

Stabilizing our U.S. life insurance businesses continues to be one of our long-term goals. We will continue

to execute this objective primarily through our multi-year long-term care insurance in-force rate action plan.
Premium rate increases and associated benefit reductions on our legacy long-term care insurance policies are

critical to the business. We continue to manage our U.S. life insurance businesses on a standalone basis. Going

forward, the U.S. life insurance businesses will continue to rely on their consolidated statutory capital, significant

claim and future policy benefit reserves, prudent management of its in-force blocks and actuarially justified in-

force rate actions to satisfy obligations to its policyholders. Our U.S. life insurance business has made strong

progress on its multi-year rate action plan in 2020, receiving approvals of approximately $344 million of

incremental annual premiums during the year. In aggregate, we estimate that we have achieved approximately

$14.5 billion, on a net present value basis, of approved in-force rate increases since 2012. We continue to work

closely with the National Association of Insurance Commissioners (“NAIC”) and state regulators to demonstrate

the broad-based need for actuarially justified rate increases in order to pay future claims.

U.S. Mortgage Insurance

Through our U.S. Mortgage Insurance segment, we provide private mortgage insurance. Private mortgage

insurance enables borrowers to buy homes with a down payment of less than 20% of the home’s value (“low

down payment mortgages” or “high loan-to-value mortgages”). Mortgage insurance protects lenders against loss

in the event of a borrower’s default. It also generally aids financial institutions in managing their capital

efficiently by, in some cases, reducing the capital required for low down payment mortgages. If a borrower

defaults on mortgage payments, private mortgage insurance reduces and may eliminate losses to the insured

institution. Private mortgage insurance may also facilitate the sale of mortgage loans in the secondary mortgage

market because of the credit enhancement it provides. Our mortgage insurance products predominantly insure

prime-based, individually underwritten residential mortgage loans.

We have been providing mortgage insurance products and services in the United States since 1981 and

operate in all 50 states and the District of Columbia. Our 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, 2020,

approximately 28% of new insurance written in our U.S. mortgage insurance business was attributable to our

largest five lender customers, of which 12% was attributable to our largest customer. No other customer

exceeded 10% of our new insurance written during 2020 and no customer had earned premiums that exceeded

10% of our U.S. mortgage insurance business total revenues for the year ended December 31, 2020.

The U.S. private mortgage insurance industry is affected in part by the requirements and practices of 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 we refer to them

collectively as the “GSEs.” The GSEs purchase and provide guarantees on residential mortgages as part of their

governmental mandate to provide liquidity through the secondary mortgage market. The GSEs may purchase

mortgages with unpaid principal amounts up to a specified maximum, known as the “conforming loan limit,”

which is currently $548,250 (up to $822,375 in certain high-cost geographic areas of the country) and subject to

annual adjustment.

Each GSE’s Congressional charter generally prohibits it from purchasing a mortgage where the

loan-to-value ratio exceeds 80% of the home value unless the portion of the unpaid principal balance of the

mortgage in excess of 80% of the value of the property securing the mortgage is protected against default by

lender recourse, participation or by a qualified insurer. Much of the demand for private mortgage insurance is a

function of the requirements of the GSEs. The GSEs purchased the majority of the primary loans we insured as

of December 31, 2020. The GSEs specify mortgage insurance coverage levels and also have the authority to

change the pricing arrangements for purchasing retained-participation mortgages, or mortgages with lender

recourse, as compared to insured mortgages, increase or reduce required mortgage insurance coverage

percentages, and alter or liberalize underwriting standards and pricing terms on low down payment mortgages

they purchase. In furtherance of their respective charter requirements, each GSE maintains eligibility criteria to

establish when a mortgage insurer is qualified to issue coverage that will be acceptable to the GSEs for high

loan-to-value mortgages they acquire. For more information about the financial and other requirements of the

4

5

In this Annual Report on Form 10-K, unless the context otherwise requires, “Genworth Financial,”

“Genworth,” the “Company,” “we,” “us” and “our” refer to Genworth Financial, Inc. and its subsidiaries.

PART I

Item 1. Business

Strategic Update

We continue to focus on evaluating and executing alternative strategic plans to raise liquidity to address our

September 2021 debt maturity, other near-term liabilities and financial obligations and maximize shareholder

value. Our plans build on actions we have taken over the last several years to strengthen our financial position,

including the sale of Genworth MI Canada Inc. (“Genworth Canada”), our former Canada mortgage insurance

business, the completion of a debt offering through our wholly-owned U.S. mortgage insurance subsidiary,

Genworth Mortgage Holdings, Inc. (“GMHI”), and the settlement agreement reached with AXA S.A. (“AXA”).

We remain focused on preparing for a potential partial initial public offering (“IPO”) of our U.S. mortgage

insurance business, subject to market conditions as well as the satisfaction of various conditions and approvals.

We also remain open to other potential strategic alternatives pertaining to our mortgage insurance businesses and

other alternatives to address our upcoming holding company debt and financial obligations in 2021 and 2022. In

assessing our strategic options, we are considering, among other factors, the level of, and restrictions contained

in, our existing indebtedness, tax considerations, the views of regulators and rating agencies, and the

performance and prospects of our businesses. In addition, we are taking steps to align our expense structure with

our reduced business activities. Expense reduction initiatives completed to date are anticipated to result in

annualized savings of approximately $50 million.

China Oceanwide Transaction

On October 21, 2016, Genworth Financial, Inc. (“Genworth”) entered into an agreement and plan of merger

(the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company

incorporated in the People’s Republic of China and a subsidiary of China Oceanwide, and Asia Pacific Global

Capital USA Corporation (“Merger Sub”), a Delaware corporation and a direct, wholly-owned subsidiary of Asia

Pacific Insurance USA Holdings LLC (“Asia Pacific Insurance”), which is a Delaware limited liability company

and owned by China Oceanwide, pursuant to which, subject to the terms and conditions set forth therein, Merger

Sub would merge with and into Genworth with Genworth surviving the merger as a direct, wholly-owned

subsidiary of Asia Pacific Insurance (the “Merger”). China Oceanwide agreed to acquire all of our outstanding

common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special

meeting held on March 7, 2017, Genworth’s stockholders voted on and approved a proposal to adopt the Merger

Agreement.

On January 4, 2021, Genworth and China Oceanwide announced that an extension of the then current

December 31, 2020 Merger Agreement end date would not be sought given uncertainty around the completion

and timing of the remaining steps required to close the transaction. The Merger Agreement between Genworth

and China Oceanwide remains in effect, although either party is able to terminate the Merger Agreement at any

time. The China Oceanwide transaction previously received all U.S. regulatory approvals needed to close the

transaction. If China Oceanwide is able to secure the required funding to close the transaction, the parties would

need to re-engage with their regulators to determine the re-approvals or confirmations that would be necessary to

close the transaction.

Ongoing Priorities

Stabilizing our U.S. life insurance businesses continues to be one of our long-term goals. We will continue

to execute this objective primarily through our multi-year long-term care insurance in-force rate action plan.

Premium rate increases and associated benefit reductions on our legacy long-term care insurance policies are

critical to the business. We continue to manage our U.S. life insurance businesses on a standalone basis. Going
forward, the U.S. life insurance businesses will continue to rely on their consolidated statutory capital, significant
claim and future policy benefit reserves, prudent management of its in-force blocks and actuarially justified in-
force rate actions to satisfy obligations to its policyholders. Our U.S. life insurance business has made strong
progress on its multi-year rate action plan in 2020, receiving approvals of approximately $344 million of
incremental annual premiums during the year. In aggregate, we estimate that we have achieved approximately
$14.5 billion, on a net present value basis, of approved in-force rate increases since 2012. We continue to work
closely with the National Association of Insurance Commissioners (“NAIC”) and state regulators to demonstrate
the broad-based need for actuarially justified rate increases in order to pay future claims.

U.S. Mortgage Insurance

Through our U.S. Mortgage Insurance segment, we provide private mortgage insurance. Private mortgage

insurance enables borrowers to buy homes with a down payment of less than 20% of the home’s value (“low
down payment mortgages” or “high loan-to-value mortgages”). Mortgage insurance protects lenders against loss
in the event of a borrower’s default. It also generally aids financial institutions in managing their capital
efficiently by, in some cases, reducing the capital required for low down payment mortgages. If a borrower
defaults on mortgage payments, private mortgage insurance reduces and may eliminate losses to the insured
institution. Private mortgage insurance may also facilitate the sale of mortgage loans in the secondary mortgage
market because of the credit enhancement it provides. Our mortgage insurance products predominantly insure
prime-based, individually underwritten residential mortgage loans.

We have been providing mortgage insurance products and services in the United States since 1981 and
operate in all 50 states and the District of Columbia. Our 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, 2020,
approximately 28% of new insurance written in our U.S. mortgage insurance business was attributable to our
largest five lender customers, of which 12% was attributable to our largest customer. No other customer
exceeded 10% of our new insurance written during 2020 and no customer had earned premiums that exceeded
10% of our U.S. mortgage insurance business total revenues for the year ended December 31, 2020.

The U.S. private mortgage insurance industry is affected in part by the requirements and practices of 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 we refer to them
collectively as the “GSEs.” The GSEs purchase and provide guarantees on residential mortgages as part of their
governmental mandate to provide liquidity through the secondary mortgage market. The GSEs may purchase
mortgages with unpaid principal amounts up to a specified maximum, known as the “conforming loan limit,”
which is currently $548,250 (up to $822,375 in certain high-cost geographic areas of the country) and subject to
annual adjustment.

Each GSE’s Congressional charter generally prohibits it from purchasing a mortgage where the
loan-to-value ratio exceeds 80% of the home value unless the portion of the unpaid principal balance of the
mortgage in excess of 80% of the value of the property securing the mortgage is protected against default by
lender recourse, participation or by a qualified insurer. Much of the demand for private mortgage insurance is a
function of the requirements of the GSEs. The GSEs purchased the majority of the primary loans we insured as
of December 31, 2020. The GSEs specify mortgage insurance coverage levels and also have the authority to
change the pricing arrangements for purchasing retained-participation mortgages, or mortgages with lender
recourse, as compared to insured mortgages, increase or reduce required mortgage insurance coverage
percentages, and alter or liberalize underwriting standards and pricing terms on low down payment mortgages
they purchase. In furtherance of their respective charter requirements, each GSE maintains eligibility criteria to
establish when a mortgage insurer is qualified to issue coverage that will be acceptable to the GSEs for high
loan-to-value mortgages they acquire. For more information about the financial and other requirements of the

4

5

GSEs for our U.S. mortgage insurance subsidiaries, see “—Regulation—Mortgage Insurance Regulation—Other
U.S. regulation.”

Underwriting and pricing

Selected financial information and operating performance measures regarding our U.S. Mortgage Insurance

segment are included under “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition
and Results of Operations—U.S. Mortgage Insurance segment.”

Products and services

In the United States, we offer the following mortgage insurance products:

Primary mortgage insurance

Substantially all of our U.S. mortgage insurance 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 are typically delivered to us on a loan-by-loan basis. Primary
mortgage insurance can also be delivered to us 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 our primary mortgage insurance select a specific coverage level for each insured

loan. To be eligible for purchase by a GSE, a low-down payment mortgage must comply with the coverage
percentages established by that particular GSE. For loans not sold to the GSEs, the customer determines its
desired coverage percentage. Generally, our risk across all policies written is approximately 25% of the
underlying primary insurance in-force, but may vary from policy to policy, typically between 6% and 35%
coverage. The loan amount and coverage percentage determine our risk in-force on each insured loan.

We file our premium rates, as required, with state insurance departments 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. Premium
payments, whether borrower or lender-paid, can either be periodic/monthly or single premium. In either case, the
payment of premium to us is generally the responsibility of the insured.

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. Currently, we have an insignificant amount of
pool insurance in-force.

We also perform fee-based contract underwriting services for our customers. Contract underwriting
provides our customers outsourced scalable capacity to underwrite mortgage loans. Our underwriters can
underwrite the loan on behalf of our customers for both investor compliance and mortgage insurance, thus
reducing duplicative activities and increasing our ability to write mortgage insurance for these loans. Under the
terms of our contract underwriting agreements, we indemnify our customer against losses incurred in the event
we make material errors in determining whether loans processed by our contract underwriters meet specified
underwriting or purchase criteria, subject to contractual limitations on liability.

We establish and maintain underwriting guidelines based on our risk appetite. We require borrowers to have

a verified capacity and willingness to support their obligation and a well-supported valuation of the collateral.

Our underwriting guidelines incorporate credit eligibility requirements that, among other things, limit our

coverage to mortgages that meet our thresholds with respect to borrower Fair Isaac Company (“FICO”) scores,

maximum loan-to-value ratios, documentation requirements and maximum debt-to-income ratios. Our

underwriting guidelines are largely consistent with those of the GSEs. Many of our customers use the GSEs’

automated loan underwriting systems for making credit determinations. We generally accept the underwriting

decisions and documentation requirements made by GSEs’ underwriting systems, subject to our review as well as

certain limitations and requirements.

FICO developed the FICO credit scoring model to calculate a score based upon a borrower’s credit history.

We use the FICO credit score as one indicator of a borrower’s credit quality. Typically, a borrower with a higher

credit score has a lower likelihood of defaulting on a loan. FICO credit scores range up to 850, with a score of

620 or more generally viewed as a “prime” loan and a score below 620 generally viewed as a “sub-prime” loan.

Generally, “A minus” loans are loans where the borrowers have FICO credit scores between 575 and 660 and

have a blemished credit history. As of December 31, 2020, on a risk in-force basis and at the time of loan closing,

approximately 99% of our primary insurance loans were “prime” in credit quality with FICO credit scores of at

least 620.

Loan applications for primary mortgage insurance are either directly reviewed by us (or our contract

underwriters), or as noted below, by lenders under delegated authority. In either case automated underwriting

systems may be utilized. For non-delegated underwriting, customers submit loan files to us and we individually

underwrite each application to determine whether we will insure the loan. We use our mortgage insurance

underwriting system to perform our non-delegated underwriting evaluations. We delegate to eligible lender

customers the ability to underwrite mortgage insurance based on our delegated underwriting guidelines. We

regularly perform quality assurance reviews of delegated loans to assess compliance with our guidelines. Upon

satisfactory completion of our review, we agree to waive our right to rescind coverage under certain

circumstances.

Our policy has been to set and charge premium rates commensurate with the underlying risk of each loan we

insure. Recent industry pricing trends have introduced an increasing number of loan, borrower, lender and

property attributes, resulting in expanded granularity in pricing mortgage insurance products and a shift from

traditional published rate cards to dynamic pricing engines that better align price and risk. The majority of our

new insurance written is priced using our proprietary risk-based pricing engine, GenRATE, which provides us

with a more flexible, granular and analytical approach to selecting and pricing risk. GenRATE is modeled to

assess the performance of new business under expected and stress scenarios on an individualized loan basis,

which is used to determine pricing and inform our risk selection strategy that optimizes economic value by

balancing return and volatility. Once a certificate of coverage is issued, we are not able to alter the premium

charged or cancel coverage without cause. We continue to monitor current housing conditions and the

performance of our books of business to determine if we need to make further changes in our pricing or

underwriting guidelines and practices.

Loss mitigation

Our loss mitigation and claims area is led by seasoned personnel who are supported by default tracking and

claims processing capabilities within our integrated platform. Our loss mitigation staff is also actively engaged

with the GSEs and servicers regarding appropriate servicing and loss mitigation practices. We have granted loss

mitigation delegation to the GSEs and servicers, whereby they perform certain loss mitigation efforts on our

behalf. Moreover, the Consumer Financial Protection Bureau’s (“CFPB”) mortgage servicing rule obligates

servicers to engage in early intervention and loss mitigation efforts with a borrower prior to foreclosure. These

6

7

GSEs for our U.S. mortgage insurance subsidiaries, see “—Regulation—Mortgage Insurance Regulation—Other

Underwriting and pricing

U.S. regulation.”

Selected financial information and operating performance measures regarding our U.S. Mortgage Insurance

segment are included under “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition

and Results of Operations—U.S. Mortgage Insurance segment.”

Products and services

In the United States, we offer the following mortgage insurance products:

Primary mortgage insurance

Substantially all of our U.S. mortgage insurance 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 are typically delivered to us on a loan-by-loan basis. Primary

mortgage insurance can also be delivered to us 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 our primary mortgage insurance select a specific coverage level for each insured

loan. To be eligible for purchase by a GSE, a low-down payment mortgage must comply with the coverage

percentages established by that particular GSE. For loans not sold to the GSEs, the customer determines its

desired coverage percentage. Generally, our risk across all policies written is approximately 25% of the

underlying primary insurance in-force, but may vary from policy to policy, typically between 6% and 35%

coverage. The loan amount and coverage percentage determine our risk in-force on each insured loan.

We file our premium rates, as required, with state insurance departments 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. Premium

payments, whether borrower or lender-paid, can either be periodic/monthly or single premium. In either case, the

payment of premium to us is generally the responsibility of the insured.

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. Currently, we have an insignificant amount of

pool insurance in-force.

We also perform fee-based contract underwriting services for our customers. Contract underwriting

provides our customers outsourced scalable capacity to underwrite mortgage loans. Our underwriters can

underwrite the loan on behalf of our customers for both investor compliance and mortgage insurance, thus

reducing duplicative activities and increasing our ability to write mortgage insurance for these loans. Under the

terms of our contract underwriting agreements, we indemnify our customer against losses incurred in the event

we make material errors in determining whether loans processed by our contract underwriters meet specified

underwriting or purchase criteria, subject to contractual limitations on liability.

We establish and maintain underwriting guidelines based on our risk appetite. We require borrowers to have

a verified capacity and willingness to support their obligation and a well-supported valuation of the collateral.
Our underwriting guidelines incorporate credit eligibility requirements that, among other things, limit our
coverage to mortgages that meet our thresholds with respect to borrower Fair Isaac Company (“FICO”) scores,
maximum loan-to-value ratios, documentation requirements and maximum debt-to-income ratios. Our
underwriting guidelines are largely consistent with those of the GSEs. Many of our customers use the GSEs’
automated loan underwriting systems for making credit determinations. We generally accept the underwriting
decisions and documentation requirements made by GSEs’ underwriting systems, subject to our review as well as
certain limitations and requirements.

FICO developed the FICO credit scoring model to calculate a score based upon a borrower’s credit history.
We use the FICO credit score as one indicator of a borrower’s credit quality. Typically, a borrower with a higher
credit score has a lower likelihood of defaulting on a loan. FICO credit scores range up to 850, with a score of
620 or more generally viewed as a “prime” loan and a score below 620 generally viewed as a “sub-prime” loan.
Generally, “A minus” loans are loans where the borrowers have FICO credit scores between 575 and 660 and
have a blemished credit history. As of December 31, 2020, on a risk in-force basis and at the time of loan closing,
approximately 99% of our primary insurance loans were “prime” in credit quality with FICO credit scores of at
least 620.

Loan applications for primary mortgage insurance are either directly reviewed by us (or our contract
underwriters), or as noted below, by lenders under delegated authority. In either case automated underwriting
systems may be utilized. For non-delegated underwriting, customers submit loan files to us and we individually
underwrite each application to determine whether we will insure the loan. We use our mortgage insurance
underwriting system to perform our non-delegated underwriting evaluations. We delegate to eligible lender
customers the ability to underwrite mortgage insurance based on our delegated underwriting guidelines. We
regularly perform quality assurance reviews of delegated loans to assess compliance with our guidelines. Upon
satisfactory completion of our review, we agree to waive our right to rescind coverage under certain
circumstances.

Our policy has been to set and charge premium rates commensurate with the underlying risk of each loan we

insure. Recent industry pricing trends have introduced an increasing number of loan, borrower, lender and
property attributes, resulting in expanded granularity in pricing mortgage insurance products and a shift from
traditional published rate cards to dynamic pricing engines that better align price and risk. The majority of our
new insurance written is priced using our proprietary risk-based pricing engine, GenRATE, which provides us
with a more flexible, granular and analytical approach to selecting and pricing risk. GenRATE is modeled to
assess the performance of new business under expected and stress scenarios on an individualized loan basis,
which is used to determine pricing and inform our risk selection strategy that optimizes economic value by
balancing return and volatility. Once a certificate of coverage is issued, we are not able to alter the premium
charged or cancel coverage without cause. We continue to monitor current housing conditions and the
performance of our books of business to determine if we need to make further changes in our pricing or
underwriting guidelines and practices.

Loss mitigation

Our loss mitigation and claims area is led by seasoned personnel who are supported by default tracking and

claims processing capabilities within our integrated platform. Our loss mitigation staff is also actively engaged
with the GSEs and servicers regarding appropriate servicing and loss mitigation practices. We have granted loss
mitigation delegation to the GSEs and servicers, whereby they perform certain loss mitigation efforts on our
behalf. Moreover, the Consumer Financial Protection Bureau’s (“CFPB”) mortgage servicing rule obligates
servicers to engage in early intervention and loss mitigation efforts with a borrower prior to foreclosure. These

6

7

efforts have traditionally involved loan modifications intended to enable qualified borrowers to make
restructured loan payments or efforts to sell the property, thereby potentially reducing claim amounts. If a loan
becomes delinquent, we work closely with customers, investors and servicers to attempt to cure the delinquency
and allow the homeowner to retain ownership of their property.

Claims result from delinquencies that are not cured, or from losses on short sales, other third-party sales or
deeds-in-lieu of foreclosure that we approve. Upon review and determination that a filed claim is valid, we may
pay the coverage percentage specified in the certificate of insurance and related expenses, pay the amount of the
claim required to make the customer whole, commonly referred to as the “actual loss amount,” following the
approved sale or pay the full claim amount and acquire title to the property.

When claim notices are received, we review loan and servicing files to determine the appropriateness of a

claim amount. Failure to deliver required documentation or our review of such documentation may result in
rescission, cancellation or claims denial. Our insurance policies provide that we can reduce or deny claims if the
servicer does not materially comply with its obligations under our policies, including the requirement to pursue
reasonable loss mitigation actions. We also periodically receive claim notices that request coverage for costs and
expenses associated with items not covered under our policies, such as losses resulting from property damage to
a covered home. We actively review claim notices to ensure we pay only for covered expenses. We deem a
reduction in the claim amount paid relative to the amount requested in the claim notice to be a curtailment.

When reviewing loan and servicing files in connection with the delinquency or claims process, we may also

decide to rescind coverage of the underlying mortgages or deny payment of claims. Our ability to rescind
coverage is limited by the terms of our master policies. We may rescind coverage in situations where, among
other things, (i) fraudulent misrepresentations were made or materially inaccurate information was provided
regarding a borrower’s income, debts, intention to occupy a property or property value or (ii) a loan was
originated in material violation of our underwriting guidelines.

We will consider an insured’s appeal of our decision and, if we agree with the appeal, we take the necessary
steps to reinstate our insurance coverage and reactivate the loan certificate or otherwise address the issues raised
in the appeal. If the parties are unable to agree on the outcome of the appeal, the insured may choose to pursue
arbitration or litigation under the terms of the applicable master policy and challenge the results. Subject to
applicable limitations in our policies and state law, legal challenges to our actions may be brought several years
after we dispose of a claim. For additional information regarding our master policies, see “—Regulation—U.S.
Insurance Regulation—Policy forms.”

From time to time, we enter into agreements with policyholders to accelerate claims and negotiate an

agreed-upon payment amount for claims on an identified group of delinquent loans. In exchange for our
accelerated claim payment, mortgage insurance is canceled, and we are discharged from any further liability on
the identified loans.

Distribution

We distribute our mortgage insurance products through our dedicated sales force located throughout the

United States, our home-based in-house sales representatives, and a digital marketing program designed to
expand our reach beyond our sales force. Our sales force primarily markets to financial institutions and mortgage
originators which impose a requirement for mortgage insurance as part of the borrower’s financing.

Competition

Our principal sources of competition are U.S. federal, state and local government agencies and other private
mortgage insurers. We also compete with mortgage lenders and other investors, the GSEs, portfolio lenders who
self-insure, reinsurers, and other capital markets participants who may utilize financial instruments designed to
mitigate risk.

U.S. federal, state and local government agencies. We and other private mortgage insurers compete for

mortgage insurance business directly with 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.

Private mortgage insurers. The U.S. private mortgage insurance industry is highly competitive. We compete

on pricing, underwriting guidelines, customer relationships, service levels, policy terms, loss mitigation practices,

perceived financial strength (including comparative credit ratings), reputation, strength of management, product

features, and effective use and ease of technology. There are currently six active mortgage insurers, including us.

GSEs, portfolio lenders, reinsurers and other capital markets participants. We have also experienced

competition in recent years from various participants in the mortgage finance industry including the GSEs,

portfolio lenders, reinsurers and other participants in the capital markets. We compete with these participants

primarily based on pricing, policy terms and perceived financial strength. The GSEs enter into risk sharing

transactions with financial institutions designed to reduce the risk of their mortgage portfolios. Competition also

comes from portfolio lenders that are willing to hold credit risk on their balance sheets without credit

enhancement. In addition, investors can make use of risk-sharing structures designed to mitigate the impact of

mortgage defaults in place of private mortgage insurance. Finally, although their presence is a fraction of what it

was in the past, there are products designed to eliminate the need for private mortgage insurance, such as

“simultaneous seconds,” which combine a first lien loan with a second lien loan in order to meet the 80%

loan-to-value threshold required for sale to the GSEs without certain credit protections.

Australia Mortgage Insurance

We entered the Australian mortgage insurance market in 1997. In 2020 and 2019, we were the leading

provider of mortgage insurance in Australia based upon gross written premiums.

In May 2014, Genworth Mortgage Insurance Australia Limited (“Genworth Australia”), a holding company

for our Australian mortgage insurance business, completed an IPO of its common shares and we currently

beneficially own approximately 52.0% of the ordinary shares of Genworth Australia through our subsidiaries.

See note 22 in our consolidated financial statements under “Part II—Item 8—Financial Statements and

Supplementary Data” for additional information.

Selected financial information and operating performance measures regarding our Australia Mortgage

Insurance segment are included under “Part II—Item 7—Management’s Discussion and Analysis of Financial

Condition and Results of Operations—Australia Mortgage Insurance segment.”

Products

In Australia, we offer individually underwritten residential mortgage loans (“flow mortgage insurance”),

also referred to as lender mortgage insurance (“LMI”), and we selectively provide mortgage insurance on a bulk

basis (“bulk mortgage insurance”). In addition, we execute structured insurance transactions where we provide

excess of loss cover for bulk portfolios. LMI provides insurance coverage for 100% of the unpaid loan balance,

including interest, selling costs and expenses. Residential mortgage loans in Australia are predominantly variable

rate loans with 25 to 30-year terms. Lenders remit the single premium to us following settlement of the loan and,

generally, either collect the equivalent amount from the borrower at the time the loan proceeds are advanced or

capitalize the amount in the loan. In 2020, we commenced a flow monthly premium option with a consistent

monthly premium amount for the duration of the policy term, which is expected to cease upon the loan balance

reaching a specified loan-to-value ratio based on the original security valuation amount or the borrower

refinancing or discharging the loan. As of December 31, 2020, we had one customer contract in place with a

monthly premium.

Banks, building societies and credit unions generally acquire LMI only for residential mortgage loans with

loan-to-value ratios above 80%. The Australian Prudential Regulation Authority (“APRA”) makes and enforces

8

9

efforts have traditionally involved loan modifications intended to enable qualified borrowers to make

restructured loan payments or efforts to sell the property, thereby potentially reducing claim amounts. If a loan

becomes delinquent, we work closely with customers, investors and servicers to attempt to cure the delinquency

and allow the homeowner to retain ownership of their property.

Claims result from delinquencies that are not cured, or from losses on short sales, other third-party sales or

deeds-in-lieu of foreclosure that we approve. Upon review and determination that a filed claim is valid, we may

pay the coverage percentage specified in the certificate of insurance and related expenses, pay the amount of the

claim required to make the customer whole, commonly referred to as the “actual loss amount,” following the

approved sale or pay the full claim amount and acquire title to the property.

When claim notices are received, we review loan and servicing files to determine the appropriateness of a

claim amount. Failure to deliver required documentation or our review of such documentation may result in

rescission, cancellation or claims denial. Our insurance policies provide that we can reduce or deny claims if the

servicer does not materially comply with its obligations under our policies, including the requirement to pursue

reasonable loss mitigation actions. We also periodically receive claim notices that request coverage for costs and

expenses associated with items not covered under our policies, such as losses resulting from property damage to

a covered home. We actively review claim notices to ensure we pay only for covered expenses. We deem a

reduction in the claim amount paid relative to the amount requested in the claim notice to be a curtailment.

When reviewing loan and servicing files in connection with the delinquency or claims process, we may also

decide to rescind coverage of the underlying mortgages or deny payment of claims. Our ability to rescind

coverage is limited by the terms of our master policies. We may rescind coverage in situations where, among

other things, (i) fraudulent misrepresentations were made or materially inaccurate information was provided

regarding a borrower’s income, debts, intention to occupy a property or property value or (ii) a loan was

originated in material violation of our underwriting guidelines.

We will consider an insured’s appeal of our decision and, if we agree with the appeal, we take the necessary

steps to reinstate our insurance coverage and reactivate the loan certificate or otherwise address the issues raised

in the appeal. If the parties are unable to agree on the outcome of the appeal, the insured may choose to pursue

arbitration or litigation under the terms of the applicable master policy and challenge the results. Subject to

applicable limitations in our policies and state law, legal challenges to our actions may be brought several years

after we dispose of a claim. For additional information regarding our master policies, see “—Regulation—U.S.

Insurance Regulation—Policy forms.”

From time to time, we enter into agreements with policyholders to accelerate claims and negotiate an

agreed-upon payment amount for claims on an identified group of delinquent loans. In exchange for our

accelerated claim payment, mortgage insurance is canceled, and we are discharged from any further liability on

the identified loans.

Distribution

Competition

mitigate risk.

We distribute our mortgage insurance products through our dedicated sales force located throughout the

United States, our home-based in-house sales representatives, and a digital marketing program designed to

expand our reach beyond our sales force. Our sales force primarily markets to financial institutions and mortgage

originators which impose a requirement for mortgage insurance as part of the borrower’s financing.

Our principal sources of competition are U.S. federal, state and local government agencies and other private

mortgage insurers. We also compete with mortgage lenders and other investors, the GSEs, portfolio lenders who

self-insure, reinsurers, and other capital markets participants who may utilize financial instruments designed to

U.S. federal, state and local government agencies. We and other private mortgage insurers compete for
mortgage insurance business directly with 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.

Private mortgage insurers. The U.S. private mortgage insurance industry is highly competitive. We compete
on pricing, underwriting guidelines, customer relationships, service levels, policy terms, loss mitigation practices,
perceived financial strength (including comparative credit ratings), reputation, strength of management, product
features, and effective use and ease of technology. There are currently six active mortgage insurers, including us.

GSEs, portfolio lenders, reinsurers and other capital markets participants. We have also experienced
competition in recent years from various participants in the mortgage finance industry including the GSEs,
portfolio lenders, reinsurers and other participants in the capital markets. We compete with these participants
primarily based on pricing, policy terms and perceived financial strength. The GSEs enter into risk sharing
transactions with financial institutions designed to reduce the risk of their mortgage portfolios. Competition also
comes from portfolio lenders that are willing to hold credit risk on their balance sheets without credit
enhancement. In addition, investors can make use of risk-sharing structures designed to mitigate the impact of
mortgage defaults in place of private mortgage insurance. Finally, although their presence is a fraction of what it
was in the past, there are products designed to eliminate the need for private mortgage insurance, such as
“simultaneous seconds,” which combine a first lien loan with a second lien loan in order to meet the 80%
loan-to-value threshold required for sale to the GSEs without certain credit protections.

Australia Mortgage Insurance

We entered the Australian mortgage insurance market in 1997. In 2020 and 2019, we were the leading

provider of mortgage insurance in Australia based upon gross written premiums.

In May 2014, Genworth Mortgage Insurance Australia Limited (“Genworth Australia”), a holding company

for our Australian mortgage insurance business, completed an IPO of its common shares and we currently
beneficially own approximately 52.0% of the ordinary shares of Genworth Australia through our subsidiaries.
See note 22 in our consolidated financial statements under “Part II—Item 8—Financial Statements and
Supplementary Data” for additional information.

Selected financial information and operating performance measures regarding our Australia Mortgage
Insurance segment are included under “Part II—Item 7—Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Australia Mortgage Insurance segment.”

Products

In Australia, we offer individually underwritten residential mortgage loans (“flow mortgage insurance”),
also referred to as lender mortgage insurance (“LMI”), and we selectively provide mortgage insurance on a bulk
basis (“bulk mortgage insurance”). In addition, we execute structured insurance transactions where we provide
excess of loss cover for bulk portfolios. LMI provides insurance coverage for 100% of the unpaid loan balance,
including interest, selling costs and expenses. Residential mortgage loans in Australia are predominantly variable
rate loans with 25 to 30-year terms. Lenders remit the single premium to us following settlement of the loan and,
generally, either collect the equivalent amount from the borrower at the time the loan proceeds are advanced or
capitalize the amount in the loan. In 2020, we commenced a flow monthly premium option with a consistent
monthly premium amount for the duration of the policy term, which is expected to cease upon the loan balance
reaching a specified loan-to-value ratio based on the original security valuation amount or the borrower
refinancing or discharging the loan. As of December 31, 2020, we had one customer contract in place with a
monthly premium.

Banks, building societies and credit unions generally acquire LMI only for residential mortgage loans with
loan-to-value ratios above 80%. The Australian Prudential Regulation Authority (“APRA”) makes and enforces

8

9

the regulatory prudential rules which govern authorized deposit-taking institutions (“ADIs”). APRA uses an
application of international capital standards issued by the Basel Committee on Banking Supervision (“Basel
Committee”), which are collectively termed the Basel framework, that generally allow for reduced capital
requirements for high loan-to-value residential mortgage loans if they have been insured by a mortgage insurance
company regulated by APRA. APRA’s application of the Basel framework for ADIs that use an internal ratings-
based (“IRB”) approach requires that the IRB models be approved by APRA. The IRB models may or may not
allocate capital credit for LMI. We do not believe that the IRB ADIs currently benefit from an explicit reduction
in their capital requirements for mortgage loans covered by mortgage insurance. APRA and the IRB ADIs have
not yet finalized internal models for residential mortgage risk. APRA’s insurance authorization conditions
require Australian mortgage insurance companies, including ours, to be monoline insurers, which are insurance
companies that offer just one type of insurance product.

We also provide bulk mortgage insurance in Australia to lenders that intend to securitize Australian

residential loans they have originated. Bulk mortgage insurance serves as an important source of credit
enhancement for the Australian securitization market, and our bulk coverage is generally purchased for low
loan-to-value, seasoned loans, and accounted for approximately 5% of new insurance written in our Australian
mortgage insurance business for the year ended December 31, 2020.

Underwriting and pricing

Loan applications for all flow loans we insure in Australia are reviewed by us or approved lenders under

delegated underwriting authority to evaluate each individual borrower’s credit strength and history, the
characteristics of the loan and the value of the underlying property. We employ internal scoring models in the
underwriting process and use risk rules models to enhance the underwriter’s ability to evaluate the loan risk and
make consistent underwriting decisions. We also use automated decision models to assess, and in some cases
approve, flow mortgage insurance loans. Additional tools used by our mortgage insurance business in Australia
include automated valuation models to evaluate property risk and fraud application prevention and management
tools. When underwriting bulk mortgage insurance transactions, we evaluate characteristics of the loans in the
portfolio and examine loan files on a sample basis.

Our delegated underwriting program permits qualified mortgage lender customers to underwrite loan
applications for mortgage insurance using underwriting guidelines we have previously approved. We have
established a quality assurance system to review delegated underwritten loans to ensure compliance with the
approved underwriting guidelines, operational procedures and master policy requirements. Our business review
teams request and review samples (statistically valid and/or stratified) of performing loans. Once a quality
assurance review has been completed, our business review teams summarize and evaluate their findings against
the policy. In addition, we process all policies approved under a delegated model through our decisioning engine,
which incorporates policy and scoring rules to provide further insight into the lenders’ underwriting quality. If
we identify instances of non-compliance with the established delegation criteria or if the lender fails to meet the
quality assurance benchmarks, we work with the lender to develop appropriate corrective actions.

We regularly evaluate our new business risk profile, which includes reviewing underwriting guidelines and
product restrictions, reducing new business in geographic areas we believe are more economically sensitive and
if deemed prudent, terminate commercial relationships as a result of weaker business performance. We have also
increased prices for certain products based on periodic reviews of performance, with a focus on higher risk
segments.

Loss mitigation

In Australia, we work closely with lenders to identify and monitor delinquent borrowers. When a
delinquency cannot be cured through basic collections, we work with the lender to identify an optimal loan
workout solution. If it is determined that the borrower has the capacity to make a modified mortgage loan

payment, we work with the lender to implement the most appropriate payment plan to address the borrower’s

hardship situation. If the borrower does not have the capacity to make payments on a modified loan, we work

with the lender and borrower to sell the property at the best price to minimize the severity of our claim and

provide the borrower with a reasonable resolution.

After a delinquency is reported to us, or after a claim is received, for lenders that do not have claims

coverage commitment or have failed to qualify for their claims coverage commitment, we review and where

appropriate conduct further investigations to determine if there has been an event of underwriting

non-compliance, non-disclosure of relevant information or any misrepresentation of information provided during

the underwriting process. Our master policies provide that we may rescind coverage if there has been any failure

to comply with agreed underwriting criteria or in the event of fraud or misrepresentation involving the lender or

an agent of the lender. However, some lenders have claims coverage commitment, under which we are obligated

to pay the claim provided certain conditions are met. Such conditions include but are not limited to, meeting

minimum aggregate quality assurance benchmarks, minimum loan performance periods and compliance with

other conditions contained in the master policy. Irrespective of the claims coverage commitment, we may also

curtail or rescind coverage if we identify instances of extensive damage to the property, mismanagement of the

claims management processes or other systemic failures in the lenders’ systems, processes or controls. If such

issues are identified, the claim or delinquent loan file is reviewed to determine the appropriate action, including

potentially reducing the claim amount to be paid or rescinding the coverage. Generally, the issues we have

initially identified are reviewed with the lender and the lender has an opportunity to provide further information

or documentation to resolve the issue.

We also review a group or portfolio of insured loans if we believe there may be systemic misrepresentations

or non-compliance issues. If such issues are detected, we generally will work with the lender to develop an

agreed settlement with respect to the group of loans identified. Additionally, we may pursue recoveries from

borrowers for paid claims within the time period permitted by law and use third-party collection agencies to

assist in these recoveries.

Distribution and customers

to lenders and mortgage originators.

We maintain a dedicated commercial function that promotes our mortgage insurance products in Australia

There is concentration among a small group of banks that write most of the residential mortgage loans in

Australia. We maintain strong relationships within the major bank and regional bank channels, as well as

building societies, credit unions and non-bank mortgage originators. The four largest banks in Australia provide

the majority of the financing for residential mortgages in that country. Our mortgage insurance business in

Australia is concentrated in a small number of key customers. For the year ended December 31, 2020, our largest

customer represented 58% of gross written premiums. In October 2019, we renewed our supply and service

contract with this customer, effective January 1, 2020, for a term of three years. In November 2020, the contract

with our second largest customer, based on gross written premiums in 2020, was not renewed following a

request-for-proposal process. While the termination of the contract with this customer will reduce gross written

premiums in 2021, it is expected to modestly impact future financial results. This customer represented 11% of

our gross written premiums for the year ended December 31, 2020. No other customer represented 10% or more

of gross written premiums in 2020.

These banks continue to evaluate the utilization of mortgage insurance in connection with the

implementation of the bank capital standards in Australia based on the standards of the Basel Committee, and

this could impact both the size of the private mortgage insurance market in Australia and our market share. The

response of banks to the new capital standards will develop over time and this response could impact our

Australian mortgage insurance business.

10

11

the regulatory prudential rules which govern authorized deposit-taking institutions (“ADIs”). APRA uses an

application of international capital standards issued by the Basel Committee on Banking Supervision (“Basel

Committee”), which are collectively termed the Basel framework, that generally allow for reduced capital

requirements for high loan-to-value residential mortgage loans if they have been insured by a mortgage insurance

company regulated by APRA. APRA’s application of the Basel framework for ADIs that use an internal ratings-

based (“IRB”) approach requires that the IRB models be approved by APRA. The IRB models may or may not

allocate capital credit for LMI. We do not believe that the IRB ADIs currently benefit from an explicit reduction

in their capital requirements for mortgage loans covered by mortgage insurance. APRA and the IRB ADIs have

not yet finalized internal models for residential mortgage risk. APRA’s insurance authorization conditions

require Australian mortgage insurance companies, including ours, to be monoline insurers, which are insurance

companies that offer just one type of insurance product.

We also provide bulk mortgage insurance in Australia to lenders that intend to securitize Australian

residential loans they have originated. Bulk mortgage insurance serves as an important source of credit

enhancement for the Australian securitization market, and our bulk coverage is generally purchased for low

loan-to-value, seasoned loans, and accounted for approximately 5% of new insurance written in our Australian

mortgage insurance business for the year ended December 31, 2020.

Underwriting and pricing

Loan applications for all flow loans we insure in Australia are reviewed by us or approved lenders under

delegated underwriting authority to evaluate each individual borrower’s credit strength and history, the

characteristics of the loan and the value of the underlying property. We employ internal scoring models in the

underwriting process and use risk rules models to enhance the underwriter’s ability to evaluate the loan risk and

make consistent underwriting decisions. We also use automated decision models to assess, and in some cases

approve, flow mortgage insurance loans. Additional tools used by our mortgage insurance business in Australia

include automated valuation models to evaluate property risk and fraud application prevention and management

tools. When underwriting bulk mortgage insurance transactions, we evaluate characteristics of the loans in the

portfolio and examine loan files on a sample basis.

Our delegated underwriting program permits qualified mortgage lender customers to underwrite loan

applications for mortgage insurance using underwriting guidelines we have previously approved. We have

established a quality assurance system to review delegated underwritten loans to ensure compliance with the

approved underwriting guidelines, operational procedures and master policy requirements. Our business review

teams request and review samples (statistically valid and/or stratified) of performing loans. Once a quality

assurance review has been completed, our business review teams summarize and evaluate their findings against

the policy. In addition, we process all policies approved under a delegated model through our decisioning engine,

which incorporates policy and scoring rules to provide further insight into the lenders’ underwriting quality. If

we identify instances of non-compliance with the established delegation criteria or if the lender fails to meet the

quality assurance benchmarks, we work with the lender to develop appropriate corrective actions.

We regularly evaluate our new business risk profile, which includes reviewing underwriting guidelines and

product restrictions, reducing new business in geographic areas we believe are more economically sensitive and

if deemed prudent, terminate commercial relationships as a result of weaker business performance. We have also

increased prices for certain products based on periodic reviews of performance, with a focus on higher risk

segments.

Loss mitigation

In Australia, we work closely with lenders to identify and monitor delinquent borrowers. When a

delinquency cannot be cured through basic collections, we work with the lender to identify an optimal loan

workout solution. If it is determined that the borrower has the capacity to make a modified mortgage loan

payment, we work with the lender to implement the most appropriate payment plan to address the borrower’s
hardship situation. If the borrower does not have the capacity to make payments on a modified loan, we work
with the lender and borrower to sell the property at the best price to minimize the severity of our claim and
provide the borrower with a reasonable resolution.

After a delinquency is reported to us, or after a claim is received, for lenders that do not have claims
coverage commitment or have failed to qualify for their claims coverage commitment, we review and where
appropriate conduct further investigations to determine if there has been an event of underwriting
non-compliance, non-disclosure of relevant information or any misrepresentation of information provided during
the underwriting process. Our master policies provide that we may rescind coverage if there has been any failure
to comply with agreed underwriting criteria or in the event of fraud or misrepresentation involving the lender or
an agent of the lender. However, some lenders have claims coverage commitment, under which we are obligated
to pay the claim provided certain conditions are met. Such conditions include but are not limited to, meeting
minimum aggregate quality assurance benchmarks, minimum loan performance periods and compliance with
other conditions contained in the master policy. Irrespective of the claims coverage commitment, we may also
curtail or rescind coverage if we identify instances of extensive damage to the property, mismanagement of the
claims management processes or other systemic failures in the lenders’ systems, processes or controls. If such
issues are identified, the claim or delinquent loan file is reviewed to determine the appropriate action, including
potentially reducing the claim amount to be paid or rescinding the coverage. Generally, the issues we have
initially identified are reviewed with the lender and the lender has an opportunity to provide further information
or documentation to resolve the issue.

We also review a group or portfolio of insured loans if we believe there may be systemic misrepresentations

or non-compliance issues. If such issues are detected, we generally will work with the lender to develop an
agreed settlement with respect to the group of loans identified. Additionally, we may pursue recoveries from
borrowers for paid claims within the time period permitted by law and use third-party collection agencies to
assist in these recoveries.

Distribution and customers

We maintain a dedicated commercial function that promotes our mortgage insurance products in Australia

to lenders and mortgage originators.

There is concentration among a small group of banks that write most of the residential mortgage loans in

Australia. We maintain strong relationships within the major bank and regional bank channels, as well as
building societies, credit unions and non-bank mortgage originators. The four largest banks in Australia provide
the majority of the financing for residential mortgages in that country. Our mortgage insurance business in
Australia is concentrated in a small number of key customers. For the year ended December 31, 2020, our largest
customer represented 58% of gross written premiums. In October 2019, we renewed our supply and service
contract with this customer, effective January 1, 2020, for a term of three years. In November 2020, the contract
with our second largest customer, based on gross written premiums in 2020, was not renewed following a
request-for-proposal process. While the termination of the contract with this customer will reduce gross written
premiums in 2021, it is expected to modestly impact future financial results. This customer represented 11% of
our gross written premiums for the year ended December 31, 2020. No other customer represented 10% or more
of gross written premiums in 2020.

These banks continue to evaluate the utilization of mortgage insurance in connection with the

implementation of the bank capital standards in Australia based on the standards of the Basel Committee, and
this could impact both the size of the private mortgage insurance market in Australia and our market share. The
response of banks to the new capital standards will develop over time and this response could impact our
Australian mortgage insurance business.

10

11

Competition

Life insurance

The Australian flow mortgage insurance market is primarily served by us and one other private mortgage

insurance company, as well as certain lender-affiliated captive mortgage insurance companies. In addition, some
lenders self-insure certain high loan-to-value mortgage risks. On January 17, 2019, APRA authorized a third
private mortgage insurance company to conduct business in Australia, but the additional competitor did not have
a significant impact on our market share during the year ended December 31, 2020. We also operate in a similar
space as a government-owned enterprise. For related risks, see “Item 1A—Risk Factors—We compete with
government-owned and government-sponsored enterprises in our mortgage insurance businesses, and this may
put us at a competitive disadvantage on pricing and other terms and conditions.”

We compete primarily based upon our reputation for high quality customer service, meeting customer
service-level agreements for decision making on insurance applications, strong underwriting expertise and
flexibility in terms of product development and provision of support services.

U.S. Life Insurance

Our U.S. Life Insurance segment includes long-term care insurance, life insurance and fixed annuity
products. Given the delay in the China Oceanwide transaction, we are currently assessing long-term care
insurance offerings going forward. In 2016, we suspended sales of our traditional life insurance and fixed annuity
products; however, we continue to service our existing retained and reinsured blocks of business.

Selected financial information and operating performance measures regarding our U.S. Life Insurance
segment are included under “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition
and Results of Operations—U.S. Life Insurance segment.”

Long-term care insurance

We established ourselves as a leader in long-term care insurance over 40 years ago and remain a leading

insurer. We believe our experience, hedging strategies and reinsurance reduce some of the risks associated with
these products.

In-force rate actions

As part of our strategy for our long-term care insurance business, we have been implementing, and expect to

continue to pursue, significant premium rate increases and associated benefit reductions on older generation
blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on
earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer
blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their
original pricing. For all of these in-force rate action filings, we received 144 filing approvals from 37 states in
2020, representing a weighted-average increase of 34% on approximately $1,008 million in annualized in-force
premiums, or approximately $344 million of incremental annual premiums. We also submitted 245 new filings in
50 states in 2020 on approximately $1,485 million in annualized in-force premiums.

The approval process for in-force rate actions and the amount and timing of the premium rate increases and

associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a
rate increase can take a significant amount of time, and the approved amount may be phased in over time. After
approval, insureds are provided with written notice of the increase and increases are generally applied on the
insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the
implementation cycle is complete and are, therefore, expected to be realized over time. For certain risks related to
our long-term care insurance business and in-force rate increases, see “Item 1A—Risk Factors—Our financial
condition, results of operations, long-term care insurance products and/or our reputation in the market may be
adversely affected if we are unable to implement premium rate increases and associated benefit reductions on our
in-force long-term care insurance policies by enough or quickly enough.”

Life insurance products provide protection against financial hardship after the death of an insured. Some of

these products also offer a savings element that can help accumulate funds to meet future financial needs. We

previously sold traditional life insurance product offerings including universal and term life insurance. We also

previously sold an index universal life insurance product and linked-benefit products, combining a universal life

insurance contract with a long-term care insurance rider. We continue to hold in-force blocks of these products,

as well as in-force blocks of term universal life and whole life insurance.

Fixed annuities

Fixed annuity products help individuals create dependable income streams for life or for a specified period

of time and help them save and invest to achieve financial goals. We previously sold traditional fixed annuity

product offerings, including single premium deferred annuities, single premium immediate annuities and

structured settlements. We continue to hold in-force blocks of these products.

Single premium deferred annuities

Fixed single premium deferred annuities require a single premium payment at time of issue and provide an

accumulation period and an annuity payout period. The annuity payout period in these products may be either a

defined number of years, the annuitant’s lifetime or the longer of a defined number of years and the annuitant’s

lifetime. During the accumulation period, we credit the account value of the annuity with interest earned at a

crediting rate guaranteed for no less than one year at issue, but which may be guaranteed for up to seven years,

and thereafter is subject to annual crediting rate resets at our discretion. The crediting rate is based upon many

factors including prevailing market rates, spreads and targeted returns, subject to statutory and contractual

minimums. The majority of our fixed single premium deferred annuity contractholders retain their contracts for

five to ten years.

Fixed indexed annuities provide an annual crediting rate that is based on the performance of a defined

external index rather than a rate that is declared by the insurance company. The external indices we use are the

S&P 500® and the Barclay’s U.S. Low Volatility ER II Index. Our fixed indexed annuity product also may

provide guaranteed minimum withdrawal benefits (“GMWBs”).

Single premium immediate annuities

Single premium immediate annuities provide a fixed amount of income for either a defined number of years,

the annuitant’s lifetime or the longer of a defined number of years and the annuitant’s lifetime in exchange for a

single premium.

Structured settlements

Structured settlement annuity contracts provide an alternative to a lump sum settlement, generally in a

personal injury lawsuit or workers compensation claim, and typically are purchased by property and casualty

insurance companies for the benefit of an injured claimant. The structured settlements provide scheduled

payments over a fixed period or, in the case of a life-contingent structured settlement, for the life of the claimant

with a guaranteed minimum period of payments.

Runoff

The Runoff segment includes the results of products which have not been actively sold since 2011, but we

continue to service our existing blocks of business. These products primarily include variable annuity, variable

life insurance and corporate-owned life insurance, as well as funding agreements. We explore periodic issuances

of funding agreements for asset-liability management and liquidity purposes.

12

13

Competition

Life insurance

The Australian flow mortgage insurance market is primarily served by us and one other private mortgage

insurance company, as well as certain lender-affiliated captive mortgage insurance companies. In addition, some

lenders self-insure certain high loan-to-value mortgage risks. On January 17, 2019, APRA authorized a third

private mortgage insurance company to conduct business in Australia, but the additional competitor did not have

a significant impact on our market share during the year ended December 31, 2020. We also operate in a similar

space as a government-owned enterprise. For related risks, see “Item 1A—Risk Factors—We compete with

government-owned and government-sponsored enterprises in our mortgage insurance businesses, and this may

put us at a competitive disadvantage on pricing and other terms and conditions.”

We compete primarily based upon our reputation for high quality customer service, meeting customer

service-level agreements for decision making on insurance applications, strong underwriting expertise and

flexibility in terms of product development and provision of support services.

U.S. Life Insurance

Our U.S. Life Insurance segment includes long-term care insurance, life insurance and fixed annuity

products. Given the delay in the China Oceanwide transaction, we are currently assessing long-term care

insurance offerings going forward. In 2016, we suspended sales of our traditional life insurance and fixed annuity

products; however, we continue to service our existing retained and reinsured blocks of business.

Selected financial information and operating performance measures regarding our U.S. Life Insurance

segment are included under “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition

and Results of Operations—U.S. Life Insurance segment.”

We established ourselves as a leader in long-term care insurance over 40 years ago and remain a leading

insurer. We believe our experience, hedging strategies and reinsurance reduce some of the risks associated with

Long-term care insurance

these products.

In-force rate actions

As part of our strategy for our long-term care insurance business, we have been implementing, and expect to

continue to pursue, significant premium rate increases and associated benefit reductions on older generation

blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on

earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer

blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their

original pricing. For all of these in-force rate action filings, we received 144 filing approvals from 37 states in

2020, representing a weighted-average increase of 34% on approximately $1,008 million in annualized in-force

premiums, or approximately $344 million of incremental annual premiums. We also submitted 245 new filings in

50 states in 2020 on approximately $1,485 million in annualized in-force premiums.

The approval process for in-force rate actions and the amount and timing of the premium rate increases and

associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a

rate increase can take a significant amount of time, and the approved amount may be phased in over time. After

approval, insureds are provided with written notice of the increase and increases are generally applied on the

insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the

implementation cycle is complete and are, therefore, expected to be realized over time. For certain risks related to

our long-term care insurance business and in-force rate increases, see “Item 1A—Risk Factors—Our financial

condition, results of operations, long-term care insurance products and/or our reputation in the market may be

adversely affected if we are unable to implement premium rate increases and associated benefit reductions on our

in-force long-term care insurance policies by enough or quickly enough.”

Life insurance products provide protection against financial hardship after the death of an insured. Some of

these products also offer a savings element that can help accumulate funds to meet future financial needs. We
previously sold traditional life insurance product offerings including universal and term life insurance. We also
previously sold an index universal life insurance product and linked-benefit products, combining a universal life
insurance contract with a long-term care insurance rider. We continue to hold in-force blocks of these products,
as well as in-force blocks of term universal life and whole life insurance.

Fixed annuities

Fixed annuity products help individuals create dependable income streams for life or for a specified period

of time and help them save and invest to achieve financial goals. We previously sold traditional fixed annuity
product offerings, including single premium deferred annuities, single premium immediate annuities and
structured settlements. We continue to hold in-force blocks of these products.

Single premium deferred annuities

Fixed single premium deferred annuities require a single premium payment at time of issue and provide an
accumulation period and an annuity payout period. The annuity payout period in these products may be either a
defined number of years, the annuitant’s lifetime or the longer of a defined number of years and the annuitant’s
lifetime. During the accumulation period, we credit the account value of the annuity with interest earned at a
crediting rate guaranteed for no less than one year at issue, but which may be guaranteed for up to seven years,
and thereafter is subject to annual crediting rate resets at our discretion. The crediting rate is based upon many
factors including prevailing market rates, spreads and targeted returns, subject to statutory and contractual
minimums. The majority of our fixed single premium deferred annuity contractholders retain their contracts for
five to ten years.

Fixed indexed annuities provide an annual crediting rate that is based on the performance of a defined
external index rather than a rate that is declared by the insurance company. The external indices we use are the
S&P 500® and the Barclay’s U.S. Low Volatility ER II Index. Our fixed indexed annuity product also may
provide guaranteed minimum withdrawal benefits (“GMWBs”).

Single premium immediate annuities

Single premium immediate annuities provide a fixed amount of income for either a defined number of years,

the annuitant’s lifetime or the longer of a defined number of years and the annuitant’s lifetime in exchange for a
single premium.

Structured settlements

Structured settlement annuity contracts provide an alternative to a lump sum settlement, generally in a

personal injury lawsuit or workers compensation claim, and typically are purchased by property and casualty
insurance companies for the benefit of an injured claimant. The structured settlements provide scheduled
payments over a fixed period or, in the case of a life-contingent structured settlement, for the life of the claimant
with a guaranteed minimum period of payments.

Runoff

The Runoff segment includes the results of products which have not been actively sold since 2011, but we
continue to service our existing blocks of business. These products primarily include variable annuity, variable
life insurance and corporate-owned life insurance, as well as funding agreements. We explore periodic issuances
of funding agreements for asset-liability management and liquidity purposes.

12

13

Selected financial information and operating performance measures regarding our Runoff segment are
included under “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations— Runoff segment.”

Corporate and Other Activities

Our Corporate and Other activities include debt financing expenses that are incurred at the Genworth
Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the
results of other businesses that are managed outside our operating segments, including certain smaller
international mortgage insurance businesses and discontinued operations. We have a presence in the private
mortgage insurance market in Mexico and are also a minority shareholder of a joint venture partnership in India
that offers mortgage guarantees against borrower defaults on housing loans from mortgage lenders in India. The
financial impact of this joint venture was minimal during 2020, 2019 and 2018.

On December 12, 2019, we sold Genworth Canada to Brookfield Business Partners L.P. (“Brookfield”) for

approximately $1.7 billion in net cash proceeds. This business was reported as discontinued operations and its
financial position, results of operations and cash flows were separately reported for the applicable periods prior
to sale. See note 23 in our consolidated financial statements under “Part II—Item 8—Financial Statements and
Supplementary Data” for additional information.

Selected financial information regarding our Corporate and Other activities is included under “Part II—
Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Corporate
and Other Activities.”

International Operations

Product development and management

Our total revenues attributable to international operations for the years ended December 31, 2020, 2019 and
2018 were approximately $382 million, $395 million and $432 million, respectively. More information regarding
our international operations and revenue in our largest countries is presented in note 18 to the consolidated
financial statements under “Part II—Item 8—Financial Statements and Supplementary Data.”

Risk Management

Risk management is a critical part of our business. We have an enterprise risk management framework that

includes risk management processes relating to economic capital analysis, strategic initiatives and risks
(including emerging and/or disruptive risks), product development and pricing, management of in-force business,
including certain mitigating strategies and claims risk management, credit risk management, asset-liability
management, liquidity management, investment activities (including derivatives), model risk management,
portfolio diversification, underwriting and loss mitigation, financial databases and information systems,
information technology risk management, data security and cybersecurity, business acquisitions and dispositions,
operational risk assessment capabilities and overall operational risk management.

We have identified the following as the most significant risk types to our business: credit risk, market risk,
insurance risk, housing risk, strategic risk, operational risk, model risk and information technology risk. Related
to these identified risk types, we have classified our top risks and frequently report these risks to both senior
management and the risk committee of our Board of Directors. In addition, we have developed a process and
models to identify and manage emerging risks, that seek to quantify and calibrate all risks in their probability of
occurrence.

Our risk management framework includes seven key components: risk type key attributes (to ensure full
coverage); identification of risk exposures to identify top risks; business strategy and planning; governance; risk
quantification (both qualitative and quantitative); risk appetite; and stress testing. Our risk management

framework also includes an assessment and implementation of company and business risk appetites, the

identification and assessment of risks, a proactive decision process to determine which risks are acceptable to be

retained (based on risk and reward considerations, among other factors) and the ongoing management,

monitoring and reporting of material risks.

Our risk management practices are an important component in the management of our legacy U.S. life

insurance product lines, including in-force blocks of long-term care and life insurance and fixed annuity

products. We continue to pursue significant premium rate increases and associated benefit reductions on our

older generation long-term care insurance in-force block. In support of this initiative, we have developed

processes that include experience studies to analyze emerging experience, reviews of in-force product

performance, an assumption review process, and comprehensive monitoring and reporting. In connection with

these processes, our risk management team works closely with the U.S. life insurance business to enhance proper

governance and to better align the development of assumptions with the identified risks. In addition, the business

has been focused on enhancing the effectiveness of its claims processes as it relates to its long-term care

insurance business.

As part of our evaluation of overall in-force product performance, new product initiatives and risk

mitigation alternatives, we monitor regulatory and rating agency capital models as well as internal economic

capital models to determine the appropriate level of risk-adjusted capital required. We utilize our internal

economic capital model and a stress testing framework to assess the risk of loss to our capital resources based

upon the portfolio of risks we underwrite and retain and upon our asset and operational risk profiles. Our

commitment to risk management involves the ongoing review and expansion of internal risk management

capabilities with a focus on improving infrastructure and modeling.

Our risk management process is also involved in the development and introduction of new products and

services. We have established a product development process that specifies a series of required analyses, reviews

and approvals for any new product. Significant product introductions, measured either by volume, level or type

of risk, require approval by our senior management team at either the business or enterprise level. We also use a

similar process to introduce changes to existing products and to offer existing products in new markets and

through new distribution channels.

In addition, we initiate special reviews when a product’s performance fails to meet the indicators we

established during that product’s introductory review process. If a product does not meet our performance

criteria, we consider adjustments in pricing, design and marketing or ultimately discontinuing sales of that

product. We review our underwriting, pricing, distribution and risk selection strategies on a regular basis in an

effort to ensure that our products remain competitive and consistent with our marketing and profitability

objectives. For example, in our mortgage insurance businesses, we review the profitability of lender accounts to

assess whether our business with these lenders is achieving anticipated performance levels and to identify trends

requiring remedial action, including changes to underwriting guidelines, product mix or other customer

performance. We adhere to risk management disciplines and aim to leverage these efforts in our distribution and

management of our products.

Asset-liability management and other market risks

We maintain segmented investment portfolios for the majority of our product lines. This enables us to

perform an ongoing analysis of the interest rate, foreign exchange, equity, volatility and liquidity risks associated

with each major product line, in addition to credit risks for our overall enterprise versus approved limits. We

analyze the behavior of our liability cash flows across a wide variety of scenarios, reflecting policy features and

expected policyholder behavior. Similarly, we analyze the potential cash flow variability of our asset portfolios

across a wide variety of scenarios. We believe this analysis shows the sensitivity of both our assets and liabilities

14

15

Selected financial information and operating performance measures regarding our Runoff segment are

included under “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of

Operations— Runoff segment.”

Corporate and Other Activities

Our Corporate and Other activities include debt financing expenses that are incurred at the Genworth

Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the

results of other businesses that are managed outside our operating segments, including certain smaller

international mortgage insurance businesses and discontinued operations. We have a presence in the private

mortgage insurance market in Mexico and are also a minority shareholder of a joint venture partnership in India

that offers mortgage guarantees against borrower defaults on housing loans from mortgage lenders in India. The

financial impact of this joint venture was minimal during 2020, 2019 and 2018.

On December 12, 2019, we sold Genworth Canada to Brookfield Business Partners L.P. (“Brookfield”) for

approximately $1.7 billion in net cash proceeds. This business was reported as discontinued operations and its

financial position, results of operations and cash flows were separately reported for the applicable periods prior

to sale. See note 23 in our consolidated financial statements under “Part II—Item 8—Financial Statements and

Supplementary Data” for additional information.

Selected financial information regarding our Corporate and Other activities is included under “Part II—

Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Corporate

and Other Activities.”

International Operations

Our total revenues attributable to international operations for the years ended December 31, 2020, 2019 and

2018 were approximately $382 million, $395 million and $432 million, respectively. More information regarding

our international operations and revenue in our largest countries is presented in note 18 to the consolidated

financial statements under “Part II—Item 8—Financial Statements and Supplementary Data.”

Risk Management

Risk management is a critical part of our business. We have an enterprise risk management framework that

includes risk management processes relating to economic capital analysis, strategic initiatives and risks

(including emerging and/or disruptive risks), product development and pricing, management of in-force business,

including certain mitigating strategies and claims risk management, credit risk management, asset-liability

management, liquidity management, investment activities (including derivatives), model risk management,

portfolio diversification, underwriting and loss mitigation, financial databases and information systems,

information technology risk management, data security and cybersecurity, business acquisitions and dispositions,

operational risk assessment capabilities and overall operational risk management.

We have identified the following as the most significant risk types to our business: credit risk, market risk,

insurance risk, housing risk, strategic risk, operational risk, model risk and information technology risk. Related

to these identified risk types, we have classified our top risks and frequently report these risks to both senior

management and the risk committee of our Board of Directors. In addition, we have developed a process and

models to identify and manage emerging risks, that seek to quantify and calibrate all risks in their probability of

occurrence.

Our risk management framework includes seven key components: risk type key attributes (to ensure full

coverage); identification of risk exposures to identify top risks; business strategy and planning; governance; risk

quantification (both qualitative and quantitative); risk appetite; and stress testing. Our risk management

framework also includes an assessment and implementation of company and business risk appetites, the
identification and assessment of risks, a proactive decision process to determine which risks are acceptable to be
retained (based on risk and reward considerations, among other factors) and the ongoing management,
monitoring and reporting of material risks.

Our risk management practices are an important component in the management of our legacy U.S. life

insurance product lines, including in-force blocks of long-term care and life insurance and fixed annuity
products. We continue to pursue significant premium rate increases and associated benefit reductions on our
older generation long-term care insurance in-force block. In support of this initiative, we have developed
processes that include experience studies to analyze emerging experience, reviews of in-force product
performance, an assumption review process, and comprehensive monitoring and reporting. In connection with
these processes, our risk management team works closely with the U.S. life insurance business to enhance proper
governance and to better align the development of assumptions with the identified risks. In addition, the business
has been focused on enhancing the effectiveness of its claims processes as it relates to its long-term care
insurance business.

As part of our evaluation of overall in-force product performance, new product initiatives and risk
mitigation alternatives, we monitor regulatory and rating agency capital models as well as internal economic
capital models to determine the appropriate level of risk-adjusted capital required. We utilize our internal
economic capital model and a stress testing framework to assess the risk of loss to our capital resources based
upon the portfolio of risks we underwrite and retain and upon our asset and operational risk profiles. Our
commitment to risk management involves the ongoing review and expansion of internal risk management
capabilities with a focus on improving infrastructure and modeling.

Product development and management

Our risk management process is also involved in the development and introduction of new products and
services. We have established a product development process that specifies a series of required analyses, reviews
and approvals for any new product. Significant product introductions, measured either by volume, level or type
of risk, require approval by our senior management team at either the business or enterprise level. We also use a
similar process to introduce changes to existing products and to offer existing products in new markets and
through new distribution channels.

In addition, we initiate special reviews when a product’s performance fails to meet the indicators we
established during that product’s introductory review process. If a product does not meet our performance
criteria, we consider adjustments in pricing, design and marketing or ultimately discontinuing sales of that
product. We review our underwriting, pricing, distribution and risk selection strategies on a regular basis in an
effort to ensure that our products remain competitive and consistent with our marketing and profitability
objectives. For example, in our mortgage insurance businesses, we review the profitability of lender accounts to
assess whether our business with these lenders is achieving anticipated performance levels and to identify trends
requiring remedial action, including changes to underwriting guidelines, product mix or other customer
performance. We adhere to risk management disciplines and aim to leverage these efforts in our distribution and
management of our products.

Asset-liability management and other market risks

We maintain segmented investment portfolios for the majority of our product lines. This enables us to
perform an ongoing analysis of the interest rate, foreign exchange, equity, volatility and liquidity risks associated
with each major product line, in addition to credit risks for our overall enterprise versus approved limits. We
analyze the behavior of our liability cash flows across a wide variety of scenarios, reflecting policy features and
expected policyholder behavior. Similarly, we analyze the potential cash flow variability of our asset portfolios
across a wide variety of scenarios. We believe this analysis shows the sensitivity of both our assets and liabilities

14

15

to changes in economic environments and enables us to manage our assets and liabilities more effectively,
including but not limited to, investing in assets that have maturities that align more closely with our longer
duration liabilities. In addition, we deploy hedging programs to mitigate certain economic risks associated with
our assets, liabilities and capital. For example, we partially hedge the equity and interest rate risks in our variable
annuity products, as well as interest rate risks in our long-term care insurance products. We also enter into
hedging transactions related to foreign exchange risk associated with dividend payments from our international
subsidiaries and/or other proceeds from our subsidiaries.

Liquidity management

We monitor the cash and highly marketable investment positions in each of our operating companies against
operating targets that are designed to ensure that we will have the cash necessary to meet our obligations as they
come due. This includes a focus on each legal entity and stress testing related to liquidity, obligations, assets and
collateral requirements. The targets are set based on stress scenarios that have the effect of increasing our
expected cash outflows and decreasing our expected cash inflows. In addition, we monitor the ability of our
operating companies to provide the dividends needed to meet the cash needs of our holding companies and
analyze the impact of reduced dividend levels and other potential factors under stress scenarios that may impact
the liquidity priorities of our holding companies, in particular Genworth Holdings (the issuer of our outstanding
debt). For example, given the performance of our U.S. life insurance businesses, dividends will not be paid by
these businesses for the foreseeable future. In addition, our mortgage insurance businesses suspended dividends
for the majority of 2020 due primarily to the adverse economic effects caused by COVID-19. We will continue to
closely monitor our liquidity given the reduced dividend levels from our mortgage insurance businesses in 2020
and the uncertainty of future dividends in 2021. Future dividends, the timing of their distribution and their impact
on holding company liquidity will depend on the economic recovery from COVID-19, regulatory requirements
and restrictions, and prepayment obligations under the secured promissory note issued in connection with the
AXA settlement agreement, among other factors.

Portfolio diversification and investments

We use new business and in-force product limits to manage our risk concentrations and to manage product,
business, geographic and other risk exposures. We manage unique product exposures in our business segments.
For example, in managing our mortgage insurance risk exposure, we monitor geographic concentrations in our
portfolio and the condition of housing markets in each major area of the countries in which we operate. We also
monitor fundamental price indicators and factors that affect home prices and their affordability at the national
and regional levels.

In addition, our assets are managed within limitations to control credit risk and to avoid excessive

concentration in our investment portfolio using defined investment and concentration guidelines that help ensure
disciplined underwriting and oversight standards. We seek diversification in our investment portfolio by
investing in multiple asset classes and limiting the size of exposures. The portfolios are tailored to match, as
closely as possible, the cash flow characteristics of our liabilities. We actively monitor exposures, changes in
credit characteristics and shifts in markets.

We utilize surveillance and quantitative credit risk analytics to identify concentrations and drive

diversification of portfolio risks with respect to issuer, sector, rating and geographic concentration. Issuer credit
limits for the investment portfolios of each of our businesses (based on business capital, portfolio size and
relative issuer cumulative default risk) govern and control credit concentrations in our portfolio. Derivatives
counterparty risk and reinsurer credit exposure are integrated into issuer limits as well. We also limit and actively
monitor country and sovereign exposures in our global portfolio and evaluate and adjust our risk profiles, where
needed, in response to geopolitical and economic developments in the relevant areas. We also pay close attention
to investment exposures by each significant subsidiary and undertake stress testing associated with potential
needs for asset sales due to liability withdrawals, collateral posting requirements or other obligations.

Underwriting and loss mitigation

Underwriting guidelines for all products are routinely reviewed and adjusted as necessary with the aim of

providing policyholders with the appropriate premium and benefit structure. We have separate underwriting units

in our businesses that develop ongoing processes to assess the effectiveness of underwriting guidelines against

original pricing assumptions and any impacts to actual product performance and profitability. We seek external

reviews from the reinsurance and consulting communities and utilize their experience to calibrate our risk taking

to expected outcomes.

Our risk and loss mitigation activities include ensuring that new policies are issued based on accurate

information and that policy benefit payments are paid in accordance with the policy contract terms. We also have

quality assurance programs that test policies and products to assess whether established underwriting guidelines

are followed.

Financial databases and information systems

Our financial databases and information systems technology are important tools in our risk management.

For example, we have substantial experience in offering long-term care and individual life insurance products

with large databases of claims experience. We have extensive data on the performance of mortgage originations

in the United States and other major markets we operate in which we use to assess the drivers and distributions of

delinquency and claims experience.

We use technology, in some cases proprietary technology, to manage variations in our underwriting process.

For example, in our mortgage insurance businesses, we use borrower credit bureau information, proprietary

mortgage scoring models and/or our extensive database of mortgage insurance experience along with external

data including rating agency data to evaluate new products and portfolio performance. In the United States, our

proprietary mortgage scoring models use the borrower’s credit score and additional data concerning the

borrower, the loan and the property, including but not limited to: loan-to-value ratio; loan type; loan amount;

property type; occupancy status and borrower employment, to predict the likelihood of having to pay a claim. In

addition, our models take into consideration macroeconomic variables such as unemployment, interest rate and

home price changes. We believe assessing housing market and mortgage loan attributes across a range of

economic outcomes enhances our ability to manage and price for risk. We perform portfolio analysis on an

ongoing basis to determine if modifications are required to our product offerings, underwriting guidelines or

premium rates.

Model risk management

We rely extensively on complex models to calculate the value of assets and liabilities (including reserves),

capital levels and other financial metrics, as well as for other purposes. We have a model risk management

framework in place that is designed to ensure model risks are appropriately identified, appropriate governance is

in place, key models are maintained, model validation programs exist (that include relevant model issues and

remediation plans, if necessary) and model risk is reported to management and our Board of Directors on a

timely basis. Independent model validation teams assess on a systematic basis the appropriate use of models,

taking into account the risks associated with assumptions, algorithms and process controls supporting the use of

the models. See “Item 1A—Risk Factors—If the models used in our businesses are inaccurate or there are

differences and/or variability in loss development compared to our model estimates and actuarial assumptions, it

could have a material adverse impact on our business, results of operations and financial condition.”

Strategic risks and business dispositions

When we consider a disposition of a block/book of business or entity, we use various business, financial and

risk management disciplines to evaluate the merits of the proposals and assess its strategic fit with our current

16

17

to changes in economic environments and enables us to manage our assets and liabilities more effectively,

including but not limited to, investing in assets that have maturities that align more closely with our longer

duration liabilities. In addition, we deploy hedging programs to mitigate certain economic risks associated with

our assets, liabilities and capital. For example, we partially hedge the equity and interest rate risks in our variable

annuity products, as well as interest rate risks in our long-term care insurance products. We also enter into

hedging transactions related to foreign exchange risk associated with dividend payments from our international

subsidiaries and/or other proceeds from our subsidiaries.

Liquidity management

We monitor the cash and highly marketable investment positions in each of our operating companies against

operating targets that are designed to ensure that we will have the cash necessary to meet our obligations as they

come due. This includes a focus on each legal entity and stress testing related to liquidity, obligations, assets and

collateral requirements. The targets are set based on stress scenarios that have the effect of increasing our

expected cash outflows and decreasing our expected cash inflows. In addition, we monitor the ability of our

operating companies to provide the dividends needed to meet the cash needs of our holding companies and

analyze the impact of reduced dividend levels and other potential factors under stress scenarios that may impact

the liquidity priorities of our holding companies, in particular Genworth Holdings (the issuer of our outstanding

debt). For example, given the performance of our U.S. life insurance businesses, dividends will not be paid by

these businesses for the foreseeable future. In addition, our mortgage insurance businesses suspended dividends

for the majority of 2020 due primarily to the adverse economic effects caused by COVID-19. We will continue to

closely monitor our liquidity given the reduced dividend levels from our mortgage insurance businesses in 2020

and the uncertainty of future dividends in 2021. Future dividends, the timing of their distribution and their impact

on holding company liquidity will depend on the economic recovery from COVID-19, regulatory requirements

and restrictions, and prepayment obligations under the secured promissory note issued in connection with the

AXA settlement agreement, among other factors.

Portfolio diversification and investments

We use new business and in-force product limits to manage our risk concentrations and to manage product,

business, geographic and other risk exposures. We manage unique product exposures in our business segments.

For example, in managing our mortgage insurance risk exposure, we monitor geographic concentrations in our

portfolio and the condition of housing markets in each major area of the countries in which we operate. We also

monitor fundamental price indicators and factors that affect home prices and their affordability at the national

and regional levels.

In addition, our assets are managed within limitations to control credit risk and to avoid excessive

concentration in our investment portfolio using defined investment and concentration guidelines that help ensure

disciplined underwriting and oversight standards. We seek diversification in our investment portfolio by

investing in multiple asset classes and limiting the size of exposures. The portfolios are tailored to match, as

closely as possible, the cash flow characteristics of our liabilities. We actively monitor exposures, changes in

credit characteristics and shifts in markets.

We utilize surveillance and quantitative credit risk analytics to identify concentrations and drive

diversification of portfolio risks with respect to issuer, sector, rating and geographic concentration. Issuer credit

limits for the investment portfolios of each of our businesses (based on business capital, portfolio size and

relative issuer cumulative default risk) govern and control credit concentrations in our portfolio. Derivatives

counterparty risk and reinsurer credit exposure are integrated into issuer limits as well. We also limit and actively

monitor country and sovereign exposures in our global portfolio and evaluate and adjust our risk profiles, where

needed, in response to geopolitical and economic developments in the relevant areas. We also pay close attention

to investment exposures by each significant subsidiary and undertake stress testing associated with potential

needs for asset sales due to liability withdrawals, collateral posting requirements or other obligations.

Underwriting and loss mitigation

Underwriting guidelines for all products are routinely reviewed and adjusted as necessary with the aim of
providing policyholders with the appropriate premium and benefit structure. We have separate underwriting units
in our businesses that develop ongoing processes to assess the effectiveness of underwriting guidelines against
original pricing assumptions and any impacts to actual product performance and profitability. We seek external
reviews from the reinsurance and consulting communities and utilize their experience to calibrate our risk taking
to expected outcomes.

Our risk and loss mitigation activities include ensuring that new policies are issued based on accurate
information and that policy benefit payments are paid in accordance with the policy contract terms. We also have
quality assurance programs that test policies and products to assess whether established underwriting guidelines
are followed.

Financial databases and information systems

Our financial databases and information systems technology are important tools in our risk management.
For example, we have substantial experience in offering long-term care and individual life insurance products
with large databases of claims experience. We have extensive data on the performance of mortgage originations
in the United States and other major markets we operate in which we use to assess the drivers and distributions of
delinquency and claims experience.

We use technology, in some cases proprietary technology, to manage variations in our underwriting process.

For example, in our mortgage insurance businesses, we use borrower credit bureau information, proprietary
mortgage scoring models and/or our extensive database of mortgage insurance experience along with external
data including rating agency data to evaluate new products and portfolio performance. In the United States, our
proprietary mortgage scoring models use the borrower’s credit score and additional data concerning the
borrower, the loan and the property, including but not limited to: loan-to-value ratio; loan type; loan amount;
property type; occupancy status and borrower employment, to predict the likelihood of having to pay a claim. In
addition, our models take into consideration macroeconomic variables such as unemployment, interest rate and
home price changes. We believe assessing housing market and mortgage loan attributes across a range of
economic outcomes enhances our ability to manage and price for risk. We perform portfolio analysis on an
ongoing basis to determine if modifications are required to our product offerings, underwriting guidelines or
premium rates.

Model risk management

We rely extensively on complex models to calculate the value of assets and liabilities (including reserves),

capital levels and other financial metrics, as well as for other purposes. We have a model risk management
framework in place that is designed to ensure model risks are appropriately identified, appropriate governance is
in place, key models are maintained, model validation programs exist (that include relevant model issues and
remediation plans, if necessary) and model risk is reported to management and our Board of Directors on a
timely basis. Independent model validation teams assess on a systematic basis the appropriate use of models,
taking into account the risks associated with assumptions, algorithms and process controls supporting the use of
the models. See “Item 1A—Risk Factors—If the models used in our businesses are inaccurate or there are
differences and/or variability in loss development compared to our model estimates and actuarial assumptions, it
could have a material adverse impact on our business, results of operations and financial condition.”

Strategic risks and business dispositions

When we consider a disposition of a block/book of business or entity, we use various business, financial and

risk management disciplines to evaluate the merits of the proposals and assess its strategic fit with our current

16

17

business model. We have a review process that includes a series of required analyses, reviews and approvals
similar to those employed for new product introductions. We also evaluate risks associated with strategic options
under consideration. As part of our strategic risk assessment, we also identify, manage and report on emerging
risks and disruptive risks that may impact the current, or future, liabilities of certain business model assumptions.

Operations and Technology

Service and support

Operational risk management

We have risk management programs in place to review the ongoing operation of our businesses in the event

of loss or other adverse consequences on business outcomes resulting from inadequate or failed internal
processes, people and systems or from external events. We provide risk assessments, together with control
reviews, to provide an indication as to how the risks need to be managed. Significant events impacting our
businesses are assessed in terms of their impact on our risk profile. Controls are used to mitigate or minimize the
consequence of the risk in the event of its occurrence. Investigative teams are maintained in our various locations
to address potential operational risk incidents from both internal and external sources.

Information technology risk management

Technology continues to expand and plays an ever increasing role in our business. To help mitigate some of

the rising levels of risk, in 2018 we identified information technology risk management as a separate risk type,
developed an information technology risk management framework similar to that utilized by all other risk types,
and have continued to dedicate more time and resources to this risk area. We have established an independent
risk profile for information technology and routinely report our assessments to the risk committee of our Board
of Directors. Our internal audit department works closely with our risk management team on audit planning,
audit findings and overall adherence to our information technology programs and procedures. This collaborative
effort seeks to mitigate some of the growing threats in our information technology environment.

Information security

Technology plays a critical role in our business operations. To protect the confidentiality, integrity and

availability of our technology infrastructure and information, we leverage the operational risk and technology
risk management programs to identify, monitor and manage risk.

Information security is a subset of information technology risk management and involves the protection of

information assets against unacceptable risks and cybersecurity threats. Information assets include both
information itself in the form of computer data, written materials, knowledge and supporting processes, and the
information technology systems, networks, other electronic devices and storage media used to store, process,
retrieve and transmit that information. These information assets play a vital role in our business conduct. As
more information is used and shared by our employees, customers and suppliers, both within and outside our
company, a concerted effort must be made to protect that information. Confidentiality, integrity and availability
of information are essential to maintaining our reputation, legal position and ability to conduct our operations.
Various regulatory bodies have also been increasing their focus on information security and overall information
technology management. We strive to adhere to high standards of information security governance, treating
information security as a critical business issue and creating a security-conscious environment. We also strive to
demonstrate to our customers and third parties that we deal with information security in a proactive manner and
apply fundamental principles, such as assuming ultimate responsibility for information security, implementing
controls and cybersecurity programs that are proportionate to risk. We have attempted to design our
cybersecurity program to protect and preserve the confidentiality, integrity and availability of data and systems,
although there can be no assurances that our cybersecurity program will be effective. See “Item 1A—Risk
Factors—Our computer systems may fail or be compromised, and unanticipated problems could materially
adversely impact our disaster recovery systems and business continuity plans, which could damage our
reputation, impair our ability to conduct business effectively and materially adversely affect our financial
condition and results of operations” for a discussion of the risks relating to information security.

In our mortgage insurance businesses, we have introduced technology enabled services to help our

customers (lenders and servicers) as well as our consumers (borrowers and homeowners). Our U.S. mortgage

insurance business heavily relies upon information technology and a number of critical aspects are highly

automated. The business accepts insurance applications, issues approvals, processes claims and reconciles

premium remittance through electronic submission. In order to facilitate these processes, our U.S. mortgage

insurance business has established direct connections to many of its customers and servicers’ systems so they can

select from our mortgage insurance products and communicate directly with us. We also provide our customers

secure access to our web-based portals to facilitate transactions and provide customers with access to their

account information. Technology advancements have allowed us to reduce application approval turn-times and

error rates and to enhance our customers’ ease of doing business with us. Through our secure internet-enabled

information systems and data warehouses, servicers can transact business with us in a timely manner. In the

United States, proprietary decision models have helped generate loss mitigation strategies for distressed

borrowers. Our models use information from various third-party sources, such as consumer credit agencies, to

indicate borrower willingness and capacity to fulfill debt obligations. Identification of specific borrower groups

that are likely to work their loans out allows us to create custom outreach strategies to achieve a favorable loss

mitigation outcome.

Operating centers

Reinsurance

We have established scalable, low-cost operating centers in Virginia and North Carolina. In addition,

through an arrangement with an outsourcing provider, we have a team of professionals in India and the

Philippines who provide a variety of services primarily to our U.S. life insurance businesses and certain corporate

functions, including data entry, transaction processing and functional support.

We reinsure a portion of our annuity, life insurance, long-term care insurance and mortgage insurance with

unaffiliated reinsurers. In a reinsurance transaction, a reinsurer agrees to indemnify another insurer for part or all

of its liability under a policy or policies it has issued for an agreed upon premium. We participate in reinsurance

activities in order to minimize exposure to significant risks, limit losses, and provide additional capacity for

future growth. We also obtain reinsurance to meet certain capital requirements, including sometimes utilizing

intercompany reinsurance agreements to manage our statutory capital positions. However, these intercompany

agreements do not have an effect on our consolidated U.S. generally accepted accounting principles (“U.S.

GAAP”) financial statements.

We enter into various agreements with reinsurers that cover individual risks, group risks or defined blocks

of business, primarily on a coinsurance, yearly renewable term, excess of loss or catastrophe excess basis. These

reinsurance agreements spread risk and minimize the effect of losses. Under the terms of the reinsurance

agreements, the reinsurer agrees to reimburse us for the ceded amount in the event a claim is paid. Cessions

under reinsurance agreements do not discharge our obligations as the primary insurer. In the event that reinsurers

do not meet their obligations under the terms of the reinsurance agreements, reinsurance recoverable balances

could become uncollectible. Our amounts recoverable from reinsurers represent receivables from and/or reserves

ceded to reinsurers. The amounts recoverable from reinsurers, net of allowance for credit losses, were

$16.8 billion and $17.1 billion as of December 31, 2020 and 2019, respectively.

We focus on obtaining reinsurance from a diverse group of reinsurers. We regularly evaluate the financial

condition of our reinsurers and monitor concentration risk with our reinsurers at least annually.

18

19

business model. We have a review process that includes a series of required analyses, reviews and approvals

similar to those employed for new product introductions. We also evaluate risks associated with strategic options

under consideration. As part of our strategic risk assessment, we also identify, manage and report on emerging

risks and disruptive risks that may impact the current, or future, liabilities of certain business model assumptions.

Operational risk management

We have risk management programs in place to review the ongoing operation of our businesses in the event

of loss or other adverse consequences on business outcomes resulting from inadequate or failed internal

processes, people and systems or from external events. We provide risk assessments, together with control

reviews, to provide an indication as to how the risks need to be managed. Significant events impacting our

businesses are assessed in terms of their impact on our risk profile. Controls are used to mitigate or minimize the

consequence of the risk in the event of its occurrence. Investigative teams are maintained in our various locations

to address potential operational risk incidents from both internal and external sources.

Information technology risk management

Technology continues to expand and plays an ever increasing role in our business. To help mitigate some of

the rising levels of risk, in 2018 we identified information technology risk management as a separate risk type,

developed an information technology risk management framework similar to that utilized by all other risk types,

and have continued to dedicate more time and resources to this risk area. We have established an independent

risk profile for information technology and routinely report our assessments to the risk committee of our Board

of Directors. Our internal audit department works closely with our risk management team on audit planning,

audit findings and overall adherence to our information technology programs and procedures. This collaborative

effort seeks to mitigate some of the growing threats in our information technology environment.

Information security

Technology plays a critical role in our business operations. To protect the confidentiality, integrity and

availability of our technology infrastructure and information, we leverage the operational risk and technology

risk management programs to identify, monitor and manage risk.

Information security is a subset of information technology risk management and involves the protection of

information assets against unacceptable risks and cybersecurity threats. Information assets include both

information itself in the form of computer data, written materials, knowledge and supporting processes, and the

information technology systems, networks, other electronic devices and storage media used to store, process,

retrieve and transmit that information. These information assets play a vital role in our business conduct. As

more information is used and shared by our employees, customers and suppliers, both within and outside our

company, a concerted effort must be made to protect that information. Confidentiality, integrity and availability

of information are essential to maintaining our reputation, legal position and ability to conduct our operations.

Various regulatory bodies have also been increasing their focus on information security and overall information

technology management. We strive to adhere to high standards of information security governance, treating

information security as a critical business issue and creating a security-conscious environment. We also strive to

demonstrate to our customers and third parties that we deal with information security in a proactive manner and

apply fundamental principles, such as assuming ultimate responsibility for information security, implementing

controls and cybersecurity programs that are proportionate to risk. We have attempted to design our

cybersecurity program to protect and preserve the confidentiality, integrity and availability of data and systems,

although there can be no assurances that our cybersecurity program will be effective. See “Item 1A—Risk

Factors—Our computer systems may fail or be compromised, and unanticipated problems could materially

adversely impact our disaster recovery systems and business continuity plans, which could damage our

reputation, impair our ability to conduct business effectively and materially adversely affect our financial

condition and results of operations” for a discussion of the risks relating to information security.

Operations and Technology

Service and support

In our mortgage insurance businesses, we have introduced technology enabled services to help our
customers (lenders and servicers) as well as our consumers (borrowers and homeowners). Our U.S. mortgage
insurance business heavily relies upon information technology and a number of critical aspects are highly
automated. The business accepts insurance applications, issues approvals, processes claims and reconciles
premium remittance through electronic submission. In order to facilitate these processes, our U.S. mortgage
insurance business has established direct connections to many of its customers and servicers’ systems so they can
select from our mortgage insurance products and communicate directly with us. We also provide our customers
secure access to our web-based portals to facilitate transactions and provide customers with access to their
account information. Technology advancements have allowed us to reduce application approval turn-times and
error rates and to enhance our customers’ ease of doing business with us. Through our secure internet-enabled
information systems and data warehouses, servicers can transact business with us in a timely manner. In the
United States, proprietary decision models have helped generate loss mitigation strategies for distressed
borrowers. Our models use information from various third-party sources, such as consumer credit agencies, to
indicate borrower willingness and capacity to fulfill debt obligations. Identification of specific borrower groups
that are likely to work their loans out allows us to create custom outreach strategies to achieve a favorable loss
mitigation outcome.

Operating centers

We have established scalable, low-cost operating centers in Virginia and North Carolina. In addition,

through an arrangement with an outsourcing provider, we have a team of professionals in India and the
Philippines who provide a variety of services primarily to our U.S. life insurance businesses and certain corporate
functions, including data entry, transaction processing and functional support.

Reinsurance

We reinsure a portion of our annuity, life insurance, long-term care insurance and mortgage insurance with
unaffiliated reinsurers. In a reinsurance transaction, a reinsurer agrees to indemnify another insurer for part or all
of its liability under a policy or policies it has issued for an agreed upon premium. We participate in reinsurance
activities in order to minimize exposure to significant risks, limit losses, and provide additional capacity for
future growth. We also obtain reinsurance to meet certain capital requirements, including sometimes utilizing
intercompany reinsurance agreements to manage our statutory capital positions. However, these intercompany
agreements do not have an effect on our consolidated U.S. generally accepted accounting principles (“U.S.
GAAP”) financial statements.

We enter into various agreements with reinsurers that cover individual risks, group risks or defined blocks
of business, primarily on a coinsurance, yearly renewable term, excess of loss or catastrophe excess basis. These
reinsurance agreements spread risk and minimize the effect of losses. Under the terms of the reinsurance
agreements, the reinsurer agrees to reimburse us for the ceded amount in the event a claim is paid. Cessions
under reinsurance agreements do not discharge our obligations as the primary insurer. In the event that reinsurers
do not meet their obligations under the terms of the reinsurance agreements, reinsurance recoverable balances
could become uncollectible. Our amounts recoverable from reinsurers represent receivables from and/or reserves
ceded to reinsurers. The amounts recoverable from reinsurers, net of allowance for credit losses, were
$16.8 billion and $17.1 billion as of December 31, 2020 and 2019, respectively.

We focus on obtaining reinsurance from a diverse group of reinsurers. We regularly evaluate the financial

condition of our reinsurers and monitor concentration risk with our reinsurers at least annually.

18

19

U.S. Life Insurance

U.S. Mortgage Insurance

Our U.S. life insurance subsidiaries have established standards and criteria for our use and selection of
reinsurers. In order for a new reinsurer to participate in our current program, without collateralization, we require
the reinsurer to have a Standard & Poor’s Financial Services, LLC (“S&P”) rating of “A-” or better or a Moody’s
Investors Service, Inc. (“Moody’s”) rating of “A3” or better and a minimum capital and surplus level of
$350 million. If the reinsurer does not have these ratings, we generally require them to post collateral as
described below. In addition, we may require collateral from a reinsurer to mitigate credit/collectability risk.
Typically, in such cases, the reinsurer must either maintain minimum specified ratings and risk-based capital
(“RBC”) ratios or provide the specified quality and quantity of collateral. Similarly, we have also required
collateral in connection with books of business sold pursuant to indemnity reinsurance agreements. We have
been required to post collateral when purchasing books of business.

Reinsurers that are not licensed, accredited or authorized in the state of domicile of the reinsured (“ceding

company”) are required to post statutorily prescribed forms of collateral for the ceding company to receive
reinsurance credit. The three primary forms of collateral are: (i) qualifying assets held in a reserve credit trust;
(ii) irrevocable, unconditional, evergreen letters of credit issued by a qualified U.S. financial institution; and
(iii) assets held by the ceding company in a segregated funds withheld account. Collateral must be maintained in
accordance with the rules of the ceding company’s state of domicile and must be readily accessible by the ceding
company to cover claims under the reinsurance agreement. Accordingly, our U.S. life insurance subsidiaries
require unauthorized reinsurers that are not so licensed, accredited or authorized to post acceptable forms of
collateral to support their reinsurance obligations to us.

The following table sets forth our exposure to our principal reinsurers in our U.S. life insurance subsidiaries

as of December 31, 2020:

(Amounts in millions)

UFLIC (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RGA Reinsurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Reinsurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Riversource Life Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Munich American Reassurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance
recoverable

$13,415
1,730
519
416
277

(1) We have several significant reinsurance transactions with Union Fidelity Life Insurance Company
(“UFLIC”), an affiliate of our former parent, General Electric Company (“GE”), which results in a
significant concentration of reinsurance risk. UFLIC’s obligations to us are secured by trust accounts. See
note 8 in our consolidated financial statements under “Part II—Item 8—Financial Statements and
Supplementary Data” for additional details.

In addition to reinsuring mortality risk on our life insurance products, we have executed external reinsurance

agreements to reinsure 20% of all sales of our individual long-term care insurance products that have been
introduced since early 2013. The extent of each risk retained by us depends on our evaluation of the specific risk,
subject, in certain circumstances, to maximum retention limits based on the characteristics of coverages. We also
have external reinsurance on some older blocks of long-term care insurance business which includes a treaty on a
yearly renewable term basis on business that was written between 1998 and 2003. This yearly renewable term
reinsurance provides coverage for claims on those policies for 15 years after the policy was written. After 15
years, reinsurance coverage ends for policies not on claim, while reinsurance coverage continues for policies on
claim until the claim ends. The 15-year coverage on the policies written in 2003 expired in 2018; therefore, any
new claims will not have reinsurance coverage under this treaty.

We reinsure a portion of our U.S. mortgage insurance risk in order to obtain credit towards the financial

requirements of the GSEs’ private mortgage insurer eligibility requirements (“PMIERs”). The reinsurance

coverage is provided by a panel of reinsurance partners each currently rated “A-” or better by S&P or A.M. Best

Company, Inc. (“A.M. Best”). The transactions are structured as excess of loss coverage where both the

attachment and detachment points of the ceded risk tier are within the PMIERs capital requirements at inception.

Each reinsurance treaty has a term of 10 years and grants to Genworth a unilateral right to commute prior to the

full term, subject to certain performance triggers.

On October 22, 2020, our U.S. mortgage insurance business obtained $350 million of fully collateralized

excess of loss reinsurance coverage from Triangle Re 2020-1 Ltd. (“Triangle Re 2020”) on a portfolio of existing

mortgage insurance policies written from January 2020 through August 2020. On November 25, 2019, our U.S.

mortgage insurance business executed a similar credit risk transfer transaction and obtained $303 million of fully

collateralized excess of loss reinsurance coverage from Triangle Re 2019-1 Ltd. (“Triangle Re 2019”) on a

portfolio of existing mortgage insurance policies written from January 2019 through September 2019. The

reinsurance coverages were financed by issuing mortgage insurance-linked notes to unaffiliated investors. The

notes under both transactions are non-recourse to us and our affiliates.

Reinsurance transactions, including the transactions with Triangle Re 2020 and Triangle Re 2019 discussed

above, provided an aggregate of approximately $936 million of PMIERs capital credit as of December 31, 2020.

Australia Mortgage Insurance

In our mortgage insurance business in Australia, all of the reinsurance treaties that cover its flow insurance

business are on an excess of loss basis that are designed to attach under stress loss events. In addition, in 2018,

our mortgage insurance business in Australia also obtained reinsurance on a quota-share basis for a structured

insurance transaction where it is in a secondary loss position. As of December 31, 2020, our Australian mortgage

insurance business had five excess of loss treaties, all with a one-year base term with options to extend for five to

nine years, with an aggregate coverage limit of AUD$800 million. This coverage is provided by approximately

20 reinsurance partners, each currently rated “A-” or better by S&P and/or A.M. Best. All of the treaties qualify

for full capital credit offset within APRA’s regulatory capital requirements. On January 1, 2021, our mortgage

insurance business in Australia renewed its five excess of loss reinsurance treaties with the same base term,

extension options and aggregate coverage limit.

For additional information related to reinsurance, see note 8 in our consolidated financial statements under

“Part II—Item 8—Financial Statements and Supplementary Data.”

Ratings

Financial Strength Ratings

Ratings with respect to the financial strength of operating subsidiaries are an important factor in establishing

the competitive position of insurance companies. Ratings are important to maintaining public confidence in us

and our ability to market our products. Rating organizations review the financial performance and condition of

most insurers and provide opinions regarding financial strength, operating performance and ability to meet

obligations to policyholders.

As of February 17, 2021, our principal mortgage insurance subsidiaries were rated in terms of financial

strength by S&P and Moody’s as follows:

Company

S&P rating

Moody’s rating

Genworth Mortgage Insurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . BB+ (Marginal) Baa3 (Adequate)

Genworth Financial Mortgage Insurance Pty Limited (Australia) (1) . . . . . . .

A(Strong)

N/A

(1) Also rated “A” by Fitch Ratings, Inc. (“Fitch”).

20

21

U.S. Life Insurance

U.S. Mortgage Insurance

We reinsure a portion of our U.S. mortgage insurance risk in order to obtain credit towards the financial

requirements of the GSEs’ private mortgage insurer eligibility requirements (“PMIERs”). The reinsurance
coverage is provided by a panel of reinsurance partners each currently rated “A-” or better by S&P or A.M. Best
Company, Inc. (“A.M. Best”). The transactions are structured as excess of loss coverage where both the
attachment and detachment points of the ceded risk tier are within the PMIERs capital requirements at inception.
Each reinsurance treaty has a term of 10 years and grants to Genworth a unilateral right to commute prior to the
full term, subject to certain performance triggers.

On October 22, 2020, our U.S. mortgage insurance business obtained $350 million of fully collateralized
excess of loss reinsurance coverage from Triangle Re 2020-1 Ltd. (“Triangle Re 2020”) on a portfolio of existing
mortgage insurance policies written from January 2020 through August 2020. On November 25, 2019, our U.S.
mortgage insurance business executed a similar credit risk transfer transaction and obtained $303 million of fully
collateralized excess of loss reinsurance coverage from Triangle Re 2019-1 Ltd. (“Triangle Re 2019”) on a
portfolio of existing mortgage insurance policies written from January 2019 through September 2019. The
reinsurance coverages were financed by issuing mortgage insurance-linked notes to unaffiliated investors. The
notes under both transactions are non-recourse to us and our affiliates.

Reinsurance transactions, including the transactions with Triangle Re 2020 and Triangle Re 2019 discussed
above, provided an aggregate of approximately $936 million of PMIERs capital credit as of December 31, 2020.

Australia Mortgage Insurance

In our mortgage insurance business in Australia, all of the reinsurance treaties that cover its flow insurance

business are on an excess of loss basis that are designed to attach under stress loss events. In addition, in 2018,
our mortgage insurance business in Australia also obtained reinsurance on a quota-share basis for a structured
insurance transaction where it is in a secondary loss position. As of December 31, 2020, our Australian mortgage
insurance business had five excess of loss treaties, all with a one-year base term with options to extend for five to
nine years, with an aggregate coverage limit of AUD$800 million. This coverage is provided by approximately
20 reinsurance partners, each currently rated “A-” or better by S&P and/or A.M. Best. All of the treaties qualify
for full capital credit offset within APRA’s regulatory capital requirements. On January 1, 2021, our mortgage
insurance business in Australia renewed its five excess of loss reinsurance treaties with the same base term,
extension options and aggregate coverage limit.

For additional information related to reinsurance, see note 8 in our consolidated financial statements under

“Part II—Item 8—Financial Statements and Supplementary Data.”

Ratings

Financial Strength Ratings

Ratings with respect to the financial strength of operating subsidiaries are an important factor in establishing

the competitive position of insurance companies. Ratings are important to maintaining public confidence in us
and our ability to market our products. Rating organizations review the financial performance and condition of
most insurers and provide opinions regarding financial strength, operating performance and ability to meet
obligations to policyholders.

As of February 17, 2021, our principal mortgage insurance subsidiaries were rated in terms of financial

strength by S&P and Moody’s as follows:

Company

S&P rating

Moody’s rating

Our U.S. life insurance subsidiaries have established standards and criteria for our use and selection of

reinsurers. In order for a new reinsurer to participate in our current program, without collateralization, we require

the reinsurer to have a Standard & Poor’s Financial Services, LLC (“S&P”) rating of “A-” or better or a Moody’s

Investors Service, Inc. (“Moody’s”) rating of “A3” or better and a minimum capital and surplus level of

$350 million. If the reinsurer does not have these ratings, we generally require them to post collateral as

described below. In addition, we may require collateral from a reinsurer to mitigate credit/collectability risk.

Typically, in such cases, the reinsurer must either maintain minimum specified ratings and risk-based capital

(“RBC”) ratios or provide the specified quality and quantity of collateral. Similarly, we have also required

collateral in connection with books of business sold pursuant to indemnity reinsurance agreements. We have

been required to post collateral when purchasing books of business.

Reinsurers that are not licensed, accredited or authorized in the state of domicile of the reinsured (“ceding

company”) are required to post statutorily prescribed forms of collateral for the ceding company to receive

reinsurance credit. The three primary forms of collateral are: (i) qualifying assets held in a reserve credit trust;

(ii) irrevocable, unconditional, evergreen letters of credit issued by a qualified U.S. financial institution; and

(iii) assets held by the ceding company in a segregated funds withheld account. Collateral must be maintained in

accordance with the rules of the ceding company’s state of domicile and must be readily accessible by the ceding

company to cover claims under the reinsurance agreement. Accordingly, our U.S. life insurance subsidiaries

require unauthorized reinsurers that are not so licensed, accredited or authorized to post acceptable forms of

collateral to support their reinsurance obligations to us.

The following table sets forth our exposure to our principal reinsurers in our U.S. life insurance subsidiaries

as of December 31, 2020:

(Amounts in millions)

UFLIC (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RGA Reinsurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General Reinsurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Riversource Life Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Munich American Reassurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance

recoverable

$13,415

1,730

519

416

277

(1) We have several significant reinsurance transactions with Union Fidelity Life Insurance Company

(“UFLIC”), an affiliate of our former parent, General Electric Company (“GE”), which results in a

significant concentration of reinsurance risk. UFLIC’s obligations to us are secured by trust accounts. See

note 8 in our consolidated financial statements under “Part II—Item 8—Financial Statements and

Supplementary Data” for additional details.

In addition to reinsuring mortality risk on our life insurance products, we have executed external reinsurance

agreements to reinsure 20% of all sales of our individual long-term care insurance products that have been

introduced since early 2013. The extent of each risk retained by us depends on our evaluation of the specific risk,

subject, in certain circumstances, to maximum retention limits based on the characteristics of coverages. We also

have external reinsurance on some older blocks of long-term care insurance business which includes a treaty on a

yearly renewable term basis on business that was written between 1998 and 2003. This yearly renewable term

reinsurance provides coverage for claims on those policies for 15 years after the policy was written. After 15

years, reinsurance coverage ends for policies not on claim, while reinsurance coverage continues for policies on

claim until the claim ends. The 15-year coverage on the policies written in 2003 expired in 2018; therefore, any

new claims will not have reinsurance coverage under this treaty.

Genworth Mortgage Insurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . BB+ (Marginal) Baa3 (Adequate)
Genworth Financial Mortgage Insurance Pty Limited (Australia) (1) . . . . . . .

A(Strong)

N/A

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(1) Also rated “A” by Fitch Ratings, Inc. (“Fitch”).

As of February 17, 2021, our principal life insurance subsidiaries were rated in terms of financial strength

by A.M. Best as follows:

Company

Genworth Life Insurance Company . . . . . . . . . . . . . . .
Genworth Life and Annuity Insurance Company . . . .
Genworth Life Insurance Company of New York . . . .

A.M. Best rating

C++ (Marginal)
B(Fair)
C++ (Marginal)

The financial strength ratings of our operating companies are not designed to be, and do not serve as,
measures of protection or valuation offered to investors. These financial strength ratings should not be relied on
with respect to making an investment in our securities.

S&P states that an insurer rated “A” (Strong) has strong financial security characteristics that outweigh any
vulnerabilities and is highly likely to have the ability to meet financial commitments. Insurers rated “A” (Strong)
or “BB” (Marginal) have strong or marginal financial security characteristics, respectively. The “A” and “BB”
ranges are the third- and fifth-highest of nine financial strength rating ranges assigned by S&P, which range from
“AAA” to “R.” A plus (+) or minus (-) shows relative standing within a rating category. These suffixes are not
added to ratings in the “AAA” category or to ratings below the “CCC” category. Accordingly, the “A” and
“BB+” ratings are the sixth- and eleventh-highest of S&P’s 21 ratings categories.

Moody’s states that insurance companies rated “Baa” (Adequate) offer adequate financial security. The
“Baa” (Adequate) rating is the fourth-highest of nine financial strength rating ranges assigned by Moody’s,
which range from “Aaa” to “C.” Numeric modifiers are used to refer to the ranking within the groups, with 1
being the highest and 3 being the lowest. These modifiers are not added to ratings in the “Aaa” category or to
ratings below the “Caa” category. Accordingly, the “Baa3” rating is the tenth-highest of Moody’s 21 ratings
categories.

A.M. Best states that its “B” (Fair) rating is assigned to companies that have, in its opinion, a fair ability to
meet their ongoing insurance obligations while “C++” (Marginal) is assigned to those companies that have, in its
opinion, a marginal ability to meet their ongoing insurance obligations. The “B” (Fair) and “C++” (Marginal)
ratings are the seventh- and ninth-highest of 15 ratings assigned by A.M. Best, which range from “A++” to “F.”

We also solicit a rating from Fitch for our Australian mortgage insurance subsidiary. Fitch states that “A”
(Strong) rated insurance companies are viewed as possessing strong capacity to meet policyholder and contract
obligations. The “A” rating category is the third-highest of nine financial strength rating categories, which range
from “AAA” to “C.” The symbol (+) or (-) may be appended to a rating to indicate the relative position of a
credit within a rating category. These suffixes are not added to ratings in the “AAA” category or to ratings below
the “B” category. Accordingly, the “A” rating is the sixth-highest of Fitch’s 21 ratings categories.

We also solicit a rating from HR Ratings on a local scale for Genworth Seguros de Credito a la Vivienda

S.A. de C.V., our Mexican mortgage insurance subsidiary, with a short-term rating of “HR1” and long-term
rating of “HR AA.” For short-term ratings, HR Ratings states that “HR1” rated companies are viewed as
exhibiting high capacity for timely payment of debt obligations in the short term and maintain low credit risk.
The “HR1” short-term rating category is the highest of six short-term rating categories, which range from “HR1”
to “HR D.” For long-term ratings, HR Ratings states that “HR AA” rated companies are viewed as having high
credit quality and offer high safety for timely payment of debt obligations and maintain low credit risk under
adverse economic scenarios. The “HR AA” long-term rating is the second-highest of HR Rating’s eight long-
term rating categories, which range from “HR AAA” to “HR D.”

notched lower than the financial strength ratings of our primary operating subsidiaries, reflecting Genworth

Holdings’ reliance on dividends from the operating subsidiaries to service its debt obligations. The unsecured

debt ratings may be used in evaluating Genworth Holdings’ debt as a fixed-income investment.

Credit ratings are assigned based on the risk that an entity may not meet its contractual financial obligations

as they come due. Rating organizations review the financial performance and credit condition of issuers to

provide opinions regarding financial strength, operating performance and the ability to meet debt holder

obligations.

As of February 17, 2021, our senior unsecured debt was assigned a credit rating of “B-” (Speculative) by

S&P and “Caa1” (Speculative) by Moody’s.

S&P states that an issuer rated “B” (Speculative) is more vulnerable to adverse business, financial and

economic conditions but currently has the capacity to meet financial commitments. The “B-” rating is the sixth

highest of ten credit rating ranges assigned by S&P, which range from “AAA” to “D.”

Moody’s states that an issuer rated “Caa” (Speculative) from its Global Rating Scale is considered

speculative and is subject to very high credit risk. The “Caa1” rating is the seventh highest out of nine credit

ratings assigned by Moody’s, which range from “Aaa” to “C.”

Ratings actions

On September 4, 2020, A.M. Best affirmed the financial strength ratings of our principal life insurance

subsidiaries, Genworth Life Insurance Company (“GLIC”) “C++” (Marginal), Genworth Life and Annuity

Insurance Company (“GLAIC”) “B” (Fair) and Genworth Life Insurance Company of New York (“GLICNY”)

“C++” (Marginal). A.M. Best also affirmed the credit rating of Genworth Financial and Genworth Holdings and

provided a stable outlook.

On May 19, 2020, Moody’s downgraded the credit rating of Genworth Holdings’ senior unsecured debt

from “B2” (Speculative) to “B3” (Speculative) and revised their outlook to developing. The downgrade reflects

liquidity concerns at Genworth Holdings and our ability to service debt maturities due in 2021 given our current

cash and liquid asset position, along with a reduced dividend capacity. On January 13, 2021, Moody’s took

additional action and downgraded the credit rating of Genworth Holdings’ senior unsecured debt from “B3”

(Speculative) to “Caa1” (Speculative). The additional downgrade reflects the stalled deal with China Oceanwide

and the need to raise additional liquidity to address debt maturities due in 2021 and beyond.

On May 15, 2020, Moody’s affirmed the “Baa3” (Adequate) financial strength rating of Genworth

Mortgage Insurance Corporation (“GMICO”), our principal U.S. mortgage insurance subsidiary, but changed

their outlook from positive to stable. On May 15, 2020, S&P affirmed the “BB+” (Marginal) financial strength

rating of GMICO but modified its outlook from Creditwatch developing to Creditwatch negative.

On May 12, 2020, Fitch downgraded the financial strength rating of Genworth Financial Mortgage

Insurance Pty Limited (“GFMIPL”), our principal Australian mortgage insurance subsidiary, to “A” (Strong)

from “A+” (Strong) and maintained a negative outlook. The downgrade reflects the pandemic-driven economic

impact on GFMIPL’s financial performance and earnings. In addition, S&P affirmed its “A” (Strong) rating of

GFMIPL but revised their outlook to negative from stable on May 15, 2020.

Credit Ratings

In addition to the financial strength ratings for our operating subsidiaries, rating agencies also assign credit
ratings to the debt issued by our intermediate holding company, Genworth Holdings. These ratings are typically

On April 18, 2020, we notified S&P and Moody’s of our decision to discontinue the solicitation of their

financial strength ratings of our principal life insurance subsidiaries. On April 24, 2020, Moody’s downgraded all

of our principal life insurance subsidiaries, which reflected Moody’s view that our life insurance subsidiaries are

22

23

As of February 17, 2021, our principal life insurance subsidiaries were rated in terms of financial strength

by A.M. Best as follows:

Company

Genworth Life Insurance Company . . . . . . . . . . . . . . .

C++ (Marginal)

Genworth Life and Annuity Insurance Company . . . .

B(Fair)

Genworth Life Insurance Company of New York . . . .

C++ (Marginal)

A.M. Best rating

The financial strength ratings of our operating companies are not designed to be, and do not serve as,

measures of protection or valuation offered to investors. These financial strength ratings should not be relied on

with respect to making an investment in our securities.

S&P states that an insurer rated “A” (Strong) has strong financial security characteristics that outweigh any

vulnerabilities and is highly likely to have the ability to meet financial commitments. Insurers rated “A” (Strong)

or “BB” (Marginal) have strong or marginal financial security characteristics, respectively. The “A” and “BB”

ranges are the third- and fifth-highest of nine financial strength rating ranges assigned by S&P, which range from

“AAA” to “R.” A plus (+) or minus (-) shows relative standing within a rating category. These suffixes are not

added to ratings in the “AAA” category or to ratings below the “CCC” category. Accordingly, the “A” and

“BB+” ratings are the sixth- and eleventh-highest of S&P’s 21 ratings categories.

Moody’s states that insurance companies rated “Baa” (Adequate) offer adequate financial security. The

“Baa” (Adequate) rating is the fourth-highest of nine financial strength rating ranges assigned by Moody’s,

which range from “Aaa” to “C.” Numeric modifiers are used to refer to the ranking within the groups, with 1

being the highest and 3 being the lowest. These modifiers are not added to ratings in the “Aaa” category or to

ratings below the “Caa” category. Accordingly, the “Baa3” rating is the tenth-highest of Moody’s 21 ratings

categories.

A.M. Best states that its “B” (Fair) rating is assigned to companies that have, in its opinion, a fair ability to

meet their ongoing insurance obligations while “C++” (Marginal) is assigned to those companies that have, in its

opinion, a marginal ability to meet their ongoing insurance obligations. The “B” (Fair) and “C++” (Marginal)

ratings are the seventh- and ninth-highest of 15 ratings assigned by A.M. Best, which range from “A++” to “F.”

We also solicit a rating from Fitch for our Australian mortgage insurance subsidiary. Fitch states that “A”

(Strong) rated insurance companies are viewed as possessing strong capacity to meet policyholder and contract

obligations. The “A” rating category is the third-highest of nine financial strength rating categories, which range

from “AAA” to “C.” The symbol (+) or (-) may be appended to a rating to indicate the relative position of a

credit within a rating category. These suffixes are not added to ratings in the “AAA” category or to ratings below

the “B” category. Accordingly, the “A” rating is the sixth-highest of Fitch’s 21 ratings categories.

We also solicit a rating from HR Ratings on a local scale for Genworth Seguros de Credito a la Vivienda

S.A. de C.V., our Mexican mortgage insurance subsidiary, with a short-term rating of “HR1” and long-term

rating of “HR AA.” For short-term ratings, HR Ratings states that “HR1” rated companies are viewed as

exhibiting high capacity for timely payment of debt obligations in the short term and maintain low credit risk.

The “HR1” short-term rating category is the highest of six short-term rating categories, which range from “HR1”

to “HR D.” For long-term ratings, HR Ratings states that “HR AA” rated companies are viewed as having high

credit quality and offer high safety for timely payment of debt obligations and maintain low credit risk under

adverse economic scenarios. The “HR AA” long-term rating is the second-highest of HR Rating’s eight long-

term rating categories, which range from “HR AAA” to “HR D.”

notched lower than the financial strength ratings of our primary operating subsidiaries, reflecting Genworth
Holdings’ reliance on dividends from the operating subsidiaries to service its debt obligations. The unsecured
debt ratings may be used in evaluating Genworth Holdings’ debt as a fixed-income investment.

Credit ratings are assigned based on the risk that an entity may not meet its contractual financial obligations

as they come due. Rating organizations review the financial performance and credit condition of issuers to
provide opinions regarding financial strength, operating performance and the ability to meet debt holder
obligations.

As of February 17, 2021, our senior unsecured debt was assigned a credit rating of “B-” (Speculative) by

S&P and “Caa1” (Speculative) by Moody’s.

S&P states that an issuer rated “B” (Speculative) is more vulnerable to adverse business, financial and
economic conditions but currently has the capacity to meet financial commitments. The “B-” rating is the sixth
highest of ten credit rating ranges assigned by S&P, which range from “AAA” to “D.”

Moody’s states that an issuer rated “Caa” (Speculative) from its Global Rating Scale is considered
speculative and is subject to very high credit risk. The “Caa1” rating is the seventh highest out of nine credit
ratings assigned by Moody’s, which range from “Aaa” to “C.”

Ratings actions

On September 4, 2020, A.M. Best affirmed the financial strength ratings of our principal life insurance

subsidiaries, Genworth Life Insurance Company (“GLIC”) “C++” (Marginal), Genworth Life and Annuity
Insurance Company (“GLAIC”) “B” (Fair) and Genworth Life Insurance Company of New York (“GLICNY”)
“C++” (Marginal). A.M. Best also affirmed the credit rating of Genworth Financial and Genworth Holdings and
provided a stable outlook.

On May 19, 2020, Moody’s downgraded the credit rating of Genworth Holdings’ senior unsecured debt
from “B2” (Speculative) to “B3” (Speculative) and revised their outlook to developing. The downgrade reflects
liquidity concerns at Genworth Holdings and our ability to service debt maturities due in 2021 given our current
cash and liquid asset position, along with a reduced dividend capacity. On January 13, 2021, Moody’s took
additional action and downgraded the credit rating of Genworth Holdings’ senior unsecured debt from “B3”
(Speculative) to “Caa1” (Speculative). The additional downgrade reflects the stalled deal with China Oceanwide
and the need to raise additional liquidity to address debt maturities due in 2021 and beyond.

On May 15, 2020, Moody’s affirmed the “Baa3” (Adequate) financial strength rating of Genworth
Mortgage Insurance Corporation (“GMICO”), our principal U.S. mortgage insurance subsidiary, but changed
their outlook from positive to stable. On May 15, 2020, S&P affirmed the “BB+” (Marginal) financial strength
rating of GMICO but modified its outlook from Creditwatch developing to Creditwatch negative.

On May 12, 2020, Fitch downgraded the financial strength rating of Genworth Financial Mortgage
Insurance Pty Limited (“GFMIPL”), our principal Australian mortgage insurance subsidiary, to “A” (Strong)
from “A+” (Strong) and maintained a negative outlook. The downgrade reflects the pandemic-driven economic
impact on GFMIPL’s financial performance and earnings. In addition, S&P affirmed its “A” (Strong) rating of
GFMIPL but revised their outlook to negative from stable on May 15, 2020.

Credit Ratings

In addition to the financial strength ratings for our operating subsidiaries, rating agencies also assign credit

ratings to the debt issued by our intermediate holding company, Genworth Holdings. These ratings are typically

On April 18, 2020, we notified S&P and Moody’s of our decision to discontinue the solicitation of their
financial strength ratings of our principal life insurance subsidiaries. On April 24, 2020, Moody’s downgraded all
of our principal life insurance subsidiaries, which reflected Moody’s view that our life insurance subsidiaries are

22

23

•

•

•

•

regularly evaluating our asset class mix and pursuing additional investment classes when prudent; and

continuously monitoring asset quality and market conditions that could affect our assets.

We are exposed to two primary sources of investment risk:

credit risk relating to the uncertainty associated with the continued ability of a given issuer to make

timely payments of principal and interest and

interest rate risk relating to the market price and cash flow variability associated with changes in

market interest rates.

We manage credit risk by analyzing issuers, transaction structures and any associated collateral. We

continually evaluate the probability of credit default and estimated loss in the event of such a default, which

provides us with early notification of worsening credits. We also manage credit risk through industry and issuer

diversification and asset allocation practices. For commercial mortgage loans, we manage credit risk through

property type, geographic region and product type diversification and asset allocation.

We manage interest rate risk by monitoring the relationship between the duration of our assets and the

duration of our liabilities, seeking to manage interest rate risk in both rising and falling interest rate

environments, and utilizing various derivative strategies, where appropriate and available. For further

information on our management of interest rate risk, see “Part II—Item 7A—Quantitative and Qualitative

Disclosures About Market Risk.”

Fixed maturity securities

Fixed maturity securities, which are classified as available-for-sale, including tax-exempt bonds, consisting

principally of publicly traded and privately placed debt securities, represented 82% and 81%, respectively, of

total cash, cash equivalents, restricted cash and invested assets as of December 31, 2020 and 2019.

We invest in privately placed fixed maturity securities to increase diversification and obtain higher yields

than can ordinarily be obtained with comparable public market securities. Generally, private placements provide

us with protective covenants, call protection features and, where applicable, a higher level of collateral. However,

our private placements are not as freely transferable as public securities because of restrictions imposed by

federal and state securities laws, the terms of the securities and the characteristics of the private market.

likely to suffer near term declines in profitability and capital generation due to COVID-19 and the related
economic shock. While we do not provide non-public information to rating agencies issuing unsolicited ratings,
we cannot ensure that rating agencies will not downgrade and/or discontinue their ratings of our company or our
insurance subsidiaries on an unsolicited basis going forward. Likewise, these and other agencies may also rate
our company or our insurance subsidiaries on a solicited or an unsolicited basis. S&P, Moody’s, A.M. Best, Fitch
and HR Ratings review their ratings periodically and we cannot assure you that we will maintain our current
ratings in the future.

For information on adverse credit rating actions related to our Company, see “Item 1A—Risk Factors—
Adverse rating agency actions have resulted in a loss of business and adversely affected our results of operations,
financial condition and business and future adverse rating actions could have a further and more significant
adverse impact on us.”

Investments

Organization

Our investments department includes asset management, portfolio management, derivatives, risk

management, operations, accounting and other functions. Under the direction of our Chief Investment Officer, it
is responsible for managing the assets in our various portfolios, including establishing investment and derivatives
policies and strategies, reviewing asset-liability management, performing asset allocation for our domestic
subsidiaries and coordinating investment activities with our international subsidiaries.

We use both internal and external asset managers to take advantage of expertise in particular asset classes or

to leverage country-specific investing capabilities. We internally manage certain asset classes for our domestic
insurance operations, including public government, municipal and corporate securities, structured securities,
commercial mortgage loans, privately placed debt securities, equity securities and derivatives. We utilize external
asset managers primarily for our Australia mortgage insurance investment portfolio, as well as for select asset
classes. Management of our Australia mortgage insurance investment operations is overseen by the investment
committees reporting to the board of directors of the applicable non-U.S. legal entities in consultation with our
Chief Investment Officer. The majority of the assets in our Australian mortgage insurance business are managed
by unaffiliated investment managers located in Australia. As of December 31, 2020 and 2019, approximately 3%
of our invested assets were held by our international businesses and were invested primarily in non-U.S.-
denominated securities.

We manage our assets to meet diversification, credit quality, yield and liquidity requirements of our policy
and contract liabilities by investing primarily in fixed maturity securities, including government, municipal and
corporate bonds and mortgage-backed and other asset-backed securities. We also hold mortgage loans on
commercial real estate and other invested assets, which include derivatives, bank loans, limited partnerships and
short-term investments. Investments for our particular insurance company subsidiaries are required to comply
with our risk management requirements, as well as applicable insurance laws and regulations.

Our primary investment objective is to meet our obligations to policyholders and contractholders while
increasing value to our stockholders by investing in a diversified, high quality portfolio, comprised primarily of
income producing securities and other assets. Our investment strategy focuses on:

• managing interest rate risk, as appropriate, through monitoring asset durations relative to policyholder

and contractholder obligations;

selecting assets based on fundamental, research-driven strategies;

emphasizing fixed-income, low-volatility assets while pursuing active strategies to enhance yield;

•

•

• maintaining sufficient liquidity to meet unexpected financial obligations;

24

25

•

•

regularly evaluating our asset class mix and pursuing additional investment classes when prudent; and

continuously monitoring asset quality and market conditions that could affect our assets.

We are exposed to two primary sources of investment risk:

•

•

credit risk relating to the uncertainty associated with the continued ability of a given issuer to make
timely payments of principal and interest and

interest rate risk relating to the market price and cash flow variability associated with changes in
market interest rates.

We manage credit risk by analyzing issuers, transaction structures and any associated collateral. We
continually evaluate the probability of credit default and estimated loss in the event of such a default, which
provides us with early notification of worsening credits. We also manage credit risk through industry and issuer
diversification and asset allocation practices. For commercial mortgage loans, we manage credit risk through
property type, geographic region and product type diversification and asset allocation.

We manage interest rate risk by monitoring the relationship between the duration of our assets and the

duration of our liabilities, seeking to manage interest rate risk in both rising and falling interest rate
environments, and utilizing various derivative strategies, where appropriate and available. For further
information on our management of interest rate risk, see “Part II—Item 7A—Quantitative and Qualitative
Disclosures About Market Risk.”

Fixed maturity securities

Fixed maturity securities, which are classified as available-for-sale, including tax-exempt bonds, consisting

principally of publicly traded and privately placed debt securities, represented 82% and 81%, respectively, of
total cash, cash equivalents, restricted cash and invested assets as of December 31, 2020 and 2019.

We invest in privately placed fixed maturity securities to increase diversification and obtain higher yields

than can ordinarily be obtained with comparable public market securities. Generally, private placements provide
us with protective covenants, call protection features and, where applicable, a higher level of collateral. However,
our private placements are not as freely transferable as public securities because of restrictions imposed by
federal and state securities laws, the terms of the securities and the characteristics of the private market.

likely to suffer near term declines in profitability and capital generation due to COVID-19 and the related

economic shock. While we do not provide non-public information to rating agencies issuing unsolicited ratings,

we cannot ensure that rating agencies will not downgrade and/or discontinue their ratings of our company or our

insurance subsidiaries on an unsolicited basis going forward. Likewise, these and other agencies may also rate

our company or our insurance subsidiaries on a solicited or an unsolicited basis. S&P, Moody’s, A.M. Best, Fitch

and HR Ratings review their ratings periodically and we cannot assure you that we will maintain our current

ratings in the future.

For information on adverse credit rating actions related to our Company, see “Item 1A—Risk Factors—

Adverse rating agency actions have resulted in a loss of business and adversely affected our results of operations,

financial condition and business and future adverse rating actions could have a further and more significant

adverse impact on us.”

Investments

Organization

Our investments department includes asset management, portfolio management, derivatives, risk

management, operations, accounting and other functions. Under the direction of our Chief Investment Officer, it

is responsible for managing the assets in our various portfolios, including establishing investment and derivatives

policies and strategies, reviewing asset-liability management, performing asset allocation for our domestic

subsidiaries and coordinating investment activities with our international subsidiaries.

We use both internal and external asset managers to take advantage of expertise in particular asset classes or

to leverage country-specific investing capabilities. We internally manage certain asset classes for our domestic

insurance operations, including public government, municipal and corporate securities, structured securities,

commercial mortgage loans, privately placed debt securities, equity securities and derivatives. We utilize external

asset managers primarily for our Australia mortgage insurance investment portfolio, as well as for select asset

classes. Management of our Australia mortgage insurance investment operations is overseen by the investment

committees reporting to the board of directors of the applicable non-U.S. legal entities in consultation with our

Chief Investment Officer. The majority of the assets in our Australian mortgage insurance business are managed

by unaffiliated investment managers located in Australia. As of December 31, 2020 and 2019, approximately 3%

of our invested assets were held by our international businesses and were invested primarily in non-U.S.-

denominated securities.

We manage our assets to meet diversification, credit quality, yield and liquidity requirements of our policy

and contract liabilities by investing primarily in fixed maturity securities, including government, municipal and

corporate bonds and mortgage-backed and other asset-backed securities. We also hold mortgage loans on

commercial real estate and other invested assets, which include derivatives, bank loans, limited partnerships and

short-term investments. Investments for our particular insurance company subsidiaries are required to comply

with our risk management requirements, as well as applicable insurance laws and regulations.

Our primary investment objective is to meet our obligations to policyholders and contractholders while

increasing value to our stockholders by investing in a diversified, high quality portfolio, comprised primarily of

income producing securities and other assets. Our investment strategy focuses on:

• managing interest rate risk, as appropriate, through monitoring asset durations relative to policyholder

and contractholder obligations;

selecting assets based on fundamental, research-driven strategies;

•

•

emphasizing fixed-income, low-volatility assets while pursuing active strategies to enhance yield;

• maintaining sufficient liquidity to meet unexpected financial obligations;

24

25

The following table presents our public, private and total fixed maturity securities by the Nationally
Recognized Statistical Rating Organizations (“NRSRO”) designations and/or equivalent ratings, as well as the
percentage, based upon fair value that each designation comprises. Certain fixed maturity securities that are not
rated by an NRSRO are shown based upon internally prepared credit evaluations.

(Amounts in millions)

NRSRO designation

December 31,

2020

2019

Amortized
cost

Fair
value

% of
total

Amortized
cost

Fair
value

% of
total

Public fixed maturity securities
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCC and lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,458
3,382
9,584
15,461
1,468
76
5

$ 9,488
3,983
12,080
18,551
1,641

21% $ 8,771
3,139
9
10,386
26
13,398
40
959
4
41
74 —
12
6 —

$10,160
3,536
12,315
15,041
1,040

24%
8
29
36
3

44 —
26 —

Total public fixed maturity securities . . . . . . . . . . .

$37,434

$45,823

100% $36,706

$42,162

100%

equity securities.

Private fixed maturity securities
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCC and lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,594
2,221
5,080
8,131
977
223
16

$ 1,666
2,422
5,626
8,979
1,043
219
12 —

8% $ 1,471
2,093
12
4,799
28
7,755
46
800
5
76
1
—

8%
12
29
46
5

$ 1,536
2,235
5,182
8,305
844
73 —
2 —

Total private fixed maturity securities . . . . . . . . . .

$18,242

$19,967

100% $16,994

$18,177

100%

Our businesses are subject to extensive regulation and supervision.

Total fixed maturity securities
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCC and lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,052
5,603
14,664
23,592
2,445
299
21

$11,154
6,405
17,706
27,530
2,684

17% $10,242
5,232
10
15,185
27
21,153
42
1,759
4
117
293 —
12
18 —

$11,696
5,771
17,497
23,346
1,884

19%
10
29
39
3

117 —
28 —

Total fixed maturity securities . . . . . . . . . . . . . . . .

$55,676

$65,790

100% $53,700

$60,339

100%

Based upon fair value, public fixed maturity securities represented 70% of total fixed maturity securities as

of December 31, 2020 and 2019. Private fixed maturity securities represented 30% of total fixed maturity
securities as of December 31, 2020 and 2019.

We diversify our corporate securities by industry and issuer. As of December 31, 2020, our combined

holdings in the 10 corporate issuers to which we had the greatest exposure was $2.5 billion, which was
approximately 3% of our total cash, cash equivalents, restricted cash and invested assets. The exposure to the
largest single corporate issuer held as of December 31, 2020 was $369 million, which was less than 1% of our
total cash, cash equivalents, restricted cash and invested assets. See note 4 to our consolidated financial
statements under “Part II—Item 8—Financial Statements and Supplementary Data” for additional information on
diversification by sector.

We do not have material unhedged exposure to foreign currency risk in our invested assets. In our

international insurance operations, both our assets and liabilities are generally denominated in local currencies.

For certain invested assets in our international insurance operations that are denominated in currencies other than

their respective local currency, we have effectively hedged the exposure to foreign currency risk.

Further analysis related to our investments portfolio as of December 31, 2020 and 2019 is included under

“Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—

Investments and Derivative Instruments.”

Commercial mortgage loans, equity securities and other invested assets

Our mortgage loans are collateralized by commercial properties, including multi-family residential

buildings. Commercial mortgage loans are stated at principal amounts outstanding, net of unamortized premium

or discount, deferred expenses and allowance for credit losses. We diversify our commercial mortgage loans by

both property type and geographic region. See note 4 to our consolidated financial statements under “Part II—

Item 8—Financial Statements and Supplementary Data” for additional information on distribution across

property type and geographic region for commercial mortgage loans, as well as information on our interest in

See note 5 to our consolidated financial statements under “Part II—Item 8—Financial Statements and

Supplementary Data” for additional information on our derivative instruments. Selected financial information

regarding our other invested assets as of December 31, 2020 and 2019 is included under “Part II—Item 7—

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investments and

Derivative Instruments.”

Regulation

General

Our 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 our U.S. insurance businesses, and our U.S. insurers are

regulated by the insurance departments of the states in which they are domiciled and licensed. Our non-U.S.

insurance operations are principally regulated by insurance regulatory authorities in the jurisdictions in which

they are domiciled. Our insurance products and businesses also are affected by U.S. federal, state and local tax

laws, and the tax laws of non-U.S. jurisdictions. Our securities operations, including our insurance products that

are regulated as securities, such as variable annuities and variable life insurance, also are subject to U.S. federal

and state and non-U.S. securities laws and regulations. The U.S. Securities and Exchange Commission (“SEC”),

U.S. Financial Industry Regulatory Authority (“FINRA”), state securities authorities and similar non-U.S.

authorities regulate and supervise these products.

The primary purpose of the Insurance Laws regulating our insurance businesses and their equivalents in the

other countries in which we operate, and the securities laws affecting our variable annuity products, variable life

insurance products and our broker/dealer, is to protect our policyholders, contractholders and clients, not our

stockholders. These laws and regulations are regularly re-examined and any changes to these laws or new laws

may be more restrictive or otherwise adversely affect our operations.

Insurance and securities regulatory authorities (including state law enforcement agencies and attorneys

general or their non-U.S. equivalents) periodically make inquiries regarding compliance with insurance,

securities and other laws and regulations, and we cooperate with such inquiries and take corrective action when

warranted.

26

27

The following table presents our public, private and total fixed maturity securities by the Nationally

Recognized Statistical Rating Organizations (“NRSRO”) designations and/or equivalent ratings, as well as the

percentage, based upon fair value that each designation comprises. Certain fixed maturity securities that are not

rated by an NRSRO are shown based upon internally prepared credit evaluations.

(Amounts in millions)

NRSRO designation

Public fixed maturity securities

December 31,

2020

2019

Amortized

cost

Fair

value

% of

total

Amortized

cost

Fair

value

% of

total

AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,458

$ 9,488

21% $ 8,771

$10,160

24%

AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CCC and lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,382

9,584

15,461

1,468

76

5

3,983

12,080

18,551

1,641

74 —

6 —

3,139

10,386

13,398

959

41

12

3,536

12,315

15,041

1,040

44 —

26 —

Total public fixed maturity securities . . . . . . . . . . .

$37,434

$45,823

100% $36,706

$42,162

100%

Private fixed maturity securities

AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,594

$ 1,666

8% $ 1,471

$ 1,536

8%

AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CCC and lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,221

5,080

8,131

977

223

16

2,422

5,626

8,979

1,043

219

12 —

2,093

4,799

7,755

800

76

—

2,235

5,182

8,305

844

73 —

2 —

Total private fixed maturity securities . . . . . . . . . .

$18,242

$19,967

100% $16,994

$18,177

100%

Total fixed maturity securities

AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,052

$11,154

17% $10,242

$11,696

19%

AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BBB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CCC and lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,603

14,664

23,592

2,445

299

21

6,405

17,706

27,530

2,684

293 —

18 —

5,232

15,185

21,153

1,759

117

12

5,771

17,497

23,346

1,884

117 —

28 —

Total fixed maturity securities . . . . . . . . . . . . . . . .

$55,676

$65,790

100% $53,700

$60,339

100%

9

26

40

4

12

28

46

5

1

10

27

42

4

8

29

36

3

12

29

46

5

10

29

39

3

Based upon fair value, public fixed maturity securities represented 70% of total fixed maturity securities as

of December 31, 2020 and 2019. Private fixed maturity securities represented 30% of total fixed maturity

securities as of December 31, 2020 and 2019.

We diversify our corporate securities by industry and issuer. As of December 31, 2020, our combined

holdings in the 10 corporate issuers to which we had the greatest exposure was $2.5 billion, which was

approximately 3% of our total cash, cash equivalents, restricted cash and invested assets. The exposure to the

largest single corporate issuer held as of December 31, 2020 was $369 million, which was less than 1% of our

total cash, cash equivalents, restricted cash and invested assets. See note 4 to our consolidated financial

statements under “Part II—Item 8—Financial Statements and Supplementary Data” for additional information on

diversification by sector.

We do not have material unhedged exposure to foreign currency risk in our invested assets. In our

international insurance operations, both our assets and liabilities are generally denominated in local currencies.
For certain invested assets in our international insurance operations that are denominated in currencies other than
their respective local currency, we have effectively hedged the exposure to foreign currency risk.

Further analysis related to our investments portfolio as of December 31, 2020 and 2019 is included under
“Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Investments and Derivative Instruments.”

Commercial mortgage loans, equity securities and other invested assets

Our mortgage loans are collateralized by commercial properties, including multi-family residential

buildings. Commercial mortgage loans are stated at principal amounts outstanding, net of unamortized premium
or discount, deferred expenses and allowance for credit losses. We diversify our commercial mortgage loans by
both property type and geographic region. See note 4 to our consolidated financial statements under “Part II—
Item 8—Financial Statements and Supplementary Data” for additional information on distribution across
property type and geographic region for commercial mortgage loans, as well as information on our interest in
equity securities.

See note 5 to our consolidated financial statements under “Part II—Item 8—Financial Statements and
Supplementary Data” for additional information on our derivative instruments. Selected financial information
regarding our other invested assets as of December 31, 2020 and 2019 is included under “Part II—Item 7—
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investments and
Derivative Instruments.”

Regulation

Our businesses are subject to extensive regulation and supervision.

General

Our 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 our U.S. insurance businesses, and our U.S. insurers are
regulated by the insurance departments of the states in which they are domiciled and licensed. Our non-U.S.
insurance operations are principally regulated by insurance regulatory authorities in the jurisdictions in which
they are domiciled. Our insurance products and businesses also are affected by U.S. federal, state and local tax
laws, and the tax laws of non-U.S. jurisdictions. Our securities operations, including our insurance products that
are regulated as securities, such as variable annuities and variable life insurance, also are subject to U.S. federal
and state and non-U.S. securities laws and regulations. The U.S. Securities and Exchange Commission (“SEC”),
U.S. Financial Industry Regulatory Authority (“FINRA”), state securities authorities and similar non-U.S.
authorities regulate and supervise these products.

The primary purpose of the Insurance Laws regulating our insurance businesses and their equivalents in the
other countries in which we operate, and the securities laws affecting our variable annuity products, variable life
insurance products and our broker/dealer, is to protect our policyholders, contractholders and clients, not our
stockholders. These laws and regulations are regularly re-examined and any changes to these laws or new laws
may be more restrictive or otherwise adversely affect our operations.

Insurance and securities regulatory authorities (including state law enforcement agencies and attorneys

general or their non-U.S. equivalents) periodically make inquiries regarding compliance with insurance,
securities and other laws and regulations, and we cooperate with such inquiries and take corrective action when
warranted.

26

27

Our distributors and institutional customers also operate in regulated environments. Changes in the
regulations that affect their operations may affect our business relationships with them and their decisions to
distribute or purchase our subsidiaries’ products.

In addition, the Insurance Laws of our U.S. insurers’ domiciliary jurisdictions and the equivalent laws in

Australia and certain other jurisdictions in which we operate require that a person obtain the approval of the
applicable insurance regulator prior to acquiring control, and in some cases prior to divesting its control, of an
insurer. These laws may discourage potential acquisition proposals and may delay, deter or prevent an
investment in or a change of control involving us, or one or more of our regulated subsidiaries, including
transactions that our management and some or all of our stockholders might consider desirable.

U.S. Insurance Regulation

Our U.S. insurers are licensed and regulated in all jurisdictions in which they conduct insurance business.

The extent of this regulation varies, but Insurance Laws generally govern the financial condition of insurers,
including standards of solvency, types and concentrations of permissible investments, establishment and
maintenance of reserves, credit for reinsurance and requirements of capital adequacy, and the business conduct of
insurers, including marketing and sales practices and claims handling. In addition, Insurance Laws usually
require the licensing of insurers and agents, and the approval of policy forms, related materials and the rates for
certain lines of insurance. For example, in most states where our U.S. mortgage insurance subsidiaries are
licensed, we are required to file premium rates before we are authorized to charge premiums. In some states,
these premium rates must be approved before their use. Likewise, changes in premium rates must be filed and
receive approval. In general, states may require actuarial justification on the basis of the insurer’s loss
experience, expenses and future projections. In addition, states may consider general default experience in the
U.S. mortgage insurance industry in assessing the premium rates charged by U.S. mortgage insurers.

The Insurance Laws applicable to us or our U.S. insurers are described below. Our U.S. mortgage insurers

are also subject to additional Insurance Laws applicable specifically to mortgage insurers discussed below under
“—Mortgage Insurance Regulation.”

COVID-19 Pandemic

In March 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed. The

CARES Act includes numerous measures to assist businesses and individuals impacted by COVID-19. In
addition, the CARES Act along with programs announced by the Federal Housing Finance Agency (“FHFA”)
and the GSEs all include provisions that allow deferred or reduced payments, commonly referred to as
“forbearance” for borrowers facing hardship due to COVID-19. State insurance regulators have issued bulletins,
directives and guidance in connection with COVID-19, only some of which have since expired. These encourage,
request or direct health, life, and property and casualty insurance companies to provide extended grace periods
for premium payments, forbear on the cancellation or non-renewal of policies due to non-payment of premium,
waive cost-sharing for COVID-19 testing and provide other policyholder accommodations. For example, on
March 27, 2020, the Virginia Bureau of Insurance, our lead state insurance regulator, issued a bulletin to all
insurers licensed to write life and accident and health insurance in Virginia, among others. The bulletin
encouraged these insurers to consider relaxing due dates for premium payments, extending grace periods,
waiving late fees and allowing payment plans for premium payments to avoid a lapse in coverage. It also noted
that such insurers should consider cancellation or non-renewal of policies only after exhausting efforts to work
with policyholders in an attempt to continue coverage.

Insurance holding company regulation

Our primary U.S. insurance companies are domiciled in the following states: Delaware, New York, North

Carolina and Virginia and (except for our captive insurers) they are required to register as members of an

insurance holding company system under their domiciliary state’s insurance holding company act. They are also

required to submit annual reports to the state insurance regulatory authority identifying the members of the

insurance holding company system and describing certain transactions between the insurer and any member of its

insurance group that may materially affect the operations, management or financial condition of the insurers

within the system. All transactions between an insurer and an affiliate must be fair and reasonable, and certain

transactions are subject to prior approval by the domiciliary state insurance regulator. In addition, most states

have adopted insurance regulations setting forth detailed requirements for cost sharing and management

agreements between an insurer and its affiliates.

Our U.S. insurers’ ability to pay dividends or other distributions is regulated by their domiciliary state

insurance regulators. In general, our U.S. insurers may pay dividends only from earned surplus under Insurance

Laws and may not pay an “extraordinary” dividend or distribution without prior regulatory approval. Our U.S.

life insurers’ domiciliary states generally define an “extraordinary” dividend or distribution as a dividend or

distribution that, together with other dividends and distributions made within the preceding 12 months, exceeds

the greater of:

•

•

10% of the insurer’s policyholder surplus as of the immediately prior year end or

the statutory net gain from the insurer’s operations during the prior calendar year.

In addition, insurance regulators may prohibit the payment of ordinary dividends or other payments by our

insurers to group affiliates (such as payments under a tax sharing agreement or for employment or other services)

if they determine that such payment could be adverse to our policyholders or contractholders.

Acquisition of control of a U.S. insurer requires the prior approval of the insurer’s domiciliary state

insurance regulator. The domiciliary states of our U.S. insurers also require prior notice of a divestiture of

control. Control is generally presumed to exist if any person, directly or indirectly, owns, controls, holds with the

power to vote, or holds proxies representing 10% or more of the voting securities of the insurer or any parent

company of the insurer. The commissioner’s approval of an application to acquire control of an insurer is

generally based on the experience, competence and financial strength of the applicant, the integrity of the

applicant’s board of directors and executive officers, the acquirer’s plans for the management and operation of

the insurer, and any anti-competitive results that may arise from the acquisition. Certain other states where the

U.S. insurer is licensed require the applicant to submit a filing with respect to the acquisition’s impact on

competition in the state. These provisions may not require acquisition approval but can lead to imposition of

conditions on an acquisition that could delay or prevent its consummation.

The Insurance Laws require that an insurance holding company system’s ultimate controlling person

annually submit to the holding company group’s lead state insurance regulator an “enterprise risk report” that

identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied

properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its

insurance holding company system as a whole.

Most states have adopted the NAIC Risk Management and Own Risk and Solvency Assessment Model Act

(the “ORSA Model Act”) which requires an insurer to regularly undertake a confidential internal assessment of

material and relevant risks (the “ORSA”) and upon the insurance regulator’s request, submit a confidential high-

level summary assessment of the material and relevant risks associated with an insurer or insurance group’s

current business plan and the sufficiency of capital and liquidity resources to support those risks (the “ORSA

Summary Report”). Under ORSA, we are required to:

•

annually and/or any time when there are significant changes to the risk profile of the insurer or the

insurance group, conduct an ORSA to assess the adequacy of our risk management framework,

including enhancements and updates to such framework, and current and estimated projected future

solvency position;

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Our distributors and institutional customers also operate in regulated environments. Changes in the

regulations that affect their operations may affect our business relationships with them and their decisions to

distribute or purchase our subsidiaries’ products.

In addition, the Insurance Laws of our U.S. insurers’ domiciliary jurisdictions and the equivalent laws in

Australia and certain other jurisdictions in which we operate require that a person obtain the approval of the

applicable insurance regulator prior to acquiring control, and in some cases prior to divesting its control, of an

insurer. These laws may discourage potential acquisition proposals and may delay, deter or prevent an

investment in or a change of control involving us, or one or more of our regulated subsidiaries, including

transactions that our management and some or all of our stockholders might consider desirable.

U.S. Insurance Regulation

Our U.S. insurers are licensed and regulated in all jurisdictions in which they conduct insurance business.

The extent of this regulation varies, but Insurance Laws generally govern the financial condition of insurers,

including standards of solvency, types and concentrations of permissible investments, establishment and

maintenance of reserves, credit for reinsurance and requirements of capital adequacy, and the business conduct of

insurers, including marketing and sales practices and claims handling. In addition, Insurance Laws usually

require the licensing of insurers and agents, and the approval of policy forms, related materials and the rates for

certain lines of insurance. For example, in most states where our U.S. mortgage insurance subsidiaries are

licensed, we are required to file premium rates before we are authorized to charge premiums. In some states,

these premium rates must be approved before their use. Likewise, changes in premium rates must be filed and

receive approval. In general, states may require actuarial justification on the basis of the insurer’s loss

experience, expenses and future projections. In addition, states may consider general default experience in the

U.S. mortgage insurance industry in assessing the premium rates charged by U.S. mortgage insurers.

The Insurance Laws applicable to us or our U.S. insurers are described below. Our U.S. mortgage insurers

are also subject to additional Insurance Laws applicable specifically to mortgage insurers discussed below under

“—Mortgage Insurance Regulation.”

COVID-19 Pandemic

In March 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed. The

CARES Act includes numerous measures to assist businesses and individuals impacted by COVID-19. In

addition, the CARES Act along with programs announced by the Federal Housing Finance Agency (“FHFA”)

and the GSEs all include provisions that allow deferred or reduced payments, commonly referred to as

“forbearance” for borrowers facing hardship due to COVID-19. State insurance regulators have issued bulletins,

directives and guidance in connection with COVID-19, only some of which have since expired. These encourage,

request or direct health, life, and property and casualty insurance companies to provide extended grace periods

for premium payments, forbear on the cancellation or non-renewal of policies due to non-payment of premium,

waive cost-sharing for COVID-19 testing and provide other policyholder accommodations. For example, on

March 27, 2020, the Virginia Bureau of Insurance, our lead state insurance regulator, issued a bulletin to all

insurers licensed to write life and accident and health insurance in Virginia, among others. The bulletin

encouraged these insurers to consider relaxing due dates for premium payments, extending grace periods,

waiving late fees and allowing payment plans for premium payments to avoid a lapse in coverage. It also noted

that such insurers should consider cancellation or non-renewal of policies only after exhausting efforts to work

with policyholders in an attempt to continue coverage.

Insurance holding company regulation

Our primary U.S. insurance companies are domiciled in the following states: Delaware, New York, North

Carolina and Virginia and (except for our captive insurers) they are required to register as members of an

insurance holding company system under their domiciliary state’s insurance holding company act. They are also
required to submit annual reports to the state insurance regulatory authority identifying the members of the
insurance holding company system and describing certain transactions between the insurer and any member of its
insurance group that may materially affect the operations, management or financial condition of the insurers
within the system. All transactions between an insurer and an affiliate must be fair and reasonable, and certain
transactions are subject to prior approval by the domiciliary state insurance regulator. In addition, most states
have adopted insurance regulations setting forth detailed requirements for cost sharing and management
agreements between an insurer and its affiliates.

Our U.S. insurers’ ability to pay dividends or other distributions is regulated by their domiciliary state
insurance regulators. In general, our U.S. insurers may pay dividends only from earned surplus under Insurance
Laws and may not pay an “extraordinary” dividend or distribution without prior regulatory approval. Our U.S.
life insurers’ domiciliary states generally define an “extraordinary” dividend or distribution as a dividend or
distribution that, together with other dividends and distributions made within the preceding 12 months, exceeds
the greater of:

•

•

10% of the insurer’s policyholder surplus as of the immediately prior year end or

the statutory net gain from the insurer’s operations during the prior calendar year.

In addition, insurance regulators may prohibit the payment of ordinary dividends or other payments by our

insurers to group affiliates (such as payments under a tax sharing agreement or for employment or other services)
if they determine that such payment could be adverse to our policyholders or contractholders.

Acquisition of control of a U.S. insurer requires the prior approval of the insurer’s domiciliary state

insurance regulator. The domiciliary states of our U.S. insurers also require prior notice of a divestiture of
control. Control is generally presumed to exist if any person, directly or indirectly, owns, controls, holds with the
power to vote, or holds proxies representing 10% or more of the voting securities of the insurer or any parent
company of the insurer. The commissioner’s approval of an application to acquire control of an insurer is
generally based on the experience, competence and financial strength of the applicant, the integrity of the
applicant’s board of directors and executive officers, the acquirer’s plans for the management and operation of
the insurer, and any anti-competitive results that may arise from the acquisition. Certain other states where the
U.S. insurer is licensed require the applicant to submit a filing with respect to the acquisition’s impact on
competition in the state. These provisions may not require acquisition approval but can lead to imposition of
conditions on an acquisition that could delay or prevent its consummation.

The Insurance Laws require that an insurance holding company system’s ultimate controlling person
annually submit to the holding company group’s lead state insurance regulator an “enterprise risk report” that
identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied
properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its
insurance holding company system as a whole.

Most states have adopted the NAIC Risk Management and Own Risk and Solvency Assessment Model Act
(the “ORSA Model Act”) which requires an insurer to regularly undertake a confidential internal assessment of
material and relevant risks (the “ORSA”) and upon the insurance regulator’s request, submit a confidential high-
level summary assessment of the material and relevant risks associated with an insurer or insurance group’s
current business plan and the sufficiency of capital and liquidity resources to support those risks (the “ORSA
Summary Report”). Under ORSA, we are required to:

•

annually and/or any time when there are significant changes to the risk profile of the insurer or the
insurance group, conduct an ORSA to assess the adequacy of our risk management framework,
including enhancements and updates to such framework, and current and estimated projected future
solvency position;

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29

•

•

internally document the process and results of the assessment; and

provide a confidential high-level ORSA Summary Report to our lead domiciliary state, Virginia, and
make such report available, upon request, to other domiciliary state regulators within the holding
company group.

NAIC model laws and regulations regarding insurance group governance, risk assessment and regulatory

supervision became state accreditation standards in January 2020. The NAIC Corporate Governance Annual
Disclosure Model Act and Corporate Governance Annual Disclosure Model Regulation (the “Corporate
Governance Model Act and Regulation”) require insurers to provide detailed information regarding their
corporate governance practices to their lead state and/or domestic regulator. As of December 31, 2020, the
Corporate Governance Model Act had been adopted in all states. Amendments to the NAIC Holding Company
System Model Act authorize U.S. state insurance regulators to lead or participate in the group-wide supervision
of certain international insurance groups. These amendments became an NAIC accreditation requirement on
January 1, 2020, and as of December 31, 2020, they had been adopted by nearly all states, including all of our
primary domiciliary states.

The NAIC created a regulatory framework applicable to the use of captive insurers in connection with

Regulation XXX and Regulation AXXX transactions. Among other things, the framework calls for more
disclosure of an insurer’s use of captives in its statutory financial statements and narrows the types of assets
permitted to back statutory reserves that are required to support the insurer’s future obligations. The NAIC
implemented the framework through an actuarial guideline (“AG 48”), which requires the actuary of the ceding
insurer that opines on the insurer’s reserves to issue a qualified opinion if the framework is not followed. The
requirements of AG 48 became effective in all states as of January 1, 2015, and in December 2016, the NAIC
adopted a revised version of AG 48 (“Updated AG 48”), with revisions applicable to new policies issued and new
reinsurance transactions entered into on or after January 1, 2017. AG 48 and Updated AG 48 do not affect
reinsurance arrangements that were pre-existing as of January 1, 2015, and the changes set forth in Updated AG
48 do not affect reinsurance arrangements that were pre-existing as of January 1, 2017. The NAIC also adopted
the Term and Universal Life Insurance Reserve Financing Model Regulation, which contains the same
substantive requirements as Updated AG 48. This model regulation has only been adopted by four states,
including Virginia where the rules became effective for GLAIC on January 1, 2018, although it will become an
NAIC accreditation standard on September 1, 2022. It is therefore expected to be adopted in full or in part by the
remaining states prior to this date.

Periodic reporting

Our U.S. insurers must file reports, including detailed annual financial statements, with insurance regulatory

authorities in each jurisdiction in which they do business, and their operations and accounts are subject to
periodic examination by such authorities.

Policy forms

Our U.S. insurers’ policy forms are subject to regulation in every U.S. jurisdiction in which they transact
insurance business. In most U.S. jurisdictions, policy forms must be filed prior to their use, and in some U.S.
jurisdictions, forms must be approved by insurance regulatory authorities prior to use.

Market conduct regulation

The Insurance Laws of U.S. jurisdictions govern the marketplace activities of insurers, affecting the form

and content of disclosure to consumers, product illustrations, advertising, product replacement, sales and
underwriting practices, and complaint and claims handling, and these provisions are generally enforced through
periodic market conduct examinations. As an example, in January 2019, the New York State Department of

Financial Services (“NYDFS”) issued a circular letter that relates to use by life insurers of data or information

sources that are not directly related to the medical condition of the applicant (with certain exclusions), for certain

types of underwriting or rating purposes, including as a proxy for traditional medical underwriting. The circular

letter generally prohibits life insurers from using such data or information, including algorithms or predictive

models, in this fashion unless: (i) the insurer can establish that the data source does not use and is not based in

any way on prohibited criteria, such as race, color, creed, etc.; and (ii) this use is not unfairly discriminatory and

otherwise complies with the requirements of the New York insurance laws. In addition, the circular letter

requires insurers using such data or information, including predictive models, to make certain additional

disclosures to consumers.

Statutory examinations

Insurance departments in U.S. jurisdictions conduct periodic detailed examinations of the books, records,

accounts and business practices of domestic insurers. These examinations generally are conducted in cooperation

with insurance departments of two or three other states or jurisdictions representing each of the NAIC zones,

under guidelines promulgated by the NAIC.

Guaranty associations and similar arrangements

Most jurisdictions in which our U.S. insurers are licensed require those insurers to participate in guaranty

associations which pay contractual benefits owed under the policies of impaired or insolvent insurers. These

associations levy assessments, up to prescribed limits, on each member insurer in a jurisdiction on the basis of

the proportionate share of the premiums written by such insurer in the lines of business in which the impaired,

insolvent or failed insurer is engaged. Some jurisdictions permit member insurers to recover assessments paid

through full or partial premium tax offsets.

Aggregate assessments levied against our U.S. insurers were not significant to our consolidated financial

statements for the years ended December 31, 2020, 2019 and 2018.

Policy and contract reserve sufficiency analysis

The Insurance Laws of our U.S. life insurers’ domiciliary jurisdictions require each such insurer to conduct

annual analyses of the sufficiency of their life and health insurance and annuity reserves. Other jurisdictions

where insurers are licensed may have certain reserve requirements that differ from those of their domiciliary

jurisdictions. In each case, a qualified actuary must submit an opinion stating that the aggregate statutory

reserves, when considered in light of the assets held with respect to such reserves, make good and sufficient

provision for the insurer’s associated contractual obligations and related expenses. If such an opinion cannot be

provided, the insurer must establish additional reserves by transferring funds from surplus. Our U.S. life insurers

submit these opinions annually to their insurance regulatory authorities. We annually conduct a statutory cash

flow testing process to support our opinions. Different reserve requirements exist for our U.S. mortgage

insurance subsidiaries. See “—Mortgage Insurance Regulation—State regulation—Reserves.”

Surplus and capital requirements

Insurance regulators have the discretionary authority, in connection with maintaining the licensing of our

U.S. insurers, to limit or restrict insurers from issuing new policies, or policies having a dollar value over certain

thresholds, if, in the regulators’ judgment, the insurer is not maintaining a sufficient amount of surplus or is in a

hazardous financial condition. We seek to maintain new business and capital management strategies to support

meeting related regulatory requirements.

Risk-based capital

The NAIC has established RBC standards for U.S. life insurers, as well as a Risk-Based Capital for Insurers

Model Act (“RBC Model Act”). All 50 states and the District of Columbia have adopted the RBC Model Act or a

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31

internally document the process and results of the assessment; and

provide a confidential high-level ORSA Summary Report to our lead domiciliary state, Virginia, and

make such report available, upon request, to other domiciliary state regulators within the holding

•

•

company group.

NAIC model laws and regulations regarding insurance group governance, risk assessment and regulatory

supervision became state accreditation standards in January 2020. The NAIC Corporate Governance Annual

Disclosure Model Act and Corporate Governance Annual Disclosure Model Regulation (the “Corporate

Governance Model Act and Regulation”) require insurers to provide detailed information regarding their

corporate governance practices to their lead state and/or domestic regulator. As of December 31, 2020, the

Corporate Governance Model Act had been adopted in all states. Amendments to the NAIC Holding Company

System Model Act authorize U.S. state insurance regulators to lead or participate in the group-wide supervision

of certain international insurance groups. These amendments became an NAIC accreditation requirement on

January 1, 2020, and as of December 31, 2020, they had been adopted by nearly all states, including all of our

primary domiciliary states.

The NAIC created a regulatory framework applicable to the use of captive insurers in connection with

Regulation XXX and Regulation AXXX transactions. Among other things, the framework calls for more

disclosure of an insurer’s use of captives in its statutory financial statements and narrows the types of assets

permitted to back statutory reserves that are required to support the insurer’s future obligations. The NAIC

implemented the framework through an actuarial guideline (“AG 48”), which requires the actuary of the ceding

insurer that opines on the insurer’s reserves to issue a qualified opinion if the framework is not followed. The

requirements of AG 48 became effective in all states as of January 1, 2015, and in December 2016, the NAIC

adopted a revised version of AG 48 (“Updated AG 48”), with revisions applicable to new policies issued and new

reinsurance transactions entered into on or after January 1, 2017. AG 48 and Updated AG 48 do not affect

reinsurance arrangements that were pre-existing as of January 1, 2015, and the changes set forth in Updated AG

48 do not affect reinsurance arrangements that were pre-existing as of January 1, 2017. The NAIC also adopted

the Term and Universal Life Insurance Reserve Financing Model Regulation, which contains the same

substantive requirements as Updated AG 48. This model regulation has only been adopted by four states,

including Virginia where the rules became effective for GLAIC on January 1, 2018, although it will become an

NAIC accreditation standard on September 1, 2022. It is therefore expected to be adopted in full or in part by the

remaining states prior to this date.

Periodic reporting

Our U.S. insurers must file reports, including detailed annual financial statements, with insurance regulatory

authorities in each jurisdiction in which they do business, and their operations and accounts are subject to

periodic examination by such authorities.

Policy forms

Our U.S. insurers’ policy forms are subject to regulation in every U.S. jurisdiction in which they transact

insurance business. In most U.S. jurisdictions, policy forms must be filed prior to their use, and in some U.S.

jurisdictions, forms must be approved by insurance regulatory authorities prior to use.

Market conduct regulation

The Insurance Laws of U.S. jurisdictions govern the marketplace activities of insurers, affecting the form

and content of disclosure to consumers, product illustrations, advertising, product replacement, sales and

underwriting practices, and complaint and claims handling, and these provisions are generally enforced through

periodic market conduct examinations. As an example, in January 2019, the New York State Department of

Financial Services (“NYDFS”) issued a circular letter that relates to use by life insurers of data or information
sources that are not directly related to the medical condition of the applicant (with certain exclusions), for certain
types of underwriting or rating purposes, including as a proxy for traditional medical underwriting. The circular
letter generally prohibits life insurers from using such data or information, including algorithms or predictive
models, in this fashion unless: (i) the insurer can establish that the data source does not use and is not based in
any way on prohibited criteria, such as race, color, creed, etc.; and (ii) this use is not unfairly discriminatory and
otherwise complies with the requirements of the New York insurance laws. In addition, the circular letter
requires insurers using such data or information, including predictive models, to make certain additional
disclosures to consumers.

Statutory examinations

Insurance departments in U.S. jurisdictions conduct periodic detailed examinations of the books, records,
accounts and business practices of domestic insurers. These examinations generally are conducted in cooperation
with insurance departments of two or three other states or jurisdictions representing each of the NAIC zones,
under guidelines promulgated by the NAIC.

Guaranty associations and similar arrangements

Most jurisdictions in which our U.S. insurers are licensed require those insurers to participate in guaranty

associations which pay contractual benefits owed under the policies of impaired or insolvent insurers. These
associations levy assessments, up to prescribed limits, on each member insurer in a jurisdiction on the basis of
the proportionate share of the premiums written by such insurer in the lines of business in which the impaired,
insolvent or failed insurer is engaged. Some jurisdictions permit member insurers to recover assessments paid
through full or partial premium tax offsets.

Aggregate assessments levied against our U.S. insurers were not significant to our consolidated financial

statements for the years ended December 31, 2020, 2019 and 2018.

Policy and contract reserve sufficiency analysis

The Insurance Laws of our U.S. life insurers’ domiciliary jurisdictions require each such insurer to conduct

annual analyses of the sufficiency of their life and health insurance and annuity reserves. Other jurisdictions
where insurers are licensed may have certain reserve requirements that differ from those of their domiciliary
jurisdictions. In each case, a qualified actuary must submit an opinion stating that the aggregate statutory
reserves, when considered in light of the assets held with respect to such reserves, make good and sufficient
provision for the insurer’s associated contractual obligations and related expenses. If such an opinion cannot be
provided, the insurer must establish additional reserves by transferring funds from surplus. Our U.S. life insurers
submit these opinions annually to their insurance regulatory authorities. We annually conduct a statutory cash
flow testing process to support our opinions. Different reserve requirements exist for our U.S. mortgage
insurance subsidiaries. See “—Mortgage Insurance Regulation—State regulation—Reserves.”

Surplus and capital requirements

Insurance regulators have the discretionary authority, in connection with maintaining the licensing of our
U.S. insurers, to limit or restrict insurers from issuing new policies, or policies having a dollar value over certain
thresholds, if, in the regulators’ judgment, the insurer is not maintaining a sufficient amount of surplus or is in a
hazardous financial condition. We seek to maintain new business and capital management strategies to support
meeting related regulatory requirements.

Risk-based capital

The NAIC has established RBC standards for U.S. life insurers, as well as a Risk-Based Capital for Insurers
Model Act (“RBC Model Act”). All 50 states and the District of Columbia have adopted the RBC Model Act or a

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31

substantially similar law or regulation. The RBC Model Act requires that life insurers annually submit a report to
state regulators regarding their RBC based upon four categories of risk: asset risk, insurance risk, interest rate
and business risk. The capital requirement for each is generally determined by applying factors which vary based
upon the degree of risk to various asset, premium and reserve items. The formula is an early warning tool to
identify possible weakly capitalized companies for purposes of initiating further regulatory action.

Regulatory compliance is determined by a ratio of a company’s total adjusted capital (“TAC”) to its
authorized control level RBC (“ACL RBC”). The minimum level of TAC before corrective action commences
(“Company Action Level”) is two times the ACL RBC or three times the ACL RBC with a negative trend. If an
insurer’s ACL RBC falls below specified levels, it would be subject to different degrees of regulatory action
depending upon the level, ranging from requiring the insurer to propose actions to correct the capital deficiency
to placing the insurer under regulatory control. Our reported RBC ratio measures the ratio of TAC to our
Company Action Level.

As of December 31, 2020, the RBC of each of our U.S. life insurance subsidiaries exceeded the level of

RBC that would require any of them to take or become subject to any corrective action in their respective
domiciliary state. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries was
approximately 229% and 213% as of December 31, 2020 and 2019, respectively.

Group capital

The NAIC and international insurance regulators, including the International Association of Insurance
Supervisors (“IAIS”), have developed group capital standards. The NAIC developed a group capital calculation
(“GCC”) tool using an RBC aggregation methodology for all entities within the insurance holding company
system, including non-U.S. entities. The GCC provides regulators with an additional tool for conducting group-
wide supervision and enhances transparency into how capital is allocated. In December 2020, the NAIC adopted
the GCC Template and Instructions as well as amendments to the Holding Company System Model Act and
Regulation. These amendments, which implement the annual filing requirement for the GCC, now have to be
adopted by state legislatures in order to become effective. The NAIC expects to adopt the final GCC Template
and Instructions in 2021.

The IAIS spent several years developing a risk-based global insurance capital standard (“ICS”) based upon

10 key principles, which will apply to internationally active insurance groups. The IAIS adopted a revised
version of the ICS in 2019 and it began a five-year monitoring period in 2020 prior to final implementation. It is
unclear how the development of group capital measures by the NAIC and IAIS will interact with existing capital
requirements for insurance companies in the United States and with international capital standards. It is possible
that we may be required to hold additional capital as a result of these developments.

Statutory accounting principles

U.S. insurance regulators developed statutory accounting principles (“SAP”) as a basis of accounting used

to monitor and regulate the solvency of insurers. Since insurance regulators are primarily concerned with
ensuring an insurer’s ability to pay its current and future obligations to policyholders, statutory accounting
conservatively values the assets and liabilities of insurers, generally in accordance with standards specified by the
insurer’s domiciliary jurisdiction. Uniform statutory accounting practices are established by the NAIC and are
generally adopted by regulators in the various U.S. jurisdictions.

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.

Regulation of investments

Each of our U.S. insurers is subject to Insurance Laws that require diversification of its investment portfolio

and which limit the proportion of investments in different asset categories. Assets invested contrary to such

regulatory limitations must be treated as non-admitted assets for purposes of measuring surplus, and in some

instances, regulations require divestiture of such non-complying investments. We believe the investments made

by our U.S. insurers comply with these Insurance Laws.

The NAIC continues to review the investment risk factors for fixed-income assets that are applied in the

NAIC’s RBC formula for life insurers. The NAIC’s Investment Risk-Based Capital Working Group previously

exposed new factors for comment, which factors would apply to 20 different ratings categories versus the current

six ratings categories, thereby providing additional granularity to the risk charges applied across insurer

investment portfolios. Generally, the proposed factors are higher than the current factors for more highly rated

fixed-income assets and are lower than current factors for lower rated fixed-income assets. Currently, the NAIC

does not anticipate that the proposed factors will be implemented before year-end 2021, although the NAIC has

updated its systems as of December 31, 2020 to accept the 20 new ratings categories. If the proposed factors are

adopted, we believe our required capital will increase for our U.S. life insurers. In addition, the proposed factors

may encourage insurers to invest more of their portfolios in lower rated fixed-income assets to benefit from the

lower risk charges.

Reinsurance collateral regulation

On September 22, 2017, U.S. federal authorities signed a covered agreement with the European Union

(“EU”) on matters including reinsurance collateral. This agreement requires U.S. states to adopt, within five

years from the execution of the covered agreement, laws removing reinsurance collateral requirements for

reinsurance ceded to a qualifying non-U.S. reinsurer domiciled in an EU jurisdiction. Additionally, in December

2018, the U.S. Department of the Treasury and the Office of the U.S. Trade Representative entered into a covered

agreement with the United Kingdom (“U.K.”). The U.K. covered agreement extended the covered agreement

between the U.S. and EU to the U.K. after the withdrawal of the U.K. from the EU (“Brexit”) on January 31,

2020, and it largely reflects the provisions of the covered agreement between the U.S. and the EU and

incorporates the same timeframes contained within it.

Under the terms of both covered agreements, as of September 1, 2022, state credit for reinsurance laws that

result in non-U.S. reinsurers subject to the covered agreements being treated less favorably than U.S. reinsurers

may be preempted by the applicable covered agreement. Accordingly, in 2019, the NAIC adopted revisions

incorporating the provisions of the covered agreement into its Credit for Reinsurance Model Law and Model

Regulation, which will become an NAIC accreditation standard as of September 1, 2022, with enforcement

beginning on January 1, 2023. Until the covered agreements become effective and individual states adopt the

2019 revisions, each state’s existing framework governing reinsurance collateral requirements will continue to

apply. We cannot currently predict the impact of these changes to the law or whether any other covered

agreements will be entered by the U.S., and cannot currently estimate the impact of these changes to the law and

any such adopted covered agreements on our business, financial condition or operating results.

Federal regulation of insurance products

Most of our variable annuity products, some of our fixed guaranteed products, and all of our variable life

insurance products are registered under the Securities Act of 1933 and are subject to regulation by the SEC. See

“—Other Laws and Regulations—Securities regulation.” The entities that offer these products that are broker/

dealers, as defined by the SEC, are also regulated by FINRA and may be regulated by state securities authorities.

Federal and state securities regulation similar to that discussed below under “—Other Laws and Regulations—

Securities regulation” affects investment advice and sales and related activities with respect to these products.

U.S. mortgage insurance products and insurers are also subject to federal regulation discussed below under

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substantially similar law or regulation. The RBC Model Act requires that life insurers annually submit a report to

state regulators regarding their RBC based upon four categories of risk: asset risk, insurance risk, interest rate

and business risk. The capital requirement for each is generally determined by applying factors which vary based

upon the degree of risk to various asset, premium and reserve items. The formula is an early warning tool to

identify possible weakly capitalized companies for purposes of initiating further regulatory action.

Regulatory compliance is determined by a ratio of a company’s total adjusted capital (“TAC”) to its

authorized control level RBC (“ACL RBC”). The minimum level of TAC before corrective action commences

(“Company Action Level”) is two times the ACL RBC or three times the ACL RBC with a negative trend. If an

insurer’s ACL RBC falls below specified levels, it would be subject to different degrees of regulatory action

depending upon the level, ranging from requiring the insurer to propose actions to correct the capital deficiency

to placing the insurer under regulatory control. Our reported RBC ratio measures the ratio of TAC to our

Company Action Level.

As of December 31, 2020, the RBC of each of our U.S. life insurance subsidiaries exceeded the level of

RBC that would require any of them to take or become subject to any corrective action in their respective

domiciliary state. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries was

approximately 229% and 213% as of December 31, 2020 and 2019, respectively.

Group capital

The NAIC and international insurance regulators, including the International Association of Insurance

Supervisors (“IAIS”), have developed group capital standards. The NAIC developed a group capital calculation

(“GCC”) tool using an RBC aggregation methodology for all entities within the insurance holding company

system, including non-U.S. entities. The GCC provides regulators with an additional tool for conducting group-

wide supervision and enhances transparency into how capital is allocated. In December 2020, the NAIC adopted

the GCC Template and Instructions as well as amendments to the Holding Company System Model Act and

Regulation. These amendments, which implement the annual filing requirement for the GCC, now have to be

adopted by state legislatures in order to become effective. The NAIC expects to adopt the final GCC Template

and Instructions in 2021.

The IAIS spent several years developing a risk-based global insurance capital standard (“ICS”) based upon

10 key principles, which will apply to internationally active insurance groups. The IAIS adopted a revised

version of the ICS in 2019 and it began a five-year monitoring period in 2020 prior to final implementation. It is

unclear how the development of group capital measures by the NAIC and IAIS will interact with existing capital

requirements for insurance companies in the United States and with international capital standards. It is possible

that we may be required to hold additional capital as a result of these developments.

Statutory accounting principles

U.S. insurance regulators developed statutory accounting principles (“SAP”) as a basis of accounting used

to monitor and regulate the solvency of insurers. Since insurance regulators are primarily concerned with

ensuring an insurer’s ability to pay its current and future obligations to policyholders, statutory accounting

conservatively values the assets and liabilities of insurers, generally in accordance with standards specified by the

insurer’s domiciliary jurisdiction. Uniform statutory accounting practices are established by the NAIC and are

generally adopted by regulators in the various U.S. jurisdictions.

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.

Regulation of investments

Each of our U.S. insurers is subject to Insurance Laws that require diversification of its investment portfolio

and which limit the proportion of investments in different asset categories. Assets invested contrary to such
regulatory limitations must be treated as non-admitted assets for purposes of measuring surplus, and in some
instances, regulations require divestiture of such non-complying investments. We believe the investments made
by our U.S. insurers comply with these Insurance Laws.

The NAIC continues to review the investment risk factors for fixed-income assets that are applied in the

NAIC’s RBC formula for life insurers. The NAIC’s Investment Risk-Based Capital Working Group previously
exposed new factors for comment, which factors would apply to 20 different ratings categories versus the current
six ratings categories, thereby providing additional granularity to the risk charges applied across insurer
investment portfolios. Generally, the proposed factors are higher than the current factors for more highly rated
fixed-income assets and are lower than current factors for lower rated fixed-income assets. Currently, the NAIC
does not anticipate that the proposed factors will be implemented before year-end 2021, although the NAIC has
updated its systems as of December 31, 2020 to accept the 20 new ratings categories. If the proposed factors are
adopted, we believe our required capital will increase for our U.S. life insurers. In addition, the proposed factors
may encourage insurers to invest more of their portfolios in lower rated fixed-income assets to benefit from the
lower risk charges.

Reinsurance collateral regulation

On September 22, 2017, U.S. federal authorities signed a covered agreement with the European Union
(“EU”) on matters including reinsurance collateral. This agreement requires U.S. states to adopt, within five
years from the execution of the covered agreement, laws removing reinsurance collateral requirements for
reinsurance ceded to a qualifying non-U.S. reinsurer domiciled in an EU jurisdiction. Additionally, in December
2018, the U.S. Department of the Treasury and the Office of the U.S. Trade Representative entered into a covered
agreement with the United Kingdom (“U.K.”). The U.K. covered agreement extended the covered agreement
between the U.S. and EU to the U.K. after the withdrawal of the U.K. from the EU (“Brexit”) on January 31,
2020, and it largely reflects the provisions of the covered agreement between the U.S. and the EU and
incorporates the same timeframes contained within it.

Under the terms of both covered agreements, as of September 1, 2022, state credit for reinsurance laws that
result in non-U.S. reinsurers subject to the covered agreements being treated less favorably than U.S. reinsurers
may be preempted by the applicable covered agreement. Accordingly, in 2019, the NAIC adopted revisions
incorporating the provisions of the covered agreement into its Credit for Reinsurance Model Law and Model
Regulation, which will become an NAIC accreditation standard as of September 1, 2022, with enforcement
beginning on January 1, 2023. Until the covered agreements become effective and individual states adopt the
2019 revisions, each state’s existing framework governing reinsurance collateral requirements will continue to
apply. We cannot currently predict the impact of these changes to the law or whether any other covered
agreements will be entered by the U.S., and cannot currently estimate the impact of these changes to the law and
any such adopted covered agreements on our business, financial condition or operating results.

Federal regulation of insurance products

Most of our variable annuity products, some of our fixed guaranteed products, and all of our variable life

insurance products are registered under the Securities Act of 1933 and are subject to regulation by the SEC. See
“—Other Laws and Regulations—Securities regulation.” The entities that offer these products that are broker/
dealers, as defined by the SEC, are also regulated by FINRA and may be regulated by state securities authorities.
Federal and state securities regulation similar to that discussed below under “—Other Laws and Regulations—
Securities regulation” affects investment advice and sales and related activities with respect to these products.
U.S. mortgage insurance products and insurers are also subject to federal regulation discussed below under

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“—Mortgage Insurance Regulation.” In addition, although the federal government does not comprehensively
regulate the business of insurance, federal legislation and administrative policies in several areas, including
taxation, financial services regulation, and pension and welfare benefits regulation, can also significantly affect
the insurance industry.

Dodd-Frank Act and other federal initiatives

Although the federal government generally does not directly regulate the insurance business, federal
initiatives often have an impact on the business in a variety of ways, including limitations on antitrust immunity,
tax incentives for lifetime annuity payouts, simplification bills affecting tax-advantaged or tax-exempt savings
and retirement vehicles, and proposals to modify the estate tax. In addition, various forms of direct federal
regulation of insurance have been proposed in recent years.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) made extensive

changes to the laws regulating financial services firms and required various federal agencies to adopt a broad
range of new implementing rules and regulations.

Among other provisions, the Dodd-Frank Act established a new framework of regulation of the

over-the-counter (“OTC”) derivatives markets. The clearing requirements under the Dodd-Frank Act require us
to post with a futures commission merchant highly liquid securities or cash as initial margin and cash to meet
variation margin requirements for most interest rate derivatives we trade. As the marketplace continues to evolve,
we may have to alter or limit the way we use derivatives in the future, which could have an adverse effect on our
results of operations and financial condition. We are subject to similar trade reporting, documentation, central
trading and clearing and OTC margining requirements when we transact with foreign derivatives counterparties.
In addition, regulations adopted by federal banking regulators that became effective in 2019 require certain bank-
regulated counterparties and certain of their affiliates to include in certain financial contracts, including many
derivatives contracts, terms that delay or restrict the rights of counterparties, such as us, to terminate such
contracts, foreclose upon collateral, exercise other default rights or restrict transfers of affiliate credit
enhancements (such as guarantees) in the event that the bank-regulated counterparty and/or its affiliates are
subject to certain types of resolution or insolvency proceedings. It is possible that these new requirements, as
well as potential additional government regulation and other developments in the market, could adversely affect
our ability to terminate existing derivatives agreements or to realize amounts to be received under such
agreements. The Dodd-Frank Act and related federal regulations and foreign derivatives requirements expose us
to operational, compliance, execution and other risks, including central counterparty insolvency risk.

In the case of our U.S. mortgage insurance business, the Dodd-Frank Act prohibited a creditor from making
a residential mortgage loan unless the creditor makes a reasonable and good faith determination that, at the time
the loan is consummated, the consumer has a reasonable ability to repay the loan. In addition, the Dodd-Frank
Act created the CFPB, which regulates certain aspects of the offering and provision of consumer financial
products or services but not the business of insurance. Certain rules and regulations established by the CFPB
require mortgage lenders to demonstrate that they have effectively considered the consumer’s ability to repay a
mortgage loan, establish when a mortgage may be classified as a Qualified Mortgage (“QM”) and determine
when a lender is eligible for a safe harbor as a presumption that the lender has complied with the ability-to-repay
requirements. The regulations also include a temporary category (the “QM Patch”) for mortgages that comply
with certain prohibitions and limitations and meet the GSE underwriting and product guidelines. Mortgages that
meet these requirements are deemed to be QMs until the earlier of the time in which the GSEs exit the FHFA
conservatorship or the mandatory compliance date of the final amendments to the CFPB’s rule defining what
constitutes a QM (“QM Rule”). The QM Patch permits loans that exceed a debt to income ratio of 43% to be
eligible for QM status. Many of the loans that qualify under the QM Patch require credit enhancement, of which
private mortgage insurance is the predominate form of coverage. On June 22, 2020, the CFPB issued a Notice of
Proposed Rulemaking seeking comments on a proposed amendment to the QM Rule, which, among other things,
would remove the QM loan definition’s 43% debt-to-income ratio and replace it with a limit based on the loan’s

pricing. On August 18, 2020, the CFPB issued an additional Notice of Proposed Rulemaking adding a

“seasoning” approach to the QM “safe harbor.” The proposed rule exempts lenders from liability when they

make a reasonable, good faith determination of a consumer’s ability to repay any non-QM loan that has

experienced minimal delinquencies within the first three years after origination. Both rules have been published

in final form in the Federal Register. The QM Rule has an optional effective date of March 1, 2021 and a

mandatory effective date of July 1, 2021. The “seasoning” rule goes into effect on March 1, 2021. We do not

expect the final rules to significantly impact our U.S. mortgage insurance business.

The Dodd-Frank Act also established a Financial Stability Oversight Council (“FSOC”), which is authorized

to subject non-bank financial companies, which may include insurance companies, deemed systemically

significant to stricter prudential standards and other requirements and to subject such companies to a special

orderly liquidation process outside the federal Bankruptcy Code, administered by the Federal Deposit Insurance

Corporation. There are currently no such companies designated as systemically significant by the FSOC. We

have not been, nor do we believe we will be, designated as systemically significant by FSOC. FSOC’s potential

recommendation of measures to address systemic financial risk could affect our insurance operations. A future

determination that we or our counterparties are systemically significant could impose significant burdens on us,

impact the way we conduct our business, increase compliance costs, duplicate state regulation and result in a

competitive disadvantage.

The Dodd-Frank Act established a Federal Insurance Office (“FIO”) within the Department of the Treasury.

While not having a general supervisory or regulatory authority over the business of insurance, the director of this

office performs various functions with respect to insurance, including serving as a non-voting member of the

FSOC and making recommendations to the FSOC regarding insurers to be designated for more stringent

regulation.

In December 2018, the SEC adopted a final rule related to certain provisions of the Dodd-Frank Act. The

rule requires companies to describe practices and policies pertaining to transactions that hedge, or are designed to

hedge, the market value of equity securities granted as compensation to any employee, including officers or

directors. The new rule and related disclosures are required in a proxy statement or information statement related

to an election of directors and such disclosures should include the categories of persons covered. Likewise, if a

company does not have any such practices or policies, disclosure of that fact must be included in such filings.

This final rule was generally effective in proxy statements or information statements during fiscal years

beginning on or after July 1, 2019.

On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (“Reform Act”)

was signed into law. In addition to other provisions, the Reform Act directs the Director of FIO and the Board of

Governors of the Federal Reserve to support increased transparency at global insurance or international standard-

setting regulatory or supervisory forums, and to achieve consensus positions with the states through the NAIC

prior to taking a position on any insurance proposal by a global insurance regulatory or supervisory forum. We

cannot predict the effect of all the regulations or legislation adopted under the Dodd-Frank Act or the Reform Act

on financial markets generally, or on our businesses specifically, the additional costs associated with compliance

with such regulations or legislation, or any changes to our operations that may be necessary to comply with the

Dodd-Frank Act and the regulations thereunder, any of which could have a material adverse effect on our

business, results of operations, cash flows or financial condition. We also cannot predict whether other federal

initiatives will be adopted or what impact, if any, such initiatives, if adopted as laws, may have on our business,

financial condition or results of operations.

Changes in tax laws

During 2018, we finalized the accounting of the provisions in the Tax Cuts and Jobs Act (“TCJA”) and

related guidance, namely through Staff Accounting Bulletin (“SAB”) 118. This guidance was issued by the SEC

to provide relief to companies due to the complexities involved in accounting for the TCJA. In addition, since the

34

35

“—Mortgage Insurance Regulation.” In addition, although the federal government does not comprehensively

regulate the business of insurance, federal legislation and administrative policies in several areas, including

taxation, financial services regulation, and pension and welfare benefits regulation, can also significantly affect

the insurance industry.

Dodd-Frank Act and other federal initiatives

Although the federal government generally does not directly regulate the insurance business, federal

initiatives often have an impact on the business in a variety of ways, including limitations on antitrust immunity,

tax incentives for lifetime annuity payouts, simplification bills affecting tax-advantaged or tax-exempt savings

and retirement vehicles, and proposals to modify the estate tax. In addition, various forms of direct federal

regulation of insurance have been proposed in recent years.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) made extensive

changes to the laws regulating financial services firms and required various federal agencies to adopt a broad

range of new implementing rules and regulations.

Among other provisions, the Dodd-Frank Act established a new framework of regulation of the

over-the-counter (“OTC”) derivatives markets. The clearing requirements under the Dodd-Frank Act require us

to post with a futures commission merchant highly liquid securities or cash as initial margin and cash to meet

variation margin requirements for most interest rate derivatives we trade. As the marketplace continues to evolve,

we may have to alter or limit the way we use derivatives in the future, which could have an adverse effect on our

results of operations and financial condition. We are subject to similar trade reporting, documentation, central

trading and clearing and OTC margining requirements when we transact with foreign derivatives counterparties.

In addition, regulations adopted by federal banking regulators that became effective in 2019 require certain bank-

regulated counterparties and certain of their affiliates to include in certain financial contracts, including many

derivatives contracts, terms that delay or restrict the rights of counterparties, such as us, to terminate such

contracts, foreclose upon collateral, exercise other default rights or restrict transfers of affiliate credit

enhancements (such as guarantees) in the event that the bank-regulated counterparty and/or its affiliates are

subject to certain types of resolution or insolvency proceedings. It is possible that these new requirements, as

well as potential additional government regulation and other developments in the market, could adversely affect

our ability to terminate existing derivatives agreements or to realize amounts to be received under such

agreements. The Dodd-Frank Act and related federal regulations and foreign derivatives requirements expose us

to operational, compliance, execution and other risks, including central counterparty insolvency risk.

In the case of our U.S. mortgage insurance business, the Dodd-Frank Act prohibited a creditor from making

a residential mortgage loan unless the creditor makes a reasonable and good faith determination that, at the time

the loan is consummated, the consumer has a reasonable ability to repay the loan. In addition, the Dodd-Frank

Act created the CFPB, which regulates certain aspects of the offering and provision of consumer financial

products or services but not the business of insurance. Certain rules and regulations established by the CFPB

require mortgage lenders to demonstrate that they have effectively considered the consumer’s ability to repay a

mortgage loan, establish when a mortgage may be classified as a Qualified Mortgage (“QM”) and determine

when a lender is eligible for a safe harbor as a presumption that the lender has complied with the ability-to-repay

requirements. The regulations also include a temporary category (the “QM Patch”) for mortgages that comply

with certain prohibitions and limitations and meet the GSE underwriting and product guidelines. Mortgages that

meet these requirements are deemed to be QMs until the earlier of the time in which the GSEs exit the FHFA

conservatorship or the mandatory compliance date of the final amendments to the CFPB’s rule defining what

constitutes a QM (“QM Rule”). The QM Patch permits loans that exceed a debt to income ratio of 43% to be

eligible for QM status. Many of the loans that qualify under the QM Patch require credit enhancement, of which

private mortgage insurance is the predominate form of coverage. On June 22, 2020, the CFPB issued a Notice of

Proposed Rulemaking seeking comments on a proposed amendment to the QM Rule, which, among other things,

would remove the QM loan definition’s 43% debt-to-income ratio and replace it with a limit based on the loan’s

pricing. On August 18, 2020, the CFPB issued an additional Notice of Proposed Rulemaking adding a
“seasoning” approach to the QM “safe harbor.” The proposed rule exempts lenders from liability when they
make a reasonable, good faith determination of a consumer’s ability to repay any non-QM loan that has
experienced minimal delinquencies within the first three years after origination. Both rules have been published
in final form in the Federal Register. The QM Rule has an optional effective date of March 1, 2021 and a
mandatory effective date of July 1, 2021. The “seasoning” rule goes into effect on March 1, 2021. We do not
expect the final rules to significantly impact our U.S. mortgage insurance business.

The Dodd-Frank Act also established a Financial Stability Oversight Council (“FSOC”), which is authorized

to subject non-bank financial companies, which may include insurance companies, deemed systemically
significant to stricter prudential standards and other requirements and to subject such companies to a special
orderly liquidation process outside the federal Bankruptcy Code, administered by the Federal Deposit Insurance
Corporation. There are currently no such companies designated as systemically significant by the FSOC. We
have not been, nor do we believe we will be, designated as systemically significant by FSOC. FSOC’s potential
recommendation of measures to address systemic financial risk could affect our insurance operations. A future
determination that we or our counterparties are systemically significant could impose significant burdens on us,
impact the way we conduct our business, increase compliance costs, duplicate state regulation and result in a
competitive disadvantage.

The Dodd-Frank Act established a Federal Insurance Office (“FIO”) within the Department of the Treasury.
While not having a general supervisory or regulatory authority over the business of insurance, the director of this
office performs various functions with respect to insurance, including serving as a non-voting member of the
FSOC and making recommendations to the FSOC regarding insurers to be designated for more stringent
regulation.

In December 2018, the SEC adopted a final rule related to certain provisions of the Dodd-Frank Act. The
rule requires companies to describe practices and policies pertaining to transactions that hedge, or are designed to
hedge, the market value of equity securities granted as compensation to any employee, including officers or
directors. The new rule and related disclosures are required in a proxy statement or information statement related
to an election of directors and such disclosures should include the categories of persons covered. Likewise, if a
company does not have any such practices or policies, disclosure of that fact must be included in such filings.
This final rule was generally effective in proxy statements or information statements during fiscal years
beginning on or after July 1, 2019.

On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (“Reform Act”)
was signed into law. In addition to other provisions, the Reform Act directs the Director of FIO and the Board of
Governors of the Federal Reserve to support increased transparency at global insurance or international standard-
setting regulatory or supervisory forums, and to achieve consensus positions with the states through the NAIC
prior to taking a position on any insurance proposal by a global insurance regulatory or supervisory forum. We
cannot predict the effect of all the regulations or legislation adopted under the Dodd-Frank Act or the Reform Act
on financial markets generally, or on our businesses specifically, the additional costs associated with compliance
with such regulations or legislation, or any changes to our operations that may be necessary to comply with the
Dodd-Frank Act and the regulations thereunder, any of which could have a material adverse effect on our
business, results of operations, cash flows or financial condition. We also cannot predict whether other federal
initiatives will be adopted or what impact, if any, such initiatives, if adopted as laws, may have on our business,
financial condition or results of operations.

Changes in tax laws

During 2018, we finalized the accounting of the provisions in the Tax Cuts and Jobs Act (“TCJA”) and
related guidance, namely through Staff Accounting Bulletin (“SAB”) 118. This guidance was issued by the SEC
to provide relief to companies due to the complexities involved in accounting for the TCJA. In addition, since the

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35

passage of the TCJA, several clarifying and tax guidance related items have been issued by the Internal Revenue
Service (“IRS”) and the U.S. Department of the Treasury. Although we have finalized the accounting for the
TCJA and SAB 118, we continue to evaluate new tax related items and the impact it will have on our results of
operations and financial condition. The effects of tax guidance issued in 2020 did not have a significant impact
on our results of operations or financial condition. We will continue to monitor new pending and proposed tax
legislation, particularly in light of the outcome of the U.S. presidential and senatorial elections, the change in
administration and unified control of the U.S. federal government.

defined by Insurance Laws. These contingency reserves generally are held until the earlier of (i) the time that loss

ratios exceed 35% or (ii) 10 years, although regulators have granted discretionary releases from time to time.

However, approval by the NCDOI, our primary domiciliary regulator, is required for contingency reserve

releases when loss ratios exceed 35%. The establishment of the statutory contingency reserve is funded by

premiums that would otherwise generate net earnings that would be reflected in policyholder surplus. This

reserve reduces the policyholder surplus of our U.S. mortgage insurers, and therefore, their ability to pay

dividends to us. The statutory contingency reserve for our U.S. mortgage insurers was approximately $2.5 billion

Mortgage Insurance Regulation

State regulation

General

Mortgage insurers generally are limited by Insurance Laws to directly writing only mortgage insurance
business to the exclusion of other types of insurance. Mortgage insurers are not subject to the NAIC’s RBC
requirements but certain states and other regulators impose another form of capital requirement on mortgage
insurers, requiring maintenance of a risk-to-capital ratio not to exceed 25:1. GMICO, our primary U.S. mortgage
insurance subsidiary, had a risk-to-capital ratio of 12.3:1 and 12.5:1 as of December 31, 2020 and 2019,
respectively.

The North Carolina Department of Insurance’s (“NCDOI”) current regulatory framework by which

GMICO’s risk-to-capital ratio is calculated differs from the capital requirements of the GSEs as discussed under
“—Other U.S. regulation.”

The NAIC established a Mortgage Guaranty Insurance Working Group (the “MGIWG”) to determine and

make recommendations to the NAIC’s Financial Condition Committee as to what, if any, changes to make to the
solvency and other regulations relating to mortgage guaranty insurers. The MGIWG continues to work on
revisions to the NAIC’s Mortgage Guaranty Insurance Model Act (the “MGI Model”), revisions to Statement of
Statutory Accounting Principles No. 58—Mortgage Guaranty Insurance and the development of a mortgage
guaranty supplemental filing. The proposed amendments of the MGI Model relate to, among other things:
(i) capital and reserve standards, including increased minimum capital and surplus requirements, mortgage
guaranty-specific RBC standards, dividend restrictions and contingency and premium deficiency reserves;
(ii) limitations on the geographic concentration of mortgage guaranty risk, including state-based limitations;
(iii) restrictions on mortgage insurers’ investments in notes secured by mortgages; (iv) prudent underwriting
standards and formal underwriting guidelines to be approved by the insurer’s board; (v) the establishment of
formal, internal “Mortgage Guaranty Quality Control Programs” with respect to in-force business;
(vi) prohibitions on captive reinsurance arrangements; and (vii) incorporation of an NAIC “Mortgage Guaranty
Insurance Standards Manual.” The MGIWG is working on the development of the mortgage guaranty insurance
capital model, which is needed to determine the RBC and loan-level capital standards for the amended MGI
Model. At this time, we cannot predict the outcome of this process, whether any state will adopt the amended
MGI Model or any of its specific provisions, the effect changes, if any, will have on the mortgage guaranty
insurance market generally, or on our business specifically, the additional costs associated with compliance with
any such changes, or any changes to our operations that may be necessary to comply, any of which could have a
material adverse effect on our business, results of operations and financial condition. We also cannot predict
whether other regulatory initiatives will be adopted or what impact, if any, such initiatives, if adopted as laws,
may have on our business, results of operations and financial condition.

Reserves

as of December 31, 2020.

Federal regulation

In addition to federal laws directly applicable to mortgage insurers, the laws and regulations applicable to

mortgage originators and lenders, purchasers of mortgage loans such as the GSEs, and governmental insurers

such as the FHA and VA indirectly affect mortgage insurers. Changes in federal housing legislation and other

laws and regulations that affect the demand for private mortgage insurance, or the way in which such laws and

regulations are interpreted or applied, may have a material effect on private mortgage insurers. For example, in

December 2020, the FHFA published a final rule that imposes a new capital framework on the GSEs, including

risk-based and leverage capital requirements and buffers in excess of regulatory minimums that can be drawn

down in periods of financial stress. This rule is part of the process to potentially end the conservatorships of the

GSEs. The final rule could cause the GSEs to increase their guarantee pricing in order to meet the new capital

requirements. Legislation or regulation that changes the role of the GSEs or ends conservatorships of the GSEs

could have a material adverse effect on our business. Likewise, any legislation or regulation that increases the

number of people eligible for FHA or VA mortgages could have a materially adverse effect on our ability to

compete with the FHA or VA.

The Homeowners Protection Act of 1998 (the “Homeowners Protection Act”) provides for the automatic

termination, or cancellation upon a borrower’s request, of the borrower’s obligation to pay for private mortgage

insurance upon satisfaction of certain conditions, although mortgage servicers may continue to keep the coverage

in place at their expense. The Homeowners Protection Act applies to owner-occupied residential mortgage loans

regardless of lien priority and to borrower-paid mortgage insurance closed after July 29, 1999. FHA loans are not

covered by the Homeowners Protection Act. The Homeowners Protection Act requires lenders to automatically

terminate a borrower’s obligation to pay for mortgage insurance coverage once the loan-to-value ratio reaches

78% of the original value. A borrower generally may also request cancellation of mortgage insurance from the

lender once the actual payments reduce the loan balance to 80% of the home’s original value. For borrower-

initiated cancellation of mortgage insurance, the borrower must have a “good payment history” as defined by the

Homeowners Protection Act.

The Real Estate Settlement and Procedures Act of 1974 (“RESPA”) applies to most residential mortgages

insured by private mortgage insurers. Mortgage insurance is considered to be a “settlement service” for purposes

of loans subject to RESPA. Subject to limited exceptions, RESPA precludes us from providing services to

mortgage lenders or other settlement service providers free of charge, charging fees for services that are lower

than their reasonable or fair market value, and paying fees for services that others provide that are higher than

their reasonable or fair market value. In addition, RESPA prohibits persons from giving or accepting any portion

or percentage of a charge for a real estate settlement service, other than for services actually performed. Although

many states prohibit mortgage insurers from giving rebates, RESPA has been interpreted to cover many non-fee

services as well. Mortgage insurers and their customers are subject to the possible sanctions of this law, which

may be enforced by the CFPB, state insurance departments, state attorneys general and other enforcement

authorities.

Insurance Laws require our U.S. mortgage insurers to establish a special statutory contingency reserve in

their statutory financial statements to provide for claims and other expenses in the event of significant economic
declines. Annual additions to the statutory contingency reserve must be at least 50% of net earned premiums as

The Equal Credit Opportunity Act (“ECOA”), the Fair Housing Act and the Fair Credit Reporting Act

(“FCRA”) also affect the business of mortgage insurance in various ways. ECOA, for example, prohibits

discrimination against certain protected classes in credit transactions. The Fair Housing Act generally prohibits

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passage of the TCJA, several clarifying and tax guidance related items have been issued by the Internal Revenue

Service (“IRS”) and the U.S. Department of the Treasury. Although we have finalized the accounting for the

TCJA and SAB 118, we continue to evaluate new tax related items and the impact it will have on our results of

operations and financial condition. The effects of tax guidance issued in 2020 did not have a significant impact

on our results of operations or financial condition. We will continue to monitor new pending and proposed tax

legislation, particularly in light of the outcome of the U.S. presidential and senatorial elections, the change in

administration and unified control of the U.S. federal government.

Mortgage Insurance Regulation

State regulation

General

Mortgage insurers generally are limited by Insurance Laws to directly writing only mortgage insurance

business to the exclusion of other types of insurance. Mortgage insurers are not subject to the NAIC’s RBC

requirements but certain states and other regulators impose another form of capital requirement on mortgage

insurers, requiring maintenance of a risk-to-capital ratio not to exceed 25:1. GMICO, our primary U.S. mortgage

insurance subsidiary, had a risk-to-capital ratio of 12.3:1 and 12.5:1 as of December 31, 2020 and 2019,

respectively.

The North Carolina Department of Insurance’s (“NCDOI”) current regulatory framework by which

GMICO’s risk-to-capital ratio is calculated differs from the capital requirements of the GSEs as discussed under

“—Other U.S. regulation.”

The NAIC established a Mortgage Guaranty Insurance Working Group (the “MGIWG”) to determine and

make recommendations to the NAIC’s Financial Condition Committee as to what, if any, changes to make to the

solvency and other regulations relating to mortgage guaranty insurers. The MGIWG continues to work on

revisions to the NAIC’s Mortgage Guaranty Insurance Model Act (the “MGI Model”), revisions to Statement of

Statutory Accounting Principles No. 58—Mortgage Guaranty Insurance and the development of a mortgage

guaranty supplemental filing. The proposed amendments of the MGI Model relate to, among other things:

(i) capital and reserve standards, including increased minimum capital and surplus requirements, mortgage

guaranty-specific RBC standards, dividend restrictions and contingency and premium deficiency reserves;

(ii) limitations on the geographic concentration of mortgage guaranty risk, including state-based limitations;

(iii) restrictions on mortgage insurers’ investments in notes secured by mortgages; (iv) prudent underwriting

standards and formal underwriting guidelines to be approved by the insurer’s board; (v) the establishment of

formal, internal “Mortgage Guaranty Quality Control Programs” with respect to in-force business;

(vi) prohibitions on captive reinsurance arrangements; and (vii) incorporation of an NAIC “Mortgage Guaranty

Insurance Standards Manual.” The MGIWG is working on the development of the mortgage guaranty insurance

capital model, which is needed to determine the RBC and loan-level capital standards for the amended MGI

Model. At this time, we cannot predict the outcome of this process, whether any state will adopt the amended

MGI Model or any of its specific provisions, the effect changes, if any, will have on the mortgage guaranty

insurance market generally, or on our business specifically, the additional costs associated with compliance with

any such changes, or any changes to our operations that may be necessary to comply, any of which could have a

material adverse effect on our business, results of operations and financial condition. We also cannot predict

whether other regulatory initiatives will be adopted or what impact, if any, such initiatives, if adopted as laws,

may have on our business, results of operations and financial condition.

Reserves

defined by Insurance Laws. These contingency reserves generally are held until the earlier of (i) the time that loss
ratios exceed 35% or (ii) 10 years, although regulators have granted discretionary releases from time to time.
However, approval by the NCDOI, our primary domiciliary regulator, is required for contingency reserve
releases when loss ratios exceed 35%. The establishment of the statutory contingency reserve is funded by
premiums that would otherwise generate net earnings that would be reflected in policyholder surplus. This
reserve reduces the policyholder surplus of our U.S. mortgage insurers, and therefore, their ability to pay
dividends to us. The statutory contingency reserve for our U.S. mortgage insurers was approximately $2.5 billion
as of December 31, 2020.

Federal regulation

In addition to federal laws directly applicable to mortgage insurers, the laws and regulations applicable to

mortgage originators and lenders, purchasers of mortgage loans such as the GSEs, and governmental insurers
such as the FHA and VA indirectly affect mortgage insurers. Changes in federal housing legislation and other
laws and regulations that affect the demand for private mortgage insurance, or the way in which such laws and
regulations are interpreted or applied, may have a material effect on private mortgage insurers. For example, in
December 2020, the FHFA published a final rule that imposes a new capital framework on the GSEs, including
risk-based and leverage capital requirements and buffers in excess of regulatory minimums that can be drawn
down in periods of financial stress. This rule is part of the process to potentially end the conservatorships of the
GSEs. The final rule could cause the GSEs to increase their guarantee pricing in order to meet the new capital
requirements. Legislation or regulation that changes the role of the GSEs or ends conservatorships of the GSEs
could have a material adverse effect on our business. Likewise, any legislation or regulation that increases the
number of people eligible for FHA or VA mortgages could have a materially adverse effect on our ability to
compete with the FHA or VA.

The Homeowners Protection Act of 1998 (the “Homeowners Protection Act”) provides for the automatic

termination, or cancellation upon a borrower’s request, of the borrower’s obligation to pay for private mortgage
insurance upon satisfaction of certain conditions, although mortgage servicers may continue to keep the coverage
in place at their expense. The Homeowners Protection Act applies to owner-occupied residential mortgage loans
regardless of lien priority and to borrower-paid mortgage insurance closed after July 29, 1999. FHA loans are not
covered by the Homeowners Protection Act. The Homeowners Protection Act requires lenders to automatically
terminate a borrower’s obligation to pay for mortgage insurance coverage once the loan-to-value ratio reaches
78% of the original value. A borrower generally may also request cancellation of mortgage insurance from the
lender once the actual payments reduce the loan balance to 80% of the home’s original value. For borrower-
initiated cancellation of mortgage insurance, the borrower must have a “good payment history” as defined by the
Homeowners Protection Act.

The Real Estate Settlement and Procedures Act of 1974 (“RESPA”) applies to most residential mortgages

insured by private mortgage insurers. Mortgage insurance is considered to be a “settlement service” for purposes
of loans subject to RESPA. Subject to limited exceptions, RESPA precludes us from providing services to
mortgage lenders or other settlement service providers free of charge, charging fees for services that are lower
than their reasonable or fair market value, and paying fees for services that others provide that are higher than
their reasonable or fair market value. In addition, RESPA prohibits persons from giving or accepting any portion
or percentage of a charge for a real estate settlement service, other than for services actually performed. Although
many states prohibit mortgage insurers from giving rebates, RESPA has been interpreted to cover many non-fee
services as well. Mortgage insurers and their customers are subject to the possible sanctions of this law, which
may be enforced by the CFPB, state insurance departments, state attorneys general and other enforcement
authorities.

Insurance Laws require our U.S. mortgage insurers to establish a special statutory contingency reserve in

their statutory financial statements to provide for claims and other expenses in the event of significant economic

declines. Annual additions to the statutory contingency reserve must be at least 50% of net earned premiums as

The Equal Credit Opportunity Act (“ECOA”), the Fair Housing Act and the Fair Credit Reporting Act

(“FCRA”) also affect the business of mortgage insurance in various ways. ECOA, for example, prohibits
discrimination against certain protected classes in credit transactions. The Fair Housing Act generally prohibits

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discrimination in the terms, conditions or privileges in residential real estate-related transactions on the basis of
race, color, religion, sex, familial status or national origin. Numerous courts have held that the Fair Housing Act
prohibits discriminatory insurance practices. The FCRA governs the access and use of consumer credit
information in credit transactions and requires notices to consumers in certain circumstances. The FCRA also
imposes restrictions on the permissible use of credit report information and requires mortgage insurance
companies to provide adverse action notices to consumers in the event an application for mortgage insurance is
declined or offered at less than the best available rate for the loan program applied for due to information
contained in a consumer’s credit report.

Other U.S. Regulation and Agency Qualification Requirements

The GSEs impose eligibility requirements that private mortgage insurers must satisfy in order to be
approved to insure loans purchased by the GSEs. Effective December 31, 2015, each GSE adopted the original
PMIERs, which set forth operational and financial requirements that mortgage insurers must meet in order to
remain eligible. On September 27, 2018, the GSEs issued revisions to the PMIERs, which became effective for
our U.S. mortgage insurance business on March 31, 2019. The PMIERs aim to ensure that approved insurers
possess the financial and operational capacity to serve as strong counterparties to the GSEs throughout various
market conditions. The PMIERs are comprehensive, covering virtually all aspects of our U.S. mortgage
insurance business and its operations as a private mortgage insurer of GSE loans, including internal risk
management and quality controls, our relationship with the GSEs and our financial condition. The PMIERs
contain extensive requirements related to the conduct and operations of our U.S. mortgage insurance business,
including requirements in areas such as claim processing, loss mitigation, document retention, underwriting,
quality control, reporting and monitoring, among others. Each approved mortgage insurer is required to provide
the GSEs with an annual certification and a quarterly report as to its compliance with PMIERs. The financial
requirements of PMIERs mandate that a mortgage insurer’s “Available Assets” (generally only the most liquid
assets of an insurer) must meet or exceed “Minimum Required Assets” (which are based on an insurer’s risk
in-force and are calculated from tables of factors with several risk dimensions and are subject to a floor amount).
In addition, the PMIERs prohibit private mortgage insurers from engaging in certain activities such as insuring
loans originated or serviced by an affiliate (except under certain circumstances) and require private mortgage
insurers to obtain the prior consent of the GSEs before taking certain actions, such as entering into various
intercompany agreements and commuting or reinsuring risk.

On June 29, 2020, the GSEs issued guidance amending PMIERs in light of COVID-19 (the “PMIERs

Amendment”). The PMIERs Amendment, which includes both temporary and permanent amendments to
PMIERs, became effective on June 30, 2020. The GSEs issued a revised and restated version of the PMIERs
Amendment on September 11, 2020, which included a new delinquency reporting requirement that became
effective on December 31, 2020 and issued another revised and restated version on December 4, 2020 that
extended certain defined periods within the PMIERs Amendment. For loans that became non-performing due to a
COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) has an
initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to
a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are
materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount
factor for the non-performing loan will be the greater of (a) the applicable risk-based required asset amount
factor for a performing loan were it not delinquent or (b) the product of a 0.30 multiplier and the applicable risk-
based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being
subject to a forbearance plan described in (ii) above, the 0.30 multiplier will be applicable for no longer than
three calendar months beginning with the month in which the loan became a non-performing loan due to having
missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are
either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the
approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial
period. The PMIERs Amendment also imposes temporary capital preservation provisions through June 30, 2021,
that require an approved insurer to obtain prior written GSE approval before paying any dividends, pledging or

transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax

sharing and intercompany expense-sharing agreements, even if such insurer has a surplus of available assets. In

addition, the PMIERs Amendment imposes permanent revisions to the risk-based required asset amount factor

for non-performing loans for properties located in future Federal Emergency Management Agency (“FEMA”)

Declared Major Disaster Areas eligible for individual assistance.

In September 2020, the GSEs imposed certain restrictions (“GSE Restrictions”) with respect to capital on

our U.S. mortgage insurance business. These restrictions will remain in effect until the later of six quarters or

until the following collective (“GSE Conditions”) are met: a) approval of GMICO’s plan to secure additional

capital, if needed, b) GMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s or Fitch for two

consecutive quarters and c) Genworth achieves certain financial metrics. Prior to the satisfaction of the GSE

Conditions, the GSE Restrictions require:

• GMICO to maintain 115% of PMIERs minimum required assets through 2021, 120% during 2022 and

125% thereafter;

GMICO or GMHI.

• GMHI to retain $300 million of its holding company cash that can be drawn down exclusively for its

debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs; and

• written approval must be received from the GSEs prior to any additional debt issuance by either

Until the GSE Conditions imposed in connection with the GSE Restrictions are met, GMHI’s liquidity must

not fall below 13.5% of its outstanding debt.

In addition, the GSEs issued separate conditions and restrictions in September 2020 in connection with their

re-approval of the China Oceanwide transaction, which place identical restrictions on our U.S. mortgage

insurance business, if the proposed China Oceanwide transaction closes. Because this transaction has not closed,

Genworth and China Oceanwide would need to re-engage with the GSEs to determine whether the transaction

could proceed under the prior re-approval. We are uncertain what, if any, new requirements, conditions or

restrictions might be imposed on our U.S. mortgage insurance business in connection with a re-approval from the

GSEs. See “Item 1A. Risk Factors—The proposed transaction with China Oceanwide may be terminated or may

not be completed within the timeframe, terms or in the manner previously anticipated, which could have a

material adverse effect on us and our stock price.”

In their respective letters approving credit for reinsurance and other credit risk transfer transactions against

PMIERs financial requirements, the GSEs require our U.S. mortgage insurance subsidiary to maintain a

maximum statutory risk-to-capital ratio of 18:1 or they reserve the right to reevaluate the amount of PMIERs

credit indicated in their approval letters. Freddie Mac has also imposed additional requirements on our option to

commute these reinsurance agreements. Both GSEs reserved the right to periodically review the reinsurance and

credit risk transfer transactions for treatment under PMIERs.

As of December 31, 2020 and 2019, our U.S. mortgage insurance business met the PMIERs financial and

operational requirements, based in part on its entry into a series of credit risk transfer transactions. As of

December 31, 2020, we estimate our U.S. mortgage insurance business had available assets of $4,588 million

against $3,359 million net required assets under PMIERs compared to available assets of $3,811 million against

$2,754 million net required assets as of December 31, 2019. The estimated sufficiency as of December 31, 2020

was $1,229 million or 137% above the published PMIERs requirements, compared to $1,057 million, or 138%

above the PMIERs requirements as of December 31, 2019. PMIERs sufficiency is based on the published

requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions.

Although we expect we will continue to retain our eligibility status with the GSEs, there can be no assurance

these conditions will continue, see “Item 1A—Risk Factors— If we are unable to continue to meet the requirements

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discrimination in the terms, conditions or privileges in residential real estate-related transactions on the basis of

race, color, religion, sex, familial status or national origin. Numerous courts have held that the Fair Housing Act

prohibits discriminatory insurance practices. The FCRA governs the access and use of consumer credit

information in credit transactions and requires notices to consumers in certain circumstances. The FCRA also

imposes restrictions on the permissible use of credit report information and requires mortgage insurance

companies to provide adverse action notices to consumers in the event an application for mortgage insurance is

declined or offered at less than the best available rate for the loan program applied for due to information

contained in a consumer’s credit report.

Other U.S. Regulation and Agency Qualification Requirements

The GSEs impose eligibility requirements that private mortgage insurers must satisfy in order to be

approved to insure loans purchased by the GSEs. Effective December 31, 2015, each GSE adopted the original

PMIERs, which set forth operational and financial requirements that mortgage insurers must meet in order to

remain eligible. On September 27, 2018, the GSEs issued revisions to the PMIERs, which became effective for

our U.S. mortgage insurance business on March 31, 2019. The PMIERs aim to ensure that approved insurers

possess the financial and operational capacity to serve as strong counterparties to the GSEs throughout various

market conditions. The PMIERs are comprehensive, covering virtually all aspects of our U.S. mortgage

insurance business and its operations as a private mortgage insurer of GSE loans, including internal risk

management and quality controls, our relationship with the GSEs and our financial condition. The PMIERs

contain extensive requirements related to the conduct and operations of our U.S. mortgage insurance business,

including requirements in areas such as claim processing, loss mitigation, document retention, underwriting,

quality control, reporting and monitoring, among others. Each approved mortgage insurer is required to provide

the GSEs with an annual certification and a quarterly report as to its compliance with PMIERs. The financial

requirements of PMIERs mandate that a mortgage insurer’s “Available Assets” (generally only the most liquid

assets of an insurer) must meet or exceed “Minimum Required Assets” (which are based on an insurer’s risk

in-force and are calculated from tables of factors with several risk dimensions and are subject to a floor amount).

In addition, the PMIERs prohibit private mortgage insurers from engaging in certain activities such as insuring

loans originated or serviced by an affiliate (except under certain circumstances) and require private mortgage

insurers to obtain the prior consent of the GSEs before taking certain actions, such as entering into various

intercompany agreements and commuting or reinsuring risk.

On June 29, 2020, the GSEs issued guidance amending PMIERs in light of COVID-19 (the “PMIERs

Amendment”). The PMIERs Amendment, which includes both temporary and permanent amendments to

PMIERs, became effective on June 30, 2020. The GSEs issued a revised and restated version of the PMIERs

Amendment on September 11, 2020, which included a new delinquency reporting requirement that became

effective on December 31, 2020 and issued another revised and restated version on December 4, 2020 that

extended certain defined periods within the PMIERs Amendment. For loans that became non-performing due to a

COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) has an

initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to

a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are

materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount

factor for the non-performing loan will be the greater of (a) the applicable risk-based required asset amount

factor for a performing loan were it not delinquent or (b) the product of a 0.30 multiplier and the applicable risk-

based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being

subject to a forbearance plan described in (ii) above, the 0.30 multiplier will be applicable for no longer than

three calendar months beginning with the month in which the loan became a non-performing loan due to having

missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are

either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the

approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial

period. The PMIERs Amendment also imposes temporary capital preservation provisions through June 30, 2021,

that require an approved insurer to obtain prior written GSE approval before paying any dividends, pledging or

transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax
sharing and intercompany expense-sharing agreements, even if such insurer has a surplus of available assets. In
addition, the PMIERs Amendment imposes permanent revisions to the risk-based required asset amount factor
for non-performing loans for properties located in future Federal Emergency Management Agency (“FEMA”)
Declared Major Disaster Areas eligible for individual assistance.

In September 2020, the GSEs imposed certain restrictions (“GSE Restrictions”) with respect to capital on
our U.S. mortgage insurance business. These restrictions will remain in effect until the later of six quarters or
until the following collective (“GSE Conditions”) are met: a) approval of GMICO’s plan to secure additional
capital, if needed, b) GMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s or Fitch for two
consecutive quarters and c) Genworth achieves certain financial metrics. Prior to the satisfaction of the GSE
Conditions, the GSE Restrictions require:

• GMICO to maintain 115% of PMIERs minimum required assets through 2021, 120% during 2022 and

125% thereafter;

• GMHI to retain $300 million of its holding company cash that can be drawn down exclusively for its
debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs; and

• written approval must be received from the GSEs prior to any additional debt issuance by either

GMICO or GMHI.

Until the GSE Conditions imposed in connection with the GSE Restrictions are met, GMHI’s liquidity must

not fall below 13.5% of its outstanding debt.

In addition, the GSEs issued separate conditions and restrictions in September 2020 in connection with their

re-approval of the China Oceanwide transaction, which place identical restrictions on our U.S. mortgage
insurance business, if the proposed China Oceanwide transaction closes. Because this transaction has not closed,
Genworth and China Oceanwide would need to re-engage with the GSEs to determine whether the transaction
could proceed under the prior re-approval. We are uncertain what, if any, new requirements, conditions or
restrictions might be imposed on our U.S. mortgage insurance business in connection with a re-approval from the
GSEs. See “Item 1A. Risk Factors—The proposed transaction with China Oceanwide may be terminated or may
not be completed within the timeframe, terms or in the manner previously anticipated, which could have a
material adverse effect on us and our stock price.”

In their respective letters approving credit for reinsurance and other credit risk transfer transactions against

PMIERs financial requirements, the GSEs require our U.S. mortgage insurance subsidiary to maintain a
maximum statutory risk-to-capital ratio of 18:1 or they reserve the right to reevaluate the amount of PMIERs
credit indicated in their approval letters. Freddie Mac has also imposed additional requirements on our option to
commute these reinsurance agreements. Both GSEs reserved the right to periodically review the reinsurance and
credit risk transfer transactions for treatment under PMIERs.

As of December 31, 2020 and 2019, our U.S. mortgage insurance business met the PMIERs financial and

operational requirements, based in part on its entry into a series of credit risk transfer transactions. As of
December 31, 2020, we estimate our U.S. mortgage insurance business had available assets of $4,588 million
against $3,359 million net required assets under PMIERs compared to available assets of $3,811 million against
$2,754 million net required assets as of December 31, 2019. The estimated sufficiency as of December 31, 2020
was $1,229 million or 137% above the published PMIERs requirements, compared to $1,057 million, or 138%
above the PMIERs requirements as of December 31, 2019. PMIERs sufficiency is based on the published
requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions.

Although we expect we will continue to retain our eligibility status with the GSEs, there can be no assurance

these conditions will continue, see “Item 1A—Risk Factors— If we are unable to continue to meet the requirements

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mandated by PMIERs because the GSEs amend them or the GSEs’ interpretation of the financial requirements
requires us to hold amounts of capital that are higher than we have planned or otherwise, we may not be eligible to
write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business,
results of operations and financial condition.”

Australia regulation

APRA regulates all ADIs, life insurance, general and mortgage insurance companies in Australia. APRA’s

authorization conditions require Australian mortgage insurers to be monoline insurers, which are insurers
offering just one type of insurance product. APRA’s prudential standards apply to individual authorized insurers
and to the relevant Australian-based holding company and group.

APRA also sets minimum capital levels and monitors corporate governance requirements, including the risk

management strategy for our Australian mortgage insurance business. In this regard, APRA reviews our
management, controls, processes, reporting and methods by which all risks are managed, including an annual
financial condition report and an annual report on insurance liabilities by an appointed actuary. APRA also
requires us to submit our risk and reinsurance management strategy, which outlines the use of reinsurance in
Australia, annually and more frequently if there are material changes.

In setting minimum capital levels, APRA requires mortgage insurers to ensure they have sufficient capital to

withstand a hypothetical three-year stress loss scenario defined by APRA. APRA’s prudential standards provide
for increased mortgage insurers’ capital requirements for insured loans that are considered to be non-standard.
Non-standard mortgages are generally those loans where the lender has not formally verified the borrower’s
income and employment or where the borrower has not passed standard credit checks. Non-standard mortgages
accounted for approximately 5% of our insurance in-force as of December 31, 2020 in our mortgage insurance
business in Australia. APRA also imposes quarterly and annual reporting obligations on mortgage insurers with
respect to risk profiles, reinsurance arrangements, financial performance and financial position. We evaluate the
capital position of our mortgage insurance business in Australia in relation to the Prescribed Capital Amount
(“PCA”) as determined by APRA, utilizing the Internal Capital Adequacy Assessment Process (“ICAAP”) as the
framework to ensure that our Australia group of companies as a whole, and each regulated entity individually, are
capitalized to meet regulatory requirements. As of December 31, 2020, our PCA ratio was 165%, which is above
APRA’s capital holding requirements.

In addition, APRA determines the capital requirements for ADIs and has reduced capital requirements for

certain ADIs that insure residential mortgages with an “acceptable” mortgage insurer for all non-standard
mortgages and for standard mortgages with a loan-to-value ratio above 80%. APRA’s prudential standards
currently set out a number of circumstances in which a loan may be considered to be non-standard from an ADI’s
perspective. The capital levels for Australian IRB ADIs are determined by their APRA-approved IRB models,
which may or may not allocate capital credit for LMI. We believe that APRA and the IRB ADIs have not yet
finalized internal models for residential mortgage risk, so we do not believe that the IRB ADIs currently benefit
from an explicit reduction in their capital requirements for mortgages covered by mortgage insurance. APRA’s
prudential standards also provide that LMI on a non-performing loan (90 days plus arrears) protects most ADIs
from having to increase the regulatory capital on the loan to a risk-weighting of 100%. These prudential
standards include a definition of an “acceptable” mortgage insurer and eliminate the reduced capital requirements
for ADIs in the event that the mortgage insurer has contractual recourse to the ADI or a member of the ADI’s
consolidated group.

In December 2017, the Basel Committee released its revised framework. Given the broad reach and

complexity of the latest Basel reforms, APRA has stated it will give due consideration to appropriate adjustments
to the implementation of these reforms to reflect Australian conditions. In June 2019, APRA released draft
changes to its banking capital framework as part of its implementation of the global Basel III reforms. The
changes include capital relief for IRB banks where eligible LMI cover is already in place and reduced capital

relief for standardized banks who previously covered high loan-to-value loans with LMI. In December 2020,

APRA published a discussion paper proposing revisions to the ADI capital framework, such as greater risk

sensitivity within risk weighting framework, requiring ADIs to hold a larger share of their required capital as

buffers, requiring ADIs to disclose their capital ratios on a common basis and explicit capital relief for IRB banks

internal models of up to 20% for LMI. APRA noted that as a result of the changes, reported capital ratios will

increase. However, APRA does not expect the proposed changes to require ADIs to raise additional capital. The

feedback period for these proposed changes ends on April 1, 2021, and the new framework is expected to be

finalized by late 2021 and implemented on January 1, 2023.

In March 2017, APRA announced changes to reinforce sound mortgage lending practices, focusing on

slowing investor growth and limiting the flow of new interest-only lending. These changes resulted in a decline

in new insurance written volumes in 2017 and 2018. In 2019, APRA removed the investor loan growth and

interest-only lending benchmarks, subject to certain assurances from ADIs as to the strength of their lending

standards.

APRA has the power to impose restrictions on the ability of our Australia mortgage insurance business to

declare and pay dividends based on a number of factors, including the impact on the minimum regulatory capital

ratio of that business. Given the economic uncertainty surrounding COVID-19, in July 2020, APRA provided

guidance to insurers asking them to maintain caution in planning capital distributions, including dividends. Given

this guidance and the uncertain economic outlook, our mortgage insurance business in Australia believes it is

prudent to preserve capital to sustain its capital position. As a result, we have not received dividends or other

returns of capital from our Australia mortgage insurance business since March 2020. The amount and timing of

future dividends will depend on the economic recovery from COVID-19, among other factors, and may require

APRA approval.

On November 30, 2017, the Australian Government announced the establishment of a Royal Commission to

consider the conduct of Australia’s Banking, Superannuation and Financial Services industry and to further

ensure its financial system is working efficiently and effectively. The Royal Commission delivered its final

report on February 4, 2019. Following the release of the Royal Commission report, in August 2019, the

Australian Government released its Financial Services Royal Commission Implementation Roadmap, which

outlined its intention to implement all of the recommendations from the Royal Commission, planning to

implement the majority of commitments by mid-2020 and introduce recommendations requiring legislation by

the end of 2020. However, on May 8, 2020, the Australian Government announced that it would defer all phases

of implementation by six months to allow financial services entities to focus their attention and resources on

COVID-19 responses and planning for the post-COVID-19 economic recovery. Under the updated timetable,

those measures that the Government had indicated would be introduced into the Parliament by June 30, 2020

were introduced in December 2020. Similarly, those measures originally scheduled for introduction by December

2020 are now scheduled to be introduced by June 30, 2021. While the changes introduced in December 2020 are

not expected to have a material impact, given the implementation delays, it is still too early to determine what

impact, if any, the remaining measures will have on our mortgage insurance business in Australia.

On August 3, 2018, the Australian Government’s Productivity Commission released its final report on

Competition in the Australian Financial System, which included findings and recommendations related to

mortgage insurance. The Australian Government has not yet provided a timeframe on when it will release its

response. At this time, it is too early to determine what impact, if any, the outcomes of this report will have on

our mortgage insurance business in Australia.

In September 2019, the Australian Government released details of the First Home Loan Deposit Scheme

(“FHLDS”), which is designed to assist eligible first-time home buyers by providing a government guarantee to

participating lenders on eligible loans equal to the difference between the deposit (of at least 5%) and 20% of the

purchase price. Borrower income and regional property value caps apply, and the program is intended to support

up to 10,000 eligible first-time home buyers each Australian Government fiscal year, which is July 1 through

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41

mandated by PMIERs because the GSEs amend them or the GSEs’ interpretation of the financial requirements

requires us to hold amounts of capital that are higher than we have planned or otherwise, we may not be eligible to

write new insurance on loans acquired by the GSEs, which would have a material adverse effect on our business,

results of operations and financial condition.”

Australia regulation

APRA regulates all ADIs, life insurance, general and mortgage insurance companies in Australia. APRA’s

authorization conditions require Australian mortgage insurers to be monoline insurers, which are insurers

offering just one type of insurance product. APRA’s prudential standards apply to individual authorized insurers

and to the relevant Australian-based holding company and group.

APRA also sets minimum capital levels and monitors corporate governance requirements, including the risk

management strategy for our Australian mortgage insurance business. In this regard, APRA reviews our

management, controls, processes, reporting and methods by which all risks are managed, including an annual

financial condition report and an annual report on insurance liabilities by an appointed actuary. APRA also

requires us to submit our risk and reinsurance management strategy, which outlines the use of reinsurance in

Australia, annually and more frequently if there are material changes.

In setting minimum capital levels, APRA requires mortgage insurers to ensure they have sufficient capital to

withstand a hypothetical three-year stress loss scenario defined by APRA. APRA’s prudential standards provide

for increased mortgage insurers’ capital requirements for insured loans that are considered to be non-standard.

Non-standard mortgages are generally those loans where the lender has not formally verified the borrower’s

income and employment or where the borrower has not passed standard credit checks. Non-standard mortgages

accounted for approximately 5% of our insurance in-force as of December 31, 2020 in our mortgage insurance

business in Australia. APRA also imposes quarterly and annual reporting obligations on mortgage insurers with

respect to risk profiles, reinsurance arrangements, financial performance and financial position. We evaluate the

capital position of our mortgage insurance business in Australia in relation to the Prescribed Capital Amount

(“PCA”) as determined by APRA, utilizing the Internal Capital Adequacy Assessment Process (“ICAAP”) as the

framework to ensure that our Australia group of companies as a whole, and each regulated entity individually, are

capitalized to meet regulatory requirements. As of December 31, 2020, our PCA ratio was 165%, which is above

APRA’s capital holding requirements.

In addition, APRA determines the capital requirements for ADIs and has reduced capital requirements for

certain ADIs that insure residential mortgages with an “acceptable” mortgage insurer for all non-standard

mortgages and for standard mortgages with a loan-to-value ratio above 80%. APRA’s prudential standards

currently set out a number of circumstances in which a loan may be considered to be non-standard from an ADI’s

perspective. The capital levels for Australian IRB ADIs are determined by their APRA-approved IRB models,

which may or may not allocate capital credit for LMI. We believe that APRA and the IRB ADIs have not yet

finalized internal models for residential mortgage risk, so we do not believe that the IRB ADIs currently benefit

from an explicit reduction in their capital requirements for mortgages covered by mortgage insurance. APRA’s

prudential standards also provide that LMI on a non-performing loan (90 days plus arrears) protects most ADIs

from having to increase the regulatory capital on the loan to a risk-weighting of 100%. These prudential

standards include a definition of an “acceptable” mortgage insurer and eliminate the reduced capital requirements

for ADIs in the event that the mortgage insurer has contractual recourse to the ADI or a member of the ADI’s

consolidated group.

In December 2017, the Basel Committee released its revised framework. Given the broad reach and

complexity of the latest Basel reforms, APRA has stated it will give due consideration to appropriate adjustments

to the implementation of these reforms to reflect Australian conditions. In June 2019, APRA released draft

changes to its banking capital framework as part of its implementation of the global Basel III reforms. The

changes include capital relief for IRB banks where eligible LMI cover is already in place and reduced capital

relief for standardized banks who previously covered high loan-to-value loans with LMI. In December 2020,
APRA published a discussion paper proposing revisions to the ADI capital framework, such as greater risk
sensitivity within risk weighting framework, requiring ADIs to hold a larger share of their required capital as
buffers, requiring ADIs to disclose their capital ratios on a common basis and explicit capital relief for IRB banks
internal models of up to 20% for LMI. APRA noted that as a result of the changes, reported capital ratios will
increase. However, APRA does not expect the proposed changes to require ADIs to raise additional capital. The
feedback period for these proposed changes ends on April 1, 2021, and the new framework is expected to be
finalized by late 2021 and implemented on January 1, 2023.

In March 2017, APRA announced changes to reinforce sound mortgage lending practices, focusing on
slowing investor growth and limiting the flow of new interest-only lending. These changes resulted in a decline
in new insurance written volumes in 2017 and 2018. In 2019, APRA removed the investor loan growth and
interest-only lending benchmarks, subject to certain assurances from ADIs as to the strength of their lending
standards.

APRA has the power to impose restrictions on the ability of our Australia mortgage insurance business to

declare and pay dividends based on a number of factors, including the impact on the minimum regulatory capital
ratio of that business. Given the economic uncertainty surrounding COVID-19, in July 2020, APRA provided
guidance to insurers asking them to maintain caution in planning capital distributions, including dividends. Given
this guidance and the uncertain economic outlook, our mortgage insurance business in Australia believes it is
prudent to preserve capital to sustain its capital position. As a result, we have not received dividends or other
returns of capital from our Australia mortgage insurance business since March 2020. The amount and timing of
future dividends will depend on the economic recovery from COVID-19, among other factors, and may require
APRA approval.

On November 30, 2017, the Australian Government announced the establishment of a Royal Commission to

consider the conduct of Australia’s Banking, Superannuation and Financial Services industry and to further
ensure its financial system is working efficiently and effectively. The Royal Commission delivered its final
report on February 4, 2019. Following the release of the Royal Commission report, in August 2019, the
Australian Government released its Financial Services Royal Commission Implementation Roadmap, which
outlined its intention to implement all of the recommendations from the Royal Commission, planning to
implement the majority of commitments by mid-2020 and introduce recommendations requiring legislation by
the end of 2020. However, on May 8, 2020, the Australian Government announced that it would defer all phases
of implementation by six months to allow financial services entities to focus their attention and resources on
COVID-19 responses and planning for the post-COVID-19 economic recovery. Under the updated timetable,
those measures that the Government had indicated would be introduced into the Parliament by June 30, 2020
were introduced in December 2020. Similarly, those measures originally scheduled for introduction by December
2020 are now scheduled to be introduced by June 30, 2021. While the changes introduced in December 2020 are
not expected to have a material impact, given the implementation delays, it is still too early to determine what
impact, if any, the remaining measures will have on our mortgage insurance business in Australia.

On August 3, 2018, the Australian Government’s Productivity Commission released its final report on

Competition in the Australian Financial System, which included findings and recommendations related to
mortgage insurance. The Australian Government has not yet provided a timeframe on when it will release its
response. At this time, it is too early to determine what impact, if any, the outcomes of this report will have on
our mortgage insurance business in Australia.

In September 2019, the Australian Government released details of the First Home Loan Deposit Scheme

(“FHLDS”), which is designed to assist eligible first-time home buyers by providing a government guarantee to
participating lenders on eligible loans equal to the difference between the deposit (of at least 5%) and 20% of the
purchase price. Borrower income and regional property value caps apply, and the program is intended to support
up to 10,000 eligible first-time home buyers each Australian Government fiscal year, which is July 1 through

40

41

June 30. If the loan comes to an end or the loan principal balance reduces to below 80% of the value of the
property at purchase, the government guarantee will terminate. The FHLDS was effective on January 1, 2020 and
the annual limit of 10,000 loan guarantees was reached for the first year of the program that ended June 30, 2020.
As part of the 2020-2021 Federal Budget, in October 2020, the Australian Government committed an additional
10,000 FHLDS guarantees for the July 1, 2020 to June 30, 2021 fiscal year. The additional 10,000 guarantees are
limited to new home builds and a revised set of property price caps.

As a public company that is traded on the Australian Securities Exchange (the “ASX”), Genworth Australia

is subject to Australian securities laws and regulation, as well as the reporting requirements of the ASX.

Other Non-U.S. Insurance Regulation

We operate in a number of countries around the world in addition to the United States and Australia.
Generally, our subsidiaries conducting business in these countries must obtain licenses from local regulatory
authorities and satisfy local regulatory requirements, including those relating to rates, forms, capital, reserves and
financial reporting.

Other Laws and Regulations

Securities regulation

Certain of our U.S. subsidiaries and certain policies, contracts and services offered by them, are subject to

regulation under federal and state securities laws and regulations of the SEC, state securities regulators and
FINRA. Most of our insurance company separate accounts are registered under the Investment Company Act of
1940. Most of our variable annuity contracts and all of our variable life insurance policies are registered under
the Securities Act of 1933. One of our U.S. subsidiaries is registered and regulated as a broker/dealer under the
Securities Exchange Act of 1934 and is a member of, and subject to regulation by FINRA, as well as by various
state and local regulators. The registered representatives of our broker/dealer are also regulated by the SEC and
FINRA and are subject to applicable state and local laws.

These laws and regulations are primarily intended to protect investors in the securities markets and
generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the
conduct of business for failure to comply with such laws and regulations. In such event, the possible sanctions
that may be imposed include suspension of individual employees, limitations on the activities in which the
broker/dealer may engage, suspension or revocation of the investment adviser or broker/dealer registration,
censure or fines. We may also be subject to similar laws and regulations in the states and other countries in which
we offer the products described above or conduct other securities-related activities.

The SEC, FINRA, state attorneys general, other federal offices and the New York Stock Exchange may
conduct periodic examinations, in addition to special or targeted examinations of us and/or specific products.
These examinations or inquiries may include, but are not necessarily limited to, product disclosures and sales
issues, financial and accounting disclosure and operational issues. Often examinations are “sweep exams”
whereby the regulator reviews current issues facing the financial or insurance industry as a whole.

Environmental considerations

As an owner and operator of real property, we are subject to extensive U.S. federal and state and non-U.S.

environmental laws and regulations. Potential environmental liabilities and costs in connection with any required
remediation of our properties is also an inherent risk in property ownership and operation. In addition, we hold
equity interests in companies, and have made loans secured by properties, that could potentially be subject to
environmental liabilities. We routinely have environmental assessments performed with respect to real estate
being acquired for investment and real property to be acquired through foreclosure. We cannot provide assurance

that unexpected environmental liabilities will not arise. However, based upon information currently available to

us, we believe that any costs associated with compliance with environmental laws and regulations or any

remediation of such properties will not have a material adverse effect on our business, financial condition or

results of operations.

ERISA considerations

We provide certain products and services to employee benefit plans that are subject to the Employee

Retirement Income Security Act of 1974 (“ERISA”) or the Internal Revenue Code. As such, our activities are

subject to the restrictions imposed by ERISA and the Internal Revenue Code, including the requirement under

ERISA that fiduciaries must perform their duties solely in the interests of ERISA plan participants and

beneficiaries, and fiduciaries may not cause or permit a covered plan to engage in certain prohibited transactions

with persons who have certain relationships with respect to such plans. The applicable provisions of ERISA and

the Internal Revenue Code are subject to enforcement by the U.S. Department of Labor (“DOL”), the IRS and the

Pension Benefit Guaranty Corporation.

USA PATRIOT Act

The USA PATRIOT Act of 2001 (the “Patriot Act”), enacted in response to the terrorist attacks on

September 11, 2001, contains anti-money laundering and financial transparency laws and mandates the

implementation of various regulations applicable to broker/dealers and other financial services companies,

including insurance companies. The Patriot Act seeks to promote cooperation among financial institutions,

regulators and law enforcement entities in identifying parties who may be involved in terrorism or money

laundering. Anti-money laundering laws outside of the United States contain similar provisions. The increased

obligations of financial institutions to identify their customers, watch for and report suspicious transactions,

respond to requests for information by regulatory authorities and law enforcement agencies, and share

information with other financial institutions, require the implementation and maintenance of internal practices,

procedures and controls. We believe that we have implemented, and that we maintain, appropriate internal

practices, procedures and controls to enable us to comply with the provisions of the Patriot Act. Certain

additional requirements became applicable under the Patriot Act in May 2006 through a U.S. Treasury regulation

which required that certain insurers have anti-money laundering compliance plans in place. We believe our

internal practices, procedures and controls comply with these requirements.

Cybersecurity

In February 2019, the Cybersecurity Disclosure Act of 2019 was introduced in the U.S. Senate that, if

passed, would direct the SEC to issue final rules requiring a registered public company to disclose in its annual

report or annual proxy statement whether any member of its board of directors has expertise or experience in

cybersecurity. If no member has expertise or experience in cybersecurity, registered public companies must

disclose what cybersecurity expertise was assessed by the persons responsible for identifying and evaluating

nominees for the board of directors.

In October 2018, the SEC issued a report of investigation regarding certain cybersecurity frauds previously

perpetrated against public companies and outlined a list of internal control requirements. Although the SEC

determined not to pursue enforcement against those public companies, the SEC did emphasize the importance of

maintaining a system of internal controls to mitigate the escalating risks associated with cybersecurity threats.

Furthermore, the SEC stressed that companies need to devise and maintain internal controls that reasonably

safeguard company and investor assets from cybersecurity frauds, which include: (i) ensuring transactions are

executed in accordance with management’s general and specific authorization; and (ii) access to assets is

permitted only in accordance with management’s general or specific authorization. Finally, in light of the ever-

growing threats from cybersecurity fraud, internal controls may need to be reassessed or strengthened, and

employee training should be enhanced to educate all employees of these threats.

42

43

June 30. If the loan comes to an end or the loan principal balance reduces to below 80% of the value of the

property at purchase, the government guarantee will terminate. The FHLDS was effective on January 1, 2020 and

the annual limit of 10,000 loan guarantees was reached for the first year of the program that ended June 30, 2020.

As part of the 2020-2021 Federal Budget, in October 2020, the Australian Government committed an additional

10,000 FHLDS guarantees for the July 1, 2020 to June 30, 2021 fiscal year. The additional 10,000 guarantees are

limited to new home builds and a revised set of property price caps.

As a public company that is traded on the Australian Securities Exchange (the “ASX”), Genworth Australia

is subject to Australian securities laws and regulation, as well as the reporting requirements of the ASX.

Other Non-U.S. Insurance Regulation

We operate in a number of countries around the world in addition to the United States and Australia.

Generally, our subsidiaries conducting business in these countries must obtain licenses from local regulatory

authorities and satisfy local regulatory requirements, including those relating to rates, forms, capital, reserves and

financial reporting.

Other Laws and Regulations

Securities regulation

Certain of our U.S. subsidiaries and certain policies, contracts and services offered by them, are subject to

regulation under federal and state securities laws and regulations of the SEC, state securities regulators and

FINRA. Most of our insurance company separate accounts are registered under the Investment Company Act of

1940. Most of our variable annuity contracts and all of our variable life insurance policies are registered under

the Securities Act of 1933. One of our U.S. subsidiaries is registered and regulated as a broker/dealer under the

Securities Exchange Act of 1934 and is a member of, and subject to regulation by FINRA, as well as by various

state and local regulators. The registered representatives of our broker/dealer are also regulated by the SEC and

FINRA and are subject to applicable state and local laws.

These laws and regulations are primarily intended to protect investors in the securities markets and

generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the

conduct of business for failure to comply with such laws and regulations. In such event, the possible sanctions

that may be imposed include suspension of individual employees, limitations on the activities in which the

broker/dealer may engage, suspension or revocation of the investment adviser or broker/dealer registration,

censure or fines. We may also be subject to similar laws and regulations in the states and other countries in which

we offer the products described above or conduct other securities-related activities.

The SEC, FINRA, state attorneys general, other federal offices and the New York Stock Exchange may

conduct periodic examinations, in addition to special or targeted examinations of us and/or specific products.

These examinations or inquiries may include, but are not necessarily limited to, product disclosures and sales

issues, financial and accounting disclosure and operational issues. Often examinations are “sweep exams”

whereby the regulator reviews current issues facing the financial or insurance industry as a whole.

Environmental considerations

As an owner and operator of real property, we are subject to extensive U.S. federal and state and non-U.S.

environmental laws and regulations. Potential environmental liabilities and costs in connection with any required

remediation of our properties is also an inherent risk in property ownership and operation. In addition, we hold

equity interests in companies, and have made loans secured by properties, that could potentially be subject to

environmental liabilities. We routinely have environmental assessments performed with respect to real estate

being acquired for investment and real property to be acquired through foreclosure. We cannot provide assurance

that unexpected environmental liabilities will not arise. However, based upon information currently available to
us, we believe that any costs associated with compliance with environmental laws and regulations or any
remediation of such properties will not have a material adverse effect on our business, financial condition or
results of operations.

ERISA considerations

We provide certain products and services to employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974 (“ERISA”) or the Internal Revenue Code. As such, our activities are
subject to the restrictions imposed by ERISA and the Internal Revenue Code, including the requirement under
ERISA that fiduciaries must perform their duties solely in the interests of ERISA plan participants and
beneficiaries, and fiduciaries may not cause or permit a covered plan to engage in certain prohibited transactions
with persons who have certain relationships with respect to such plans. The applicable provisions of ERISA and
the Internal Revenue Code are subject to enforcement by the U.S. Department of Labor (“DOL”), the IRS and the
Pension Benefit Guaranty Corporation.

USA PATRIOT Act

The USA PATRIOT Act of 2001 (the “Patriot Act”), enacted in response to the terrorist attacks on
September 11, 2001, contains anti-money laundering and financial transparency laws and mandates the
implementation of various regulations applicable to broker/dealers and other financial services companies,
including insurance companies. The Patriot Act seeks to promote cooperation among financial institutions,
regulators and law enforcement entities in identifying parties who may be involved in terrorism or money
laundering. Anti-money laundering laws outside of the United States contain similar provisions. The increased
obligations of financial institutions to identify their customers, watch for and report suspicious transactions,
respond to requests for information by regulatory authorities and law enforcement agencies, and share
information with other financial institutions, require the implementation and maintenance of internal practices,
procedures and controls. We believe that we have implemented, and that we maintain, appropriate internal
practices, procedures and controls to enable us to comply with the provisions of the Patriot Act. Certain
additional requirements became applicable under the Patriot Act in May 2006 through a U.S. Treasury regulation
which required that certain insurers have anti-money laundering compliance plans in place. We believe our
internal practices, procedures and controls comply with these requirements.

Cybersecurity

In February 2019, the Cybersecurity Disclosure Act of 2019 was introduced in the U.S. Senate that, if
passed, would direct the SEC to issue final rules requiring a registered public company to disclose in its annual
report or annual proxy statement whether any member of its board of directors has expertise or experience in
cybersecurity. If no member has expertise or experience in cybersecurity, registered public companies must
disclose what cybersecurity expertise was assessed by the persons responsible for identifying and evaluating
nominees for the board of directors.

In October 2018, the SEC issued a report of investigation regarding certain cybersecurity frauds previously

perpetrated against public companies and outlined a list of internal control requirements. Although the SEC
determined not to pursue enforcement against those public companies, the SEC did emphasize the importance of
maintaining a system of internal controls to mitigate the escalating risks associated with cybersecurity threats.
Furthermore, the SEC stressed that companies need to devise and maintain internal controls that reasonably
safeguard company and investor assets from cybersecurity frauds, which include: (i) ensuring transactions are
executed in accordance with management’s general and specific authorization; and (ii) access to assets is
permitted only in accordance with management’s general or specific authorization. Finally, in light of the ever-
growing threats from cybersecurity fraud, internal controls may need to be reassessed or strengthened, and
employee training should be enhanced to educate all employees of these threats.

42

43

In February 2018, the SEC released interpretive guidance on cybersecurity disclosures. The release outlines

the views of the SEC on cybersecurity disclosure requirements and provided enhancements to existing
cybersecurity guidance. Among the enhancements was clarifying disclosure controls and procedures to help
public companies identify cybersecurity risks and incidents, assess and analyze their implications and make
timely disclosures. It also stressed the importance of materiality assessments when considering cybersecurity
disclosures, maintaining discipline around insider trading if a cybersecurity event occurs and board oversight of
cybersecurity risks.

The area of cybersecurity has also come under increased scrutiny by insurance regulators. For example,

New York’s cybersecurity regulation, discussed further below, for financial services institutions, including
banking and insurance entities, under its jurisdiction became effective on March 1, 2017. Among other things,
this regulation requires applicable entities to establish and maintain a cybersecurity program designed to protect
consumers’ private data. In addition, the NAIC adopted the Insurance Data Security Model Law (the
“Cybersecurity Model Law”) on October 24, 2017, which is similar to New York’s cybersecurity regulation and
establishes standards for data security and for the investigation of and notification to insurance commissioners of
cybersecurity events involving unauthorized access to, or the misuse of, certain nonpublic information. The
Cybersecurity Model Law imposes significant regulatory burdens intended to protect the confidentiality, integrity
and availability of information systems. As of December 31, 2020, eleven states have adopted the model,
including Delaware and Virginia.

In March 2017, the NYDFS issued a cybersecurity regulation specific to financial services companies. The

intent of the regulation was to require cybersecurity programs to address emerging cybersecurity threats and keep
pace with technological advances and was designed to promote the protection of customer information as well as
the information technology systems of companies. This regulation requires a company’s cybersecurity program
to include robust controls regarding: access privileges, application security, policies and procedures for the
disposal of nonpublic information, regular cybersecurity awareness training, encryption of nonpublic
information, third-party due diligence and an incident response plan. The incident response plan should be
designed to respond to and recover from any cybersecurity event materially affecting the confidentiality, integrity
or availability of the company’s information system in a timely manner. Notice to the NYDFS of a cybersecurity
event needs to occur as quickly as possible but no later than 72 hours from the determination of the cybersecurity
event. Companies must also implement and maintain written policies approved by a senior officer of the
company to protect its information systems and nonpublic information, appoint a chief information security
officer and perform periodic risk assessments.

Privacy of Consumer Information

In the United States, federal and state laws and regulations require financial institutions, including insurance
companies, to protect the security and confidentiality of consumer financial information and to notify consumers
about policies and practices relating to the collection and disclosure of consumer information and policies
relating to protecting the security and confidentiality of that information. Similarly, federal and state laws and
regulations govern the disclosure and security of consumer health information. In particular, regulations
promulgated by the U.S. Department of Health and Human Services, the Federal Trade Commission and various
states regulate the disclosure and use of protected health information by health insurers and other covered
entities, the physical and procedural safeguards employed to protect the security of that information, and the
electronic transmission of such information. From time to time, Congress and state legislatures consider
additional legislation relating to privacy and other aspects of consumer information. We cannot predict whether
such legislation will be enacted, or what impact, if any, such legislation may have on our business, financial
condition or results of operations.

The California Consumer Privacy Act of 2018 (the “CCPA”) was signed into law on June 28, 2018, and
amended on September 12, 2018 and October 11, 2019. The CCPA grants all California residents the right to
know what information a business has collected from them and the sourcing and sharing of that information, as

well as a right to have a business delete their personal information (with some exceptions). Its definition of

“personal information” is more expansive than those found in other privacy laws applicable to us in the United

States. Failure to comply with the CCPA risks regulatory fines, and the law grants a private right of action for

any unauthorized disclosure of personal information as a result of failure to maintain reasonable security

procedures. The CCPA became effective on January 1, 2020, but California’s Attorney General was unable to

bring an enforcement action under the CCPA until July 1, 2020. The CCPA was amended by popular referendum

due to a new ballot initiative, the California Privacy Rights Act (“CPRA”), which was included on the November

2020 ballot in California and approved by California voters. The majority of CPRA provisions will go into effect

on January 1, 2023. In the interim, the CPRA will require additional investment in compliance programs and

potential modifications to business processes. In particular, the CPRA will create a California data protection

agency to enforce the statute and will impose new requirements relating to additional consumer rights, data

minimization and other obligations. The CPRA also extends certain exemptions under the CCPA through

December 31, 2022. Specifically, the CCPA exempts from its requirements certain information collected in

employment or business-to-business contexts.

Similar laws and regulations protecting the security and confidentiality of consumer and financial

information are also in effect in Australia and other countries in which we operate.

Human Capital Management

We are committed to helping families become more financially secure, self-reliant and prepared for the

future, and that philosophy extends to our employees. We take a holistic approach to human capital management,

including attracting and retaining talent with comprehensive benefits and compensation packages, providing

professional development and learning opportunities, facilitating access to dedicated resources that foster an

equitable and inclusive environment and encouraging a sincere commitment to community service and

involvement. Some of our key areas of focus include:

• Our compensation package, including salary, incentive bonus and long-term incentives, aligns

employee and stockholder interests, as well as rewards our employees for serving all of our current and

future policyholders.

plan.

•

In addition to a competitive compensation program, we also offer our employees benefits such as life

and health insurance, paid time off, paid parental leave, financial planning and a retirement savings

• We offer a multitude of professional development and career enrichment courses, including in the areas

of leadership, professional skills training and industry-specific matters, as well as tuition

reimbursement benefits to aid career progression.

• Our cultural and demographic-based employee resource groups help to build an inclusive culture

through company-wide events, participation in our recruitment efforts and providing valuable input

into our hiring strategies. We continue to focus on building a pipeline of talent to create more

opportunities for workplace diversity and to support greater representation within our Company.

• We champion civic engagement through paid volunteer time for our employees, event sponsorship

programs, employee-directed charitable gifts through the Genworth Foundation and through our

commitment to environmental sustainability.

As the severity of COVID-19 started to unfold at the beginning of 2020, our response included the

implementation of policies to protect our employees. In early March 2020, we closed our offices and

implemented a complete work-from-home policy. To further support our employees, we are also providing

additional financial, health and wellness resources, as well as a flexible work schedule to allow employees

additional time for selfcare and the care of family members during the crisis. We will continue to evaluate the

timing of a return to in-person work within an office environment based on federal and state health policy

guidance, among other considerations.

44

45

In February 2018, the SEC released interpretive guidance on cybersecurity disclosures. The release outlines

the views of the SEC on cybersecurity disclosure requirements and provided enhancements to existing

cybersecurity guidance. Among the enhancements was clarifying disclosure controls and procedures to help

public companies identify cybersecurity risks and incidents, assess and analyze their implications and make

timely disclosures. It also stressed the importance of materiality assessments when considering cybersecurity

disclosures, maintaining discipline around insider trading if a cybersecurity event occurs and board oversight of

cybersecurity risks.

The area of cybersecurity has also come under increased scrutiny by insurance regulators. For example,

New York’s cybersecurity regulation, discussed further below, for financial services institutions, including

banking and insurance entities, under its jurisdiction became effective on March 1, 2017. Among other things,

this regulation requires applicable entities to establish and maintain a cybersecurity program designed to protect

consumers’ private data. In addition, the NAIC adopted the Insurance Data Security Model Law (the

“Cybersecurity Model Law”) on October 24, 2017, which is similar to New York’s cybersecurity regulation and

establishes standards for data security and for the investigation of and notification to insurance commissioners of

cybersecurity events involving unauthorized access to, or the misuse of, certain nonpublic information. The

Cybersecurity Model Law imposes significant regulatory burdens intended to protect the confidentiality, integrity

and availability of information systems. As of December 31, 2020, eleven states have adopted the model,

including Delaware and Virginia.

In March 2017, the NYDFS issued a cybersecurity regulation specific to financial services companies. The

intent of the regulation was to require cybersecurity programs to address emerging cybersecurity threats and keep

pace with technological advances and was designed to promote the protection of customer information as well as

the information technology systems of companies. This regulation requires a company’s cybersecurity program

to include robust controls regarding: access privileges, application security, policies and procedures for the

disposal of nonpublic information, regular cybersecurity awareness training, encryption of nonpublic

information, third-party due diligence and an incident response plan. The incident response plan should be

designed to respond to and recover from any cybersecurity event materially affecting the confidentiality, integrity

or availability of the company’s information system in a timely manner. Notice to the NYDFS of a cybersecurity

event needs to occur as quickly as possible but no later than 72 hours from the determination of the cybersecurity

event. Companies must also implement and maintain written policies approved by a senior officer of the

company to protect its information systems and nonpublic information, appoint a chief information security

officer and perform periodic risk assessments.

Privacy of Consumer Information

In the United States, federal and state laws and regulations require financial institutions, including insurance

companies, to protect the security and confidentiality of consumer financial information and to notify consumers

about policies and practices relating to the collection and disclosure of consumer information and policies

relating to protecting the security and confidentiality of that information. Similarly, federal and state laws and

regulations govern the disclosure and security of consumer health information. In particular, regulations

promulgated by the U.S. Department of Health and Human Services, the Federal Trade Commission and various

states regulate the disclosure and use of protected health information by health insurers and other covered

entities, the physical and procedural safeguards employed to protect the security of that information, and the

electronic transmission of such information. From time to time, Congress and state legislatures consider

additional legislation relating to privacy and other aspects of consumer information. We cannot predict whether

such legislation will be enacted, or what impact, if any, such legislation may have on our business, financial

condition or results of operations.

The California Consumer Privacy Act of 2018 (the “CCPA”) was signed into law on June 28, 2018, and

amended on September 12, 2018 and October 11, 2019. The CCPA grants all California residents the right to

know what information a business has collected from them and the sourcing and sharing of that information, as

well as a right to have a business delete their personal information (with some exceptions). Its definition of
“personal information” is more expansive than those found in other privacy laws applicable to us in the United
States. Failure to comply with the CCPA risks regulatory fines, and the law grants a private right of action for
any unauthorized disclosure of personal information as a result of failure to maintain reasonable security
procedures. The CCPA became effective on January 1, 2020, but California’s Attorney General was unable to
bring an enforcement action under the CCPA until July 1, 2020. The CCPA was amended by popular referendum
due to a new ballot initiative, the California Privacy Rights Act (“CPRA”), which was included on the November
2020 ballot in California and approved by California voters. The majority of CPRA provisions will go into effect
on January 1, 2023. In the interim, the CPRA will require additional investment in compliance programs and
potential modifications to business processes. In particular, the CPRA will create a California data protection
agency to enforce the statute and will impose new requirements relating to additional consumer rights, data
minimization and other obligations. The CPRA also extends certain exemptions under the CCPA through
December 31, 2022. Specifically, the CCPA exempts from its requirements certain information collected in
employment or business-to-business contexts.

Similar laws and regulations protecting the security and confidentiality of consumer and financial

information are also in effect in Australia and other countries in which we operate.

Human Capital Management

We are committed to helping families become more financially secure, self-reliant and prepared for the
future, and that philosophy extends to our employees. We take a holistic approach to human capital management,
including attracting and retaining talent with comprehensive benefits and compensation packages, providing
professional development and learning opportunities, facilitating access to dedicated resources that foster an
equitable and inclusive environment and encouraging a sincere commitment to community service and
involvement. Some of our key areas of focus include:

• Our compensation package, including salary, incentive bonus and long-term incentives, aligns

employee and stockholder interests, as well as rewards our employees for serving all of our current and
future policyholders.

•

In addition to a competitive compensation program, we also offer our employees benefits such as life
and health insurance, paid time off, paid parental leave, financial planning and a retirement savings
plan.

• We offer a multitude of professional development and career enrichment courses, including in the areas

of leadership, professional skills training and industry-specific matters, as well as tuition
reimbursement benefits to aid career progression.

• Our cultural and demographic-based employee resource groups help to build an inclusive culture

through company-wide events, participation in our recruitment efforts and providing valuable input
into our hiring strategies. We continue to focus on building a pipeline of talent to create more
opportunities for workplace diversity and to support greater representation within our Company.

• We champion civic engagement through paid volunteer time for our employees, event sponsorship
programs, employee-directed charitable gifts through the Genworth Foundation and through our
commitment to environmental sustainability.

As the severity of COVID-19 started to unfold at the beginning of 2020, our response included the

implementation of policies to protect our employees. In early March 2020, we closed our offices and
implemented a complete work-from-home policy. To further support our employees, we are also providing
additional financial, health and wellness resources, as well as a flexible work schedule to allow employees
additional time for selfcare and the care of family members during the crisis. We will continue to evaluate the
timing of a return to in-person work within an office environment based on federal and state health policy
guidance, among other considerations.

44

45

As of December 31, 2020, we employed approximately 3,000 full-time and part-time employees. None of

Item 1A. Risk Factors

our employees are subject to a collective bargaining agreement.

Directors and Executive Officers

See Part III, Item 10 of this Annual Report on Form 10-K for information about our directors and executive

officers.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K

and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act
are available, without charge, on our website, www.genworth.com, as soon as reasonably practicable after
we file or furnish such reports with the SEC. The public may read and copy any electronic materials we
file or furnish with the SEC at the SEC’s website, www.sec.gov. Copies of our SEC filed or furnished
reports are also available, without charge, from Genworth Investor Relations, 6620 West Broad Street,
Richmond, VA 23230.

Our website also includes the charters of our Audit Committee, Nominating and Corporate Governance
Committee, Risk Committee, and Management Development and Compensation Committee, any key practices of
these committees, our Governance Principles, and our company’s code of ethics. Copies of these materials also
are available, without charge, from Genworth Investor Relations, at the above address. Within the time period
required by the SEC and the New York Stock Exchange, we will post on our website any amendment to our code
of ethics and any waiver applicable to any of our directors, executive officers or senior financial officers.

On January 11, 2021, our President and Chief Executive Officer certified to the New York Stock Exchange

that he was not aware of any violation by us of the New York Stock Exchange’s corporate governance listing
standards.

Transfer Agent and Registrar

Our Transfer Agent and Registrar is Computershare Shareowner Services LLC, P.O. Box 30170, College
Station, TX 77842-3170. Telephone: 866-229-8413; 201-680-6578 (outside the United States and Canada may
call collect); and 800-231-5469 (for hearing impaired).

You should carefully consider the following risks. These risks could materially affect our business, results of

operations or financial condition, cause the trading price of our common stock to decline materially or cause our

actual results to differ materially from those expected or those expressed in any forward-looking statements made by us

or on our behalf. These risks are not exclusive, and additional risks to which we are subject include, but are not limited

to, the factors mentioned under “Cautionary note regarding forward-looking statements” and the risks of our

businesses described elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2020.

The following summarizes material risks to the Company and is qualified by the full description contained below herewith.

The occurrence of any of the following risks or of unknown risks and uncertainties may adversely affect our business, operating

Risk Factor Summary

results and financial condition.

Strategic Risks

• We may be unable to successfully execute strategic plans to effectively address our current business challenges.

• The proposed transaction with China Oceanwide may be terminated or may not be completed under the terms or in the

manner previously anticipated, which could have a material adverse effect on us and our stock price.

• COVID-19 could materially adversely affect our financial condition and results of operations.

Risks Relating to Estimates, Assumptions and Valuations

•

•

If our reserves for future policy claims are inadequate, we may be required to increase our reserves, which could have a

material adverse effect on our results of operations and financial condition.

If the models used in our businesses are inaccurate or there are differences and/or variability in loss development

compared to our model estimates and actuarial assumptions, it could have a material adverse impact on our business,

results of operations and financial condition.

• We may be required to increase our reserves in our long-term care insurance, life insurance and/or annuity businesses as

a result of deviations from our estimates and actuarial assumptions or other reasons, which could have a material adverse

effect on our results of operations and financial condition.

• We may be required to accelerate the amortization of deferred acquisition costs and the present value of future profits,

which would increase our expenses and reduce profitability.

• When we have projected profits in earlier years followed by projected losses in later years (as is currently the case with

our long-term care insurance business), we are required to increase our reserve liabilities over time to offset the projected

future losses, which could adversely affect our results of operations and financial condition.

• Our valuation of fixed maturity, equity and trading securities uses methodologies, estimations and assumptions that are

subject to change and differing interpretations which could result in changes to investment valuations that may materially

adversely affect our results of operations and financial condition.

Liquidity, Financial Strength and Credit Ratings, and Counterparty and Credit Risks

• Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be limited or

unavailable. Under such conditions, we may seek additional capital but may be unable to obtain it.

• As holding companies, we and Genworth Holdings depend on the ability of our respective subsidiaries to pay dividends

and make other payments and distributions to each of us and to meet our obligations.

• Adverse rating agency actions have resulted in a loss of business and adversely affected our results of operations,

financial condition and business and future adverse rating actions could have a further and more significant adverse

impact on us.

• Defaults by counterparties to our reinsurance arrangements or to derivative instruments we use to hedge our business

risks, or defaults by us on agreements we have with these counterparties, may expose us to risks we sought to mitigate,

which could have a material adverse effect on our results of operations and financial condition.

• Defaults or other events impacting the value of our fixed maturity securities portfolio may reduce our income.

Risks Relating to Economic, Market and Political Conditions

•

Interest rates and changes in rates could materially adversely affect our business and profitability.

• A deterioration in economic conditions or a decline in home prices may adversely affect our loss experience in our

mortgage insurance businesses.

Regulatory and Legal Risks

growth.

• Our insurance businesses are extensively regulated and changes in regulation may reduce our profitability and limit our

46

47

As of December 31, 2020, we employed approximately 3,000 full-time and part-time employees. None of

Item 1A. Risk Factors

our employees are subject to a collective bargaining agreement.

Directors and Executive Officers

officers.

Available Information

See Part III, Item 10 of this Annual Report on Form 10-K for information about our directors and executive

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K

and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act

are available, without charge, on our website, www.genworth.com, as soon as reasonably practicable after

we file or furnish such reports with the SEC. The public may read and copy any electronic materials we

file or furnish with the SEC at the SEC’s website, www.sec.gov. Copies of our SEC filed or furnished

reports are also available, without charge, from Genworth Investor Relations, 6620 West Broad Street,

Richmond, VA 23230.

Our website also includes the charters of our Audit Committee, Nominating and Corporate Governance

Committee, Risk Committee, and Management Development and Compensation Committee, any key practices of

these committees, our Governance Principles, and our company’s code of ethics. Copies of these materials also

are available, without charge, from Genworth Investor Relations, at the above address. Within the time period

required by the SEC and the New York Stock Exchange, we will post on our website any amendment to our code

of ethics and any waiver applicable to any of our directors, executive officers or senior financial officers.

On January 11, 2021, our President and Chief Executive Officer certified to the New York Stock Exchange

that he was not aware of any violation by us of the New York Stock Exchange’s corporate governance listing

standards.

Transfer Agent and Registrar

Our Transfer Agent and Registrar is Computershare Shareowner Services LLC, P.O. Box 30170, College

Station, TX 77842-3170. Telephone: 866-229-8413; 201-680-6578 (outside the United States and Canada may

call collect); and 800-231-5469 (for hearing impaired).

You should carefully consider the following risks. These risks could materially affect our business, results of
operations or financial condition, cause the trading price of our common stock to decline materially or cause our
actual results to differ materially from those expected or those expressed in any forward-looking statements made by us
or on our behalf. These risks are not exclusive, and additional risks to which we are subject include, but are not limited
to, the factors mentioned under “Cautionary note regarding forward-looking statements” and the risks of our
businesses described elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2020.

Risk Factor Summary
The following summarizes material risks to the Company and is qualified by the full description contained below herewith.
The occurrence of any of the following risks or of unknown risks and uncertainties may adversely affect our business, operating
results and financial condition.

Strategic Risks

• We may be unable to successfully execute strategic plans to effectively address our current business challenges.
• The proposed transaction with China Oceanwide may be terminated or may not be completed under the terms or in the

manner previously anticipated, which could have a material adverse effect on us and our stock price.

• COVID-19 could materially adversely affect our financial condition and results of operations.

Risks Relating to Estimates, Assumptions and Valuations

•

•

If our reserves for future policy claims are inadequate, we may be required to increase our reserves, which could have a
material adverse effect on our results of operations and financial condition.
If the models used in our businesses are inaccurate or there are differences and/or variability in loss development
compared to our model estimates and actuarial assumptions, it could have a material adverse impact on our business,
results of operations and financial condition.

• We may be required to increase our reserves in our long-term care insurance, life insurance and/or annuity businesses as
a result of deviations from our estimates and actuarial assumptions or other reasons, which could have a material adverse
effect on our results of operations and financial condition.

• We may be required to accelerate the amortization of deferred acquisition costs and the present value of future profits,

which would increase our expenses and reduce profitability.

• When we have projected profits in earlier years followed by projected losses in later years (as is currently the case with

our long-term care insurance business), we are required to increase our reserve liabilities over time to offset the projected
future losses, which could adversely affect our results of operations and financial condition.

• Our valuation of fixed maturity, equity and trading securities uses methodologies, estimations and assumptions that are

subject to change and differing interpretations which could result in changes to investment valuations that may materially
adversely affect our results of operations and financial condition.

Liquidity, Financial Strength and Credit Ratings, and Counterparty and Credit Risks

• Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be limited or

unavailable. Under such conditions, we may seek additional capital but may be unable to obtain it.

• As holding companies, we and Genworth Holdings depend on the ability of our respective subsidiaries to pay dividends

and make other payments and distributions to each of us and to meet our obligations.

• Adverse rating agency actions have resulted in a loss of business and adversely affected our results of operations,

financial condition and business and future adverse rating actions could have a further and more significant adverse
impact on us.

• Defaults by counterparties to our reinsurance arrangements or to derivative instruments we use to hedge our business

risks, or defaults by us on agreements we have with these counterparties, may expose us to risks we sought to mitigate,
which could have a material adverse effect on our results of operations and financial condition.

• Defaults or other events impacting the value of our fixed maturity securities portfolio may reduce our income.

Risks Relating to Economic, Market and Political Conditions

Interest rates and changes in rates could materially adversely affect our business and profitability.

•
• A deterioration in economic conditions or a decline in home prices may adversely affect our loss experience in our

mortgage insurance businesses.

Regulatory and Legal Risks

• Our insurance businesses are extensively regulated and changes in regulation may reduce our profitability and limit our

growth.

46

47

• Litigation and regulatory investigations or other actions are common in the insurance business and may result in financial

losses and harm our reputation.

• An adverse change in our regulatory requirements, including risk-based capital, could have a material adverse impact on

our results of operations, financial condition and business.

• Changes to the role of the GSEs or to the charters or business practices of the GSEs, including actions or decisions to
decrease or discontinue the use of mortgage insurance, could adversely affect our financial condition and results of
operations or significantly impact our business.
If we are unable to continue to meet the requirements mandated by PMIERs because the GSEs amend them or the GSEs’
interpretation of the financial requirements requires us to hold amounts of capital that are higher than we have planned or
otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material
adverse effect on our business, results of operations and financial condition.

•

• Our U.S. mortgage insurance subsidiaries are subject to minimum statutory capital requirements, which if not met or

waived, would result in restrictions or prohibitions on our doing business and could have a material adverse impact on
our results of operations.

• Changes in regulations that adversely affect the mortgage insurance markets in which we operate could affect our

operations significantly and could reduce the demand for mortgage insurance.

• We may not be able to continue to mitigate the impact of Regulations XXX or AXXX and, therefore, we may incur
higher operating costs that could have a material adverse effect on our financial condition and results of operations.
• Changes in accounting and reporting standards issued by the Financial Accounting Standards Board or other standard-

setting bodies and insurance regulators could materially adversely affect our financial condition and results of operations.

Operational Risks

•

If we are unable to retain, attract and motivate qualified employees or senior management, our results of operations,
financial condition and business operations may be adversely impacted.

• Our reliance on key customer or distribution relationships could cause us to lose significant sales if one or more of those

relationships terminate or are reduced.

• We compete with government-owned and government-sponsored enterprises in our mortgage insurance businesses, and

this may put us at a competitive disadvantage on pricing and other terms and conditions.

• Our business could be adversely impacted from deficiencies in our disclosure controls and procedures or internal control

over financial reporting.

• Our computer systems may fail or be compromised, and unanticipated problems could materially adversely impact our
disaster recovery systems and business continuity plans, which could damage our reputation, impair our ability to
conduct business effectively and materially adversely affect our financial condition and results of operations.

Insurance and Product-Related Risks

• We may be unable to maintain or increase the capital needed in our U.S. mortgage insurance business in a timely
manner, on anticipated terms or at all, including through improved business performance, reinsurance or similar
transactions, asset sales, securities offerings or otherwise, in each case as and when required.

• Our financial condition, results of operations, long-term care insurance products and/or our reputation in the market may
be adversely affected if we are unable to implement premium rate increases and associated benefit reductions on our
in-force long-term care insurance policies by enough or quickly enough.

• Reinsurance may not be available, affordable or adequate to protect us against losses.
• A decrease in the volume of high loan-to-value home mortgage originations or an increase in the volume of mortgage

insurance cancellations could result in a decline in our revenue in our mortgage insurance businesses.

• The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage insurance are

•

used or lower coverage levels of mortgage insurance are selected.
Potential liabilities in connection with our U.S. contract underwriting services could have a material adverse effect on our
financial condition and results of operations.

• Medical advances, such as genetic research and diagnostic imaging, and related legislation could materially adversely

affect the financial performance of our life insurance, long-term care insurance and annuity businesses.

Other General Risk

Strategic Risks

We may be unable to successfully execute strategic plans to effectively address our current business

challenges.

We continue to pursue our overall strategy with a focus on improving business performance, reducing

financial leverage and increasing financial and strategic flexibility across the organization. Our strategy includes

maximizing our opportunities in our mortgage insurance businesses and stabilizing our U.S. life insurance

businesses. See “Item 1—Business—Strategic Update.”

We cannot be sure we will be able to successfully execute on any of our strategic plans to effectively

address our current business challenges (including with respect to addressing our debt maturities and other near-

term liabilities and financial obligations, reducing costs, stabilizing our U.S. life insurance businesses without

additional capital contributions, overall capital and ratings), including as a result of: (a) a failure to complete the

China Oceanwide transaction or the inability to pursue alternative strategic plans pending the outcome of the

transaction; (b) an inability to attract buyers for any businesses or other assets we may seek to sell, or securities

we may seek to issue (including a potential partial sale through an initial public offering of our U.S. mortgage

insurance business) in each case, in a timely manner and on anticipated terms; (c) an inability to increase the

capital needed in our businesses in a timely manner and on anticipated terms, including through improved

business performance, reinsurance or similar transactions, asset sales, debt issuances, securities offerings or

otherwise, in each case as and when required; (d) a failure to obtain any required regulatory, stockholder,

noteholder approvals and/or other third-party approvals or consents for such alternative strategic plans; (e) our

challenges changing or being more costly or difficult to successfully address than currently anticipated or the

benefits achieved being less than anticipated; (f) an inability to achieve anticipated cost-savings in a timely

manner; and (g) adverse tax or accounting charges.

Given uncertainty around the completion and timing of the remaining steps required to close the China

Oceanwide transaction, we are focusing on executing alternative plans, including a potential partial initial public

offering of our U.S. mortgage insurance business and/or the issuance of debt, convertible or equity-linked

securities, prior to our senior notes maturing in September 2021. We will also continue to remain open to other

feasible alternatives and actively assess our strategic options, which could include reducing ownership of or

selling businesses, including in transactions that would be material to us. We may be unable to reduce ownership

of or sell businesses on acceptable terms or at all.

We may decide to take additional measures to increase our financial flexibility, in the absence of the China

Oceanwide transaction, including issuing equity at Genworth Financial which would be dilutive to our

shareholders, or additional debt at Genworth Financial, Genworth Holdings or GMHI (including debt convertible

into equity), which could increase our leverage. The availability of any additional debt or equity funding will

depend on a variety of factors, including market conditions, regulatory considerations, the general availability of

credit and particularly important to the financial services industry, our credit ratings and credit capacity and the

performance of and outlook for our company and our businesses. Market conditions may make it difficult to

obtain funding or complete asset sales to generate additional liquidity, especially on short notice and when the

demand for additional funding in the market is high. Our access to funding may be further impaired by our credit

or financial strength ratings and our financial condition. See “—Our internal sources of liquidity may be

insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we

may seek additional capital but may be unable to obtain it.”

Even if we are successful in executing our strategic plans or alternative plans, the execution of these plans

may have expected or unexpected adverse consequences, including adverse rating actions and adverse tax and

accounting charges (such as significant losses on sale of businesses or assets or deferred acquisition costs

• The occurrence of natural or man-made disasters or a future pandemic could materially adversely affect our financial

(“DAC”) or deferred tax asset write-offs).

condition and results of operations.

48

49

• Litigation and regulatory investigations or other actions are common in the insurance business and may result in financial

losses and harm our reputation.

• An adverse change in our regulatory requirements, including risk-based capital, could have a material adverse impact on

our results of operations, financial condition and business.

• Changes to the role of the GSEs or to the charters or business practices of the GSEs, including actions or decisions to

decrease or discontinue the use of mortgage insurance, could adversely affect our financial condition and results of

operations or significantly impact our business.

•

If we are unable to continue to meet the requirements mandated by PMIERs because the GSEs amend them or the GSEs’

interpretation of the financial requirements requires us to hold amounts of capital that are higher than we have planned or

otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material

adverse effect on our business, results of operations and financial condition.

• Our U.S. mortgage insurance subsidiaries are subject to minimum statutory capital requirements, which if not met or

waived, would result in restrictions or prohibitions on our doing business and could have a material adverse impact on

our results of operations.

• Changes in regulations that adversely affect the mortgage insurance markets in which we operate could affect our

operations significantly and could reduce the demand for mortgage insurance.

• We may not be able to continue to mitigate the impact of Regulations XXX or AXXX and, therefore, we may incur

higher operating costs that could have a material adverse effect on our financial condition and results of operations.

• Changes in accounting and reporting standards issued by the Financial Accounting Standards Board or other standard-

setting bodies and insurance regulators could materially adversely affect our financial condition and results of operations.

Operational Risks

•

If we are unable to retain, attract and motivate qualified employees or senior management, our results of operations,

financial condition and business operations may be adversely impacted.

• Our reliance on key customer or distribution relationships could cause us to lose significant sales if one or more of those

relationships terminate or are reduced.

• We compete with government-owned and government-sponsored enterprises in our mortgage insurance businesses, and

this may put us at a competitive disadvantage on pricing and other terms and conditions.

• Our business could be adversely impacted from deficiencies in our disclosure controls and procedures or internal control

over financial reporting.

• Our computer systems may fail or be compromised, and unanticipated problems could materially adversely impact our

disaster recovery systems and business continuity plans, which could damage our reputation, impair our ability to

conduct business effectively and materially adversely affect our financial condition and results of operations.

Insurance and Product-Related Risks

• We may be unable to maintain or increase the capital needed in our U.S. mortgage insurance business in a timely

manner, on anticipated terms or at all, including through improved business performance, reinsurance or similar

transactions, asset sales, securities offerings or otherwise, in each case as and when required.

• Our financial condition, results of operations, long-term care insurance products and/or our reputation in the market may

be adversely affected if we are unable to implement premium rate increases and associated benefit reductions on our

in-force long-term care insurance policies by enough or quickly enough.

• Reinsurance may not be available, affordable or adequate to protect us against losses.

• A decrease in the volume of high loan-to-value home mortgage originations or an increase in the volume of mortgage

insurance cancellations could result in a decline in our revenue in our mortgage insurance businesses.

• The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage insurance are

used or lower coverage levels of mortgage insurance are selected.

•

Potential liabilities in connection with our U.S. contract underwriting services could have a material adverse effect on our

financial condition and results of operations.

• Medical advances, such as genetic research and diagnostic imaging, and related legislation could materially adversely

affect the financial performance of our life insurance, long-term care insurance and annuity businesses.

Other General Risk

condition and results of operations.

• The occurrence of natural or man-made disasters or a future pandemic could materially adversely affect our financial

Strategic Risks

We may be unable to successfully execute strategic plans to effectively address our current business
challenges.

We continue to pursue our overall strategy with a focus on improving business performance, reducing
financial leverage and increasing financial and strategic flexibility across the organization. Our strategy includes
maximizing our opportunities in our mortgage insurance businesses and stabilizing our U.S. life insurance
businesses. See “Item 1—Business—Strategic Update.”

We cannot be sure we will be able to successfully execute on any of our strategic plans to effectively
address our current business challenges (including with respect to addressing our debt maturities and other near-
term liabilities and financial obligations, reducing costs, stabilizing our U.S. life insurance businesses without
additional capital contributions, overall capital and ratings), including as a result of: (a) a failure to complete the
China Oceanwide transaction or the inability to pursue alternative strategic plans pending the outcome of the
transaction; (b) an inability to attract buyers for any businesses or other assets we may seek to sell, or securities
we may seek to issue (including a potential partial sale through an initial public offering of our U.S. mortgage
insurance business) in each case, in a timely manner and on anticipated terms; (c) an inability to increase the
capital needed in our businesses in a timely manner and on anticipated terms, including through improved
business performance, reinsurance or similar transactions, asset sales, debt issuances, securities offerings or
otherwise, in each case as and when required; (d) a failure to obtain any required regulatory, stockholder,
noteholder approvals and/or other third-party approvals or consents for such alternative strategic plans; (e) our
challenges changing or being more costly or difficult to successfully address than currently anticipated or the
benefits achieved being less than anticipated; (f) an inability to achieve anticipated cost-savings in a timely
manner; and (g) adverse tax or accounting charges.

Given uncertainty around the completion and timing of the remaining steps required to close the China
Oceanwide transaction, we are focusing on executing alternative plans, including a potential partial initial public
offering of our U.S. mortgage insurance business and/or the issuance of debt, convertible or equity-linked
securities, prior to our senior notes maturing in September 2021. We will also continue to remain open to other
feasible alternatives and actively assess our strategic options, which could include reducing ownership of or
selling businesses, including in transactions that would be material to us. We may be unable to reduce ownership
of or sell businesses on acceptable terms or at all.

We may decide to take additional measures to increase our financial flexibility, in the absence of the China

Oceanwide transaction, including issuing equity at Genworth Financial which would be dilutive to our
shareholders, or additional debt at Genworth Financial, Genworth Holdings or GMHI (including debt convertible
into equity), which could increase our leverage. The availability of any additional debt or equity funding will
depend on a variety of factors, including market conditions, regulatory considerations, the general availability of
credit and particularly important to the financial services industry, our credit ratings and credit capacity and the
performance of and outlook for our company and our businesses. Market conditions may make it difficult to
obtain funding or complete asset sales to generate additional liquidity, especially on short notice and when the
demand for additional funding in the market is high. Our access to funding may be further impaired by our credit
or financial strength ratings and our financial condition. See “—Our internal sources of liquidity may be
insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we
may seek additional capital but may be unable to obtain it.”

Even if we are successful in executing our strategic plans or alternative plans, the execution of these plans
may have expected or unexpected adverse consequences, including adverse rating actions and adverse tax and
accounting charges (such as significant losses on sale of businesses or assets or deferred acquisition costs
(“DAC”) or deferred tax asset write-offs).

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49

The proposed transaction with China Oceanwide may be terminated or may not be completed under the
terms or in the manner previously anticipated, which could have a material adverse effect on us and our
stock price.

On October 21, 2016, we entered into a definitive agreement with China Oceanwide, under which China
Oceanwide agreed to acquire all of our outstanding common stock for a total transaction value of approximately
$2.7 billion, or $5.43 per share in cash. As part of the transaction, China Oceanwide and/or its affiliates,
additionally committed to contribute an aggregate of $1.5 billion to us over time following consummation of the
Merger. On January 4, 2021, we announced that an extension of the then current December 31, 2020 Merger
Agreement end date would not be sought given uncertainty around the completion and timing of the remaining
steps required to close the transaction. Even though the Merger Agreement remains in effect, either party is able
to terminate the Merger Agreement at any time. In addition, if China Oceanwide is able to secure the required
funding to close the transaction, the parties would need to re-engage with their regulators to determine the re-
approvals or confirmations that would be necessary to close the transaction.

There are numerous risks related to the transaction, including the following:

• China Oceanwide and/or Genworth decides to terminate the Merger Agreement or that China

Oceanwide will be unable to complete the funding of the transaction and/or the transaction may not be
completed, any of which may adversely affect our business and the price of our common stock;

•

the parties’ inability to obtain regulatory approvals, clearances or extensions, or the possibility that
such regulatory approvals or clearances may further delay the transaction, to the extent the transaction
is pursued, or that materially burdensome or adverse regulatory conditions may be imposed or
undesirable measures may be required in connection with any such regulatory approvals, clearances or
extensions (including those conditions or measures that either or both of the parties may be unwilling
to accept or undertake, as applicable);

• with continuing delays, circumstances may arise that make one or both parties unwilling to proceed

with the transaction or unable to comply with the conditions to existing regulatory approvals or one or
both of the parties may be unwilling to accept any new condition under a regulatory approval;

•

•

•

•

•

•

•

•

•

the parties will not be able to obtain regulatory approvals, clearances or extensions, including in
connection with a potential alternative funding structure or the current geo-political environment;

one or more regulators may rescind or fail to extend previous approvals, or the revocation by one
regulator of approvals may lead to the revocation of approvals by other regulators;

the parties’ inability to obtain any necessary regulatory approvals, clearances or extensions for the
post-closing capital plan;

a condition to closing the transaction may not be satisfied or that a condition to closing that is currently
satisfied may not remain satisfied due to the delay in closing the transaction or that the parties are
unable to agree upon all terms following receipt of all regulatory approvals and clearances;

existing and potential legal proceedings may be instituted against us in connection with the transaction
that may delay the transaction, make it more costly or ultimately preclude it;

potential legal proceedings may be instituted against us in connection with the transaction delay and/or
its termination;

the proposed transaction or its termination disrupts Genworth’s current plans and operations;

potential adverse reactions or changes to Genworth’s business relationships with clients, employees,
suppliers or other parties or other business uncertainties resulting from the announcement of the
transaction or during the pendency of the transaction or as a result of the termination of the transaction,
including but not limited to such changes that could affect Genworth’s financial performance;

continued availability of capital and financing to Genworth under acceptable terms before, or in the
absence of, the consummation of the transaction;

•

•

•

•

•

•

•

•

•

•

material;

affected.

needs;

capital;

further rating agency actions and downgrades in Genworth’s credit or financial strength ratings;

changes in applicable laws or regulations;

our ability to recognize the anticipated benefits of the transaction;

the amount of the costs, fees, expenses and other charges related to the transaction, including costs and

expenses related to conditions imposed in connection with regulatory approvals, re-approvals or

clearances, and costs, fees and expenses and other charges already incurred, all of which may be

the inability to reduce costs due to the delay or termination of the transaction, including in connection

with any proposed resource alignment;

the risks related to diverting management’s attention from our ongoing business operations; and

our ability to attract, recruit, retain and motivate current and prospective employees may be adversely

There is no assurance that the conditions to the transaction will be satisfied in the near future, on the terms

set forth in our existing agreement with China Oceanwide or at all. If the transaction is not completed, we would

likely suffer a number of consequences that could adversely affect our stock price, business, results of operations

and financial condition, including:

•

greater difficulty in executing alternative strategic plans to effectively address our near-term liabilities

and financial obligations, including the risks that we will be unable to raise additional debt financing

and/or sell a percentage of our ownership interest in our U.S. mortgage insurance business to repay/

refinance debt maturities in 2021 and beyond and the promissory note to AXA;

inability to reduce costs through alignment of our current expense structure with anticipated business

stabilizing our U.S. life insurance businesses without additional capital contributions and preserving

increased pressure on and potential further downgrades of our credit and financial strength ratings,

particularly for our mortgage insurance businesses, which could have an adverse impact on our

mortgage insurance businesses and could result in a reduction or elimination of dividends to our

holding company; and

business in Australia.

• we would likely pursue strategic alternatives that would materially impact our business, including a

transaction with respect to our U.S. mortgage insurance business and/or our mortgage insurance

Potential consequences of these risks would likely include, among other things, business disruption,

operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a

material adverse effect on Genworth’s financial condition, results of operations, credit ratings or liquidity.

In addition, we have incurred, and may continue to incur significant costs, expenses and fees for

professional services and other transaction costs in connection with the transaction, and these fees and costs are

payable by us regardless of whether the transaction is consummated.

COVID-19 could materially adversely affect our financial condition and results of operations.

COVID-19 has brought unprecedented changes to the global economy. Large scale disruption in the U.S.

economy has left several industries non-operational through state and federal mandated shutdowns in an effort to

contain the spread of COVID-19. Unemployment claims have increased significantly, reducing consumer

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The proposed transaction with China Oceanwide may be terminated or may not be completed under the

terms or in the manner previously anticipated, which could have a material adverse effect on us and our

stock price.

On October 21, 2016, we entered into a definitive agreement with China Oceanwide, under which China

Oceanwide agreed to acquire all of our outstanding common stock for a total transaction value of approximately

$2.7 billion, or $5.43 per share in cash. As part of the transaction, China Oceanwide and/or its affiliates,

additionally committed to contribute an aggregate of $1.5 billion to us over time following consummation of the

Merger. On January 4, 2021, we announced that an extension of the then current December 31, 2020 Merger

Agreement end date would not be sought given uncertainty around the completion and timing of the remaining

steps required to close the transaction. Even though the Merger Agreement remains in effect, either party is able

to terminate the Merger Agreement at any time. In addition, if China Oceanwide is able to secure the required

funding to close the transaction, the parties would need to re-engage with their regulators to determine the re-

approvals or confirmations that would be necessary to close the transaction.

There are numerous risks related to the transaction, including the following:

• China Oceanwide and/or Genworth decides to terminate the Merger Agreement or that China

Oceanwide will be unable to complete the funding of the transaction and/or the transaction may not be

completed, any of which may adversely affect our business and the price of our common stock;

•

the parties’ inability to obtain regulatory approvals, clearances or extensions, or the possibility that

such regulatory approvals or clearances may further delay the transaction, to the extent the transaction

is pursued, or that materially burdensome or adverse regulatory conditions may be imposed or

undesirable measures may be required in connection with any such regulatory approvals, clearances or

extensions (including those conditions or measures that either or both of the parties may be unwilling

to accept or undertake, as applicable);

• with continuing delays, circumstances may arise that make one or both parties unwilling to proceed

with the transaction or unable to comply with the conditions to existing regulatory approvals or one or

both of the parties may be unwilling to accept any new condition under a regulatory approval;

•

•

•

•

•

•

•

•

the parties will not be able to obtain regulatory approvals, clearances or extensions, including in

connection with a potential alternative funding structure or the current geo-political environment;

one or more regulators may rescind or fail to extend previous approvals, or the revocation by one

regulator of approvals may lead to the revocation of approvals by other regulators;

the parties’ inability to obtain any necessary regulatory approvals, clearances or extensions for the

post-closing capital plan;

a condition to closing the transaction may not be satisfied or that a condition to closing that is currently

satisfied may not remain satisfied due to the delay in closing the transaction or that the parties are

unable to agree upon all terms following receipt of all regulatory approvals and clearances;

existing and potential legal proceedings may be instituted against us in connection with the transaction

that may delay the transaction, make it more costly or ultimately preclude it;

potential legal proceedings may be instituted against us in connection with the transaction delay and/or

its termination;

the proposed transaction or its termination disrupts Genworth’s current plans and operations;

potential adverse reactions or changes to Genworth’s business relationships with clients, employees,

suppliers or other parties or other business uncertainties resulting from the announcement of the

transaction or during the pendency of the transaction or as a result of the termination of the transaction,

including but not limited to such changes that could affect Genworth’s financial performance;

•

continued availability of capital and financing to Genworth under acceptable terms before, or in the

absence of, the consummation of the transaction;

•

•

•

•

•

•

•

further rating agency actions and downgrades in Genworth’s credit or financial strength ratings;

changes in applicable laws or regulations;

our ability to recognize the anticipated benefits of the transaction;

the amount of the costs, fees, expenses and other charges related to the transaction, including costs and
expenses related to conditions imposed in connection with regulatory approvals, re-approvals or
clearances, and costs, fees and expenses and other charges already incurred, all of which may be
material;

the inability to reduce costs due to the delay or termination of the transaction, including in connection
with any proposed resource alignment;

the risks related to diverting management’s attention from our ongoing business operations; and

our ability to attract, recruit, retain and motivate current and prospective employees may be adversely
affected.

There is no assurance that the conditions to the transaction will be satisfied in the near future, on the terms
set forth in our existing agreement with China Oceanwide or at all. If the transaction is not completed, we would
likely suffer a number of consequences that could adversely affect our stock price, business, results of operations
and financial condition, including:

•

•

•

•

greater difficulty in executing alternative strategic plans to effectively address our near-term liabilities
and financial obligations, including the risks that we will be unable to raise additional debt financing
and/or sell a percentage of our ownership interest in our U.S. mortgage insurance business to repay/
refinance debt maturities in 2021 and beyond and the promissory note to AXA;

inability to reduce costs through alignment of our current expense structure with anticipated business
needs;

stabilizing our U.S. life insurance businesses without additional capital contributions and preserving
capital;

increased pressure on and potential further downgrades of our credit and financial strength ratings,
particularly for our mortgage insurance businesses, which could have an adverse impact on our
mortgage insurance businesses and could result in a reduction or elimination of dividends to our
holding company; and

• we would likely pursue strategic alternatives that would materially impact our business, including a
transaction with respect to our U.S. mortgage insurance business and/or our mortgage insurance
business in Australia.

Potential consequences of these risks would likely include, among other things, business disruption,
operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a
material adverse effect on Genworth’s financial condition, results of operations, credit ratings or liquidity.

In addition, we have incurred, and may continue to incur significant costs, expenses and fees for

professional services and other transaction costs in connection with the transaction, and these fees and costs are
payable by us regardless of whether the transaction is consummated.

COVID-19 could materially adversely affect our financial condition and results of operations.

COVID-19 has brought unprecedented changes to the global economy. Large scale disruption in the U.S.
economy has left several industries non-operational through state and federal mandated shutdowns in an effort to
contain the spread of COVID-19. Unemployment claims have increased significantly, reducing consumer

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confidence to its lowest level since the 2008 financial crisis. The level of uncertainty created by COVID-19 is
far-reaching and difficult to estimate. Our financial results have been negatively impacted by COVID-19, and we
are unsure of the ultimate impact the pandemic will have on our business, including economic and operational, as
current conditions continue to evolve rapidly. COVID-19 exposes our business to significant risks, including
interest rate declines, significantly higher levels of unemployment, liquidity pressures, credit risk on our
investment portfolio, equity market volatility, and operational, information technology and personnel risks. We
could experience significant declines in investment valuations, including as a result of credit losses, and potential
material asset impairments, as well as unexpected changes in persistency rates, as policyholders and
contractholders who are affected by the pandemic may not be able to meet their contractual obligations, such as
mortgage payments on their loans insured by our mortgage insurance policies, premium payments on their
insurance policies or deposits to their investment products. The pandemic has decreased historically low interest
rates further and has resulted in significantly higher levels of unemployment, which has and may continue to
increase delinquencies, and could reduce mortgage originations, the need for mortgage insurance and have an
adverse effect on home prices, all of which would result in a significant adverse impact to our financial condition
and results of operations in our mortgage insurance businesses. Losses in our mortgage insurance businesses
could lead to lower credit ratings and impaired capital, which could hinder our mortgage insurance businesses
from offering their products, preclude them from returning capital to our holding company for prolonged periods
of time, and thereby harm our liquidity. The pandemic could also significantly increase our mortality and
morbidity experience and/or impact our ability to successfully implement in-force rate actions (including
increased premiums and associated benefit reductions), all of which could result in higher reserve charges and an
adverse impact to our financial results in our U.S. life insurance businesses. COVID-19 could also disrupt
medical and financial services and has resulted in us practicing social distancing with our employees through
office closures, all of which could disrupt our normal business operations. The level of disruption, the economic
downturn, the global recession, and the far-reaching effects of COVID-19 could negatively affect our investment
portfolio and cause harm to our businesses if it persists for long periods of time. As a result of the foregoing, any
of the risks identified above or other related COVID-19 risks may have a material adverse impact on us,
including a material adverse effect on our financial condition and results of operations.

Risks Relating to Estimates, Assumptions and Valuations

If our reserves for future policy claims are inadequate, we may be required to increase our reserves, which
could have a material adverse effect on our results of operations and financial condition.

We calculate and maintain reserves for estimated future payments of claims to our policyholders and
contractholders in accordance with U.S. GAAP and industry accounting practices. We release these reserves as
those future obligations are paid, experience changes or policies lapse. The reserves we establish reflect estimates
and actuarial assumptions with regard to our future experience. These estimates and actuarial assumptions
involve the exercise of significant judgment. Our future financial results depend significantly upon the extent to
which our actual future experience is consistent with the assumptions and methodologies we have used in pricing
our products and calculating our reserves. Small changes in assumptions or small deviations of actual experience
from assumptions can have, and in the past have had, material impacts on our reserves, results of operations and
financial condition. Many factors, and changes in these factors, can affect future experience, including but not
limited to: interest rates; investment returns and volatility; economic and social conditions, such as inflation,
unemployment, home price appreciation or depreciation, and health care experience (including the type of care,
and cost of care); policyholder persistency or lapses (i.e., the probability that a policy or contract will remain
in-force from one period to the next); insured mortality (i.e., life expectancy or longevity); insured morbidity
(i.e., frequency and severity of claim, including claim termination rates, claim incidence, duration of claim and
benefit utilization rates); future premium rate increases and associated benefit reductions; expenses; and
doctrines of legal liability and damage awards in litigation. Because these factors are not known in advance,
change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with
precision the ultimate amounts we will pay for actual claims or the timing of those payments. For information
regarding adequacy of reserves specifically related to our long-term care insurance, life insurance and annuities

businesses, see “—We may be required to increase our reserves in our long-term care insurance, life insurance

and/or annuity businesses as a result of deviations from our estimates and actuarial assumptions or other reasons,

which could have a material adverse effect on our results of operations and financial condition.”

We regularly review our reserves and associated assumptions as part of our ongoing assessment of our

business performance and risks. If we conclude that our reserves are insufficient to cover actual or expected

policy and contract benefits and claim payments as a result of changes in experience, assumptions or otherwise,

we would be required to increase our reserves and incur charges in the period in which we make the

determination. The amounts of such increases may be significant and this could materially adversely affect our

results of operations and financial condition.

For additional information on reserves, including the financial impact of some of these risks, see “Part II—

Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical

Accounting Estimates—Insurance liabilities and reserves.”

If the models used in our businesses are inaccurate or there are differences and/or variability in loss

development compared to our model estimates and actuarial assumptions, it could have a material adverse

impact on our business, results of operations and financial condition.

We employ models to, among other uses, price products, calculate reserves, value assets, make investment

decisions and generate projections used to estimate future pre-tax income, such as the timing of the recognition

of earned premium in our mortgage insurance businesses that offer single premium insurance contracts, and to

evaluate loss recognition testing, as well as to evaluate risk, determine internal capital requirements and perform

stress testing. These models rely on estimates and projections that are inherently uncertain, may use data and/or

assumptions (that could remain locked in over an extended period of time) that do not adequately reflect recent

experience and relevant industry data, and may not operate as intended. In addition, from time to time we seek to

improve certain actuarial and financial models, and the conversion process may result in material changes to

assumptions and financial results. The models we employ are complex, which increases our risk of error in their

design, implementation or use. Also, the associated input data, assumptions and calculations and the controls we

have in place to mitigate these risks may not be effective in all cases. The risks related to our models often

increase when we change assumptions and/or methodologies, add or change modeling platforms or implement

model changes under time constraints. These risks are exacerbated when the process for assumption changes

strains our overall governance and timing around our financial reporting.

For our mortgage insurance businesses that offer single premium insurance contracts, recognition of earned

premiums involves significant estimates and assumptions as to future loss development and policy cancellations.

These assumptions are based on our historical experience and our expectations of future performance, which are

highly dependent on modeling assumptions as to long-term macroeconomic conditions including interest rates,

home price appreciation and the rate of unemployment. In our mortgage insurance business in Australia, the

majority of our current insurance contracts have a single premium, which is paid at the beginning of the contract.

For single premium insurance contracts, we recognize premiums over the policy life in accordance with the

expected pattern of risk emergence. We recognize a portion of the revenue in premiums earned in the current

period, while the remaining portion is deferred as unearned premiums and earned over time in accordance with

the expected pattern of risk emergence.

As of December 31, 2020, we had $1.5 billion of unearned premiums in our mortgage insurance businesses,

of which $1.2 billion related to our mortgage insurance business in Australia. We periodically review our

expected pattern of risk emergence and make adjustments to earnings patterns based on actual experience and

changes in our expectation of future performance with any adjustments reflected in current period net income,

which in the past has had, and may in the future have, a material adverse effect on our results of operations,

financial condition and business. See “Part II—Item 7—Management’s Discussion and Analysis of Financial

Condition and Results of Operations—Critical Accounting Estimates—Mortgage insurance—Unearned

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confidence to its lowest level since the 2008 financial crisis. The level of uncertainty created by COVID-19 is

far-reaching and difficult to estimate. Our financial results have been negatively impacted by COVID-19, and we

are unsure of the ultimate impact the pandemic will have on our business, including economic and operational, as

current conditions continue to evolve rapidly. COVID-19 exposes our business to significant risks, including

interest rate declines, significantly higher levels of unemployment, liquidity pressures, credit risk on our

investment portfolio, equity market volatility, and operational, information technology and personnel risks. We

could experience significant declines in investment valuations, including as a result of credit losses, and potential

material asset impairments, as well as unexpected changes in persistency rates, as policyholders and

contractholders who are affected by the pandemic may not be able to meet their contractual obligations, such as

mortgage payments on their loans insured by our mortgage insurance policies, premium payments on their

insurance policies or deposits to their investment products. The pandemic has decreased historically low interest

rates further and has resulted in significantly higher levels of unemployment, which has and may continue to

increase delinquencies, and could reduce mortgage originations, the need for mortgage insurance and have an

adverse effect on home prices, all of which would result in a significant adverse impact to our financial condition

and results of operations in our mortgage insurance businesses. Losses in our mortgage insurance businesses

could lead to lower credit ratings and impaired capital, which could hinder our mortgage insurance businesses

from offering their products, preclude them from returning capital to our holding company for prolonged periods

of time, and thereby harm our liquidity. The pandemic could also significantly increase our mortality and

morbidity experience and/or impact our ability to successfully implement in-force rate actions (including

increased premiums and associated benefit reductions), all of which could result in higher reserve charges and an

adverse impact to our financial results in our U.S. life insurance businesses. COVID-19 could also disrupt

medical and financial services and has resulted in us practicing social distancing with our employees through

office closures, all of which could disrupt our normal business operations. The level of disruption, the economic

downturn, the global recession, and the far-reaching effects of COVID-19 could negatively affect our investment

portfolio and cause harm to our businesses if it persists for long periods of time. As a result of the foregoing, any

of the risks identified above or other related COVID-19 risks may have a material adverse impact on us,

including a material adverse effect on our financial condition and results of operations.

Risks Relating to Estimates, Assumptions and Valuations

If our reserves for future policy claims are inadequate, we may be required to increase our reserves, which

could have a material adverse effect on our results of operations and financial condition.

We calculate and maintain reserves for estimated future payments of claims to our policyholders and

contractholders in accordance with U.S. GAAP and industry accounting practices. We release these reserves as

those future obligations are paid, experience changes or policies lapse. The reserves we establish reflect estimates

and actuarial assumptions with regard to our future experience. These estimates and actuarial assumptions

involve the exercise of significant judgment. Our future financial results depend significantly upon the extent to

which our actual future experience is consistent with the assumptions and methodologies we have used in pricing

our products and calculating our reserves. Small changes in assumptions or small deviations of actual experience

from assumptions can have, and in the past have had, material impacts on our reserves, results of operations and

financial condition. Many factors, and changes in these factors, can affect future experience, including but not

limited to: interest rates; investment returns and volatility; economic and social conditions, such as inflation,

unemployment, home price appreciation or depreciation, and health care experience (including the type of care,

and cost of care); policyholder persistency or lapses (i.e., the probability that a policy or contract will remain

in-force from one period to the next); insured mortality (i.e., life expectancy or longevity); insured morbidity

(i.e., frequency and severity of claim, including claim termination rates, claim incidence, duration of claim and

benefit utilization rates); future premium rate increases and associated benefit reductions; expenses; and

doctrines of legal liability and damage awards in litigation. Because these factors are not known in advance,

change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with

precision the ultimate amounts we will pay for actual claims or the timing of those payments. For information

regarding adequacy of reserves specifically related to our long-term care insurance, life insurance and annuities

businesses, see “—We may be required to increase our reserves in our long-term care insurance, life insurance
and/or annuity businesses as a result of deviations from our estimates and actuarial assumptions or other reasons,
which could have a material adverse effect on our results of operations and financial condition.”

We regularly review our reserves and associated assumptions as part of our ongoing assessment of our
business performance and risks. If we conclude that our reserves are insufficient to cover actual or expected
policy and contract benefits and claim payments as a result of changes in experience, assumptions or otherwise,
we would be required to increase our reserves and incur charges in the period in which we make the
determination. The amounts of such increases may be significant and this could materially adversely affect our
results of operations and financial condition.

For additional information on reserves, including the financial impact of some of these risks, see “Part II—

Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical
Accounting Estimates—Insurance liabilities and reserves.”

If the models used in our businesses are inaccurate or there are differences and/or variability in loss
development compared to our model estimates and actuarial assumptions, it could have a material adverse
impact on our business, results of operations and financial condition.

We employ models to, among other uses, price products, calculate reserves, value assets, make investment
decisions and generate projections used to estimate future pre-tax income, such as the timing of the recognition
of earned premium in our mortgage insurance businesses that offer single premium insurance contracts, and to
evaluate loss recognition testing, as well as to evaluate risk, determine internal capital requirements and perform
stress testing. These models rely on estimates and projections that are inherently uncertain, may use data and/or
assumptions (that could remain locked in over an extended period of time) that do not adequately reflect recent
experience and relevant industry data, and may not operate as intended. In addition, from time to time we seek to
improve certain actuarial and financial models, and the conversion process may result in material changes to
assumptions and financial results. The models we employ are complex, which increases our risk of error in their
design, implementation or use. Also, the associated input data, assumptions and calculations and the controls we
have in place to mitigate these risks may not be effective in all cases. The risks related to our models often
increase when we change assumptions and/or methodologies, add or change modeling platforms or implement
model changes under time constraints. These risks are exacerbated when the process for assumption changes
strains our overall governance and timing around our financial reporting.

For our mortgage insurance businesses that offer single premium insurance contracts, recognition of earned
premiums involves significant estimates and assumptions as to future loss development and policy cancellations.
These assumptions are based on our historical experience and our expectations of future performance, which are
highly dependent on modeling assumptions as to long-term macroeconomic conditions including interest rates,
home price appreciation and the rate of unemployment. In our mortgage insurance business in Australia, the
majority of our current insurance contracts have a single premium, which is paid at the beginning of the contract.
For single premium insurance contracts, we recognize premiums over the policy life in accordance with the
expected pattern of risk emergence. We recognize a portion of the revenue in premiums earned in the current
period, while the remaining portion is deferred as unearned premiums and earned over time in accordance with
the expected pattern of risk emergence.

As of December 31, 2020, we had $1.5 billion of unearned premiums in our mortgage insurance businesses,

of which $1.2 billion related to our mortgage insurance business in Australia. We periodically review our
expected pattern of risk emergence and make adjustments to earnings patterns based on actual experience and
changes in our expectation of future performance with any adjustments reflected in current period net income,
which in the past has had, and may in the future have, a material adverse effect on our results of operations,
financial condition and business. See “Part II—Item 7—Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Critical Accounting Estimates—Mortgage insurance—Unearned

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premiums” for additional details. Our expected pattern of risk emergence for our mortgage insurance businesses
is subject to change given the inherent uncertainty as to the underlying loss development and policy cancellation
assumptions and the long duration of our mortgage insurance policy contracts. Therefore, actual future
experience that is different than expected loss development or policy cancellations could result in material
increases or decreases in the recognition of earned premiums, increases or decreases in unearned premiums and
an after-tax charge to operating results depending on the magnitude of the difference between actual and
expected experience.

In our U.S. life insurance businesses, we intend to continue developing our modeling capabilities. During or

Results of Operations—Critical Accounting Estimates—Insurance liabilities and reserves.”

after the implementation of model updates or enhancements, we may discover errors or other deficiencies in
existing models, assumptions and/or methodologies. Moreover, we may use additional, more granular and
detailed information through enhancements in our reserving and other processes or we may employ more
simplified approaches in the future, either of which may cause us to refine or otherwise change existing
assumptions and/or methodologies and thus associated reserve levels, which in turn could have a material
adverse impact on our business, results of operations and financial condition.

We may be required to increase our reserves in our long-term care insurance, life insurance and/or
annuity businesses as a result of deviations from our estimates and actuarial assumptions or other reasons,
which could have a material adverse effect on our results of operations and financial condition.

The expected future profitability of our long-term care insurance, life insurance and some annuity products
are based upon assumptions for, among other things, projected interest rates and investment returns, health care
experience, morbidity rates, mortality rates, in-force rate actions, persistency, lapses and expenses. The long-term
profitability of these products depends upon how our actual experience compares with our pricing and valuation
assumptions. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past
has had, and may in the future have, a material adverse effect on our results of operations, financial condition and
business. For example, if morbidity rates are higher than our valuation assumptions, we could be required to
make greater payments and thus establish additional reserves under our long-term care insurance policies than we
had expected, and such amounts could be significant. Likewise, if mortality rates are lower than our valuation
assumptions, we could be required to make greater payments and thus establish additional reserves under both
our long-term care insurance policies and annuity contracts and such amounts could be significant. Conversely, if
mortality rates are higher than our pricing and valuation assumptions, we could be required to make greater
payments under our life insurance policies and annuity contracts with guaranteed minimum death benefits
(“GMDBs”) than we had projected. Moreover, changes in the assumptions we use can have a material adverse
effect on our results of operations. Even small changes in assumptions or small deviations of actual experience
from assumptions can have, and in the past have had, material impacts on our DAC amortization, reserve levels,
results of operations and financial condition.

For example, we increased our reserves for our long-term care and/or life insurance products following
completion of our annual review of assumptions in 2019 and 2018, which materially impacted our results of
operations. See “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Estimates” and note 9 in our consolidated financial statements under “Item 8—
Financial Statements and Supplementary Data” for additional information. Increases to our reserves may, among
other things, limit our ability to execute our alternative strategic plans if the proposed transaction with China
Oceanwide is not completed; reduce our liquidity; and adversely impact our credit or financial strength ratings.
Any of these results could have a material adverse impact on our business, results of operations and financial
condition.

The risk that our claims experience may differ significantly from our valuation assumptions is particularly

significant for our long-term care insurance products. Long-term care insurance policies provide for long-
duration coverage and, therefore, our actual claims experience will emerge over many years, or decades, after
both pricing and locked-in valuation assumptions have been established. For example, among other factors,

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55

changes in economic and interest rate risk, socio-demographics, behavioral trends (e.g., location of care and level

of benefit use) and medical advances, may have a material adverse impact on our future claims trends. Moreover,

long-term care insurance does not have the extensive claims experience history of life insurance. As a

consequence, given that recent experience will represent a larger proportion of total experience, our long-term

care insurance assumptions will be more heavily influenced by recent experience. It follows that our ability to

forecast future claim costs for long-term care insurance is more limited than for life insurance. For additional

information on our long-term care insurance reserves, including the significant historical financial impact of

some of these risks, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and

The prices and expected future profitability of our insurance and annuity products are based in part upon

expected patterns of premiums, expenses and benefits, using a number of assumptions, including those related to

persistency, which is the probability that a policy or contract will remain in-force from one period to the next.

The effect of persistency on profitability varies for different products. For most of our life insurance and deferred

annuity products, actual persistency that is lower than our persistency assumptions could have an adverse impact

on profitability, primarily because we would be required to accelerate the amortization of expenses we deferred

in connection with the acquisition of the policy or contract. For our deferred annuity products with GMWBs and

guaranteed annuitization benefits, actual persistency that is higher than our persistency assumptions could have

an adverse impact on profitability because we could be required to make withdrawal or annuitization payments

for a longer period of time than the account value would support. For our universal life insurance contracts,

increased persistency that is the result of the sale of contracts by the insured to third parties that continue to make

premium payments on contracts that would otherwise have lapsed, also known as life settlements, could have an

adverse impact on profitability because of the higher claims rate associated with settled contracts.

For our long-term care insurance policies, actual persistency in later policy durations that is higher than our

persistency assumptions could have a negative impact on profitability. If these policies remain in-force longer

than we assumed, then we could be required to make greater benefit payments than we had anticipated when we

priced these products. This risk is particularly significant in our long-term care insurance business because we do

not have the experience history that we have in our life insurance business. As a result, our ability to predict

persistency and resulting benefit experience for long-term care insurance is more limited than for many other

products. A significant number of our long-term care insurance policies have experienced higher persistency than

we had originally assumed, which has resulted in higher claims and an adverse effect on the profitability of that

business. In addition, the impact of inflation on claims could be more pronounced for our long-term care

insurance business than our other businesses given the “long tail” nature of this business. To the extent inflation

or other factors causes these health care costs to increase, we will be required to increase our policy and claim

reserves which could negatively impact our loss recognition testing results and may result in a premium

deficiency. Although we consider the potential effects of inflation when setting premium rates, our premiums

may not fully offset the effects of inflation and may result in our underpricing of the risks we insure.

The risk that our lapse experience may differ significantly from our valuation assumptions is also significant

for our term life and term universal life insurance products. These products generally have a level premium period

for a specified period of years (e.g., 10 years to 30 years) after which the premium increases, which may be

significant. If the frequency of lapses is higher than our reserve assumptions, we would experience higher DAC

amortization and lower premiums and could experience higher benefit costs. In addition, it may be that healthy

policyholders are the ones who lapse (as they can more easily replace coverage), creating adverse selection where

less healthy policyholders remain in our portfolio. We have experienced both a greater frequency of policyholder

lapses and more severe adverse selection, after the level premium period, and this experience could continue or

worsen. For example, as our large 10- and 15-year level premium period term life insurance policies written in 1999

and 2000 transitioned to their post-level guaranteed premium rate period, we have experienced lower persistency

compared to our pricing and valuation assumptions which accelerated DAC amortization in previous years. In

addition, as our large 20-year level premium period business written in 1999 entered its post-level period, we

experienced higher lapses resulting in accelerated DAC amortization in 2019. This trend continued in the first

premiums” for additional details. Our expected pattern of risk emergence for our mortgage insurance businesses

is subject to change given the inherent uncertainty as to the underlying loss development and policy cancellation

assumptions and the long duration of our mortgage insurance policy contracts. Therefore, actual future

experience that is different than expected loss development or policy cancellations could result in material

increases or decreases in the recognition of earned premiums, increases or decreases in unearned premiums and

an after-tax charge to operating results depending on the magnitude of the difference between actual and

expected experience.

In our U.S. life insurance businesses, we intend to continue developing our modeling capabilities. During or

after the implementation of model updates or enhancements, we may discover errors or other deficiencies in

existing models, assumptions and/or methodologies. Moreover, we may use additional, more granular and

detailed information through enhancements in our reserving and other processes or we may employ more

simplified approaches in the future, either of which may cause us to refine or otherwise change existing

assumptions and/or methodologies and thus associated reserve levels, which in turn could have a material

adverse impact on our business, results of operations and financial condition.

We may be required to increase our reserves in our long-term care insurance, life insurance and/or

annuity businesses as a result of deviations from our estimates and actuarial assumptions or other reasons,

which could have a material adverse effect on our results of operations and financial condition.

The expected future profitability of our long-term care insurance, life insurance and some annuity products

are based upon assumptions for, among other things, projected interest rates and investment returns, health care

experience, morbidity rates, mortality rates, in-force rate actions, persistency, lapses and expenses. The long-term

profitability of these products depends upon how our actual experience compares with our pricing and valuation

assumptions. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past

has had, and may in the future have, a material adverse effect on our results of operations, financial condition and

business. For example, if morbidity rates are higher than our valuation assumptions, we could be required to

make greater payments and thus establish additional reserves under our long-term care insurance policies than we

had expected, and such amounts could be significant. Likewise, if mortality rates are lower than our valuation

assumptions, we could be required to make greater payments and thus establish additional reserves under both

our long-term care insurance policies and annuity contracts and such amounts could be significant. Conversely, if

mortality rates are higher than our pricing and valuation assumptions, we could be required to make greater

payments under our life insurance policies and annuity contracts with guaranteed minimum death benefits

(“GMDBs”) than we had projected. Moreover, changes in the assumptions we use can have a material adverse

effect on our results of operations. Even small changes in assumptions or small deviations of actual experience

from assumptions can have, and in the past have had, material impacts on our DAC amortization, reserve levels,

results of operations and financial condition.

For example, we increased our reserves for our long-term care and/or life insurance products following

completion of our annual review of assumptions in 2019 and 2018, which materially impacted our results of

operations. See “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Critical Accounting Estimates” and note 9 in our consolidated financial statements under “Item 8—

Financial Statements and Supplementary Data” for additional information. Increases to our reserves may, among

other things, limit our ability to execute our alternative strategic plans if the proposed transaction with China

Oceanwide is not completed; reduce our liquidity; and adversely impact our credit or financial strength ratings.

Any of these results could have a material adverse impact on our business, results of operations and financial

condition.

The risk that our claims experience may differ significantly from our valuation assumptions is particularly

significant for our long-term care insurance products. Long-term care insurance policies provide for long-

duration coverage and, therefore, our actual claims experience will emerge over many years, or decades, after

both pricing and locked-in valuation assumptions have been established. For example, among other factors,

changes in economic and interest rate risk, socio-demographics, behavioral trends (e.g., location of care and level
of benefit use) and medical advances, may have a material adverse impact on our future claims trends. Moreover,
long-term care insurance does not have the extensive claims experience history of life insurance. As a
consequence, given that recent experience will represent a larger proportion of total experience, our long-term
care insurance assumptions will be more heavily influenced by recent experience. It follows that our ability to
forecast future claim costs for long-term care insurance is more limited than for life insurance. For additional
information on our long-term care insurance reserves, including the significant historical financial impact of
some of these risks, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Critical Accounting Estimates—Insurance liabilities and reserves.”

The prices and expected future profitability of our insurance and annuity products are based in part upon
expected patterns of premiums, expenses and benefits, using a number of assumptions, including those related to
persistency, which is the probability that a policy or contract will remain in-force from one period to the next.
The effect of persistency on profitability varies for different products. For most of our life insurance and deferred
annuity products, actual persistency that is lower than our persistency assumptions could have an adverse impact
on profitability, primarily because we would be required to accelerate the amortization of expenses we deferred
in connection with the acquisition of the policy or contract. For our deferred annuity products with GMWBs and
guaranteed annuitization benefits, actual persistency that is higher than our persistency assumptions could have
an adverse impact on profitability because we could be required to make withdrawal or annuitization payments
for a longer period of time than the account value would support. For our universal life insurance contracts,
increased persistency that is the result of the sale of contracts by the insured to third parties that continue to make
premium payments on contracts that would otherwise have lapsed, also known as life settlements, could have an
adverse impact on profitability because of the higher claims rate associated with settled contracts.

For our long-term care insurance policies, actual persistency in later policy durations that is higher than our

persistency assumptions could have a negative impact on profitability. If these policies remain in-force longer
than we assumed, then we could be required to make greater benefit payments than we had anticipated when we
priced these products. This risk is particularly significant in our long-term care insurance business because we do
not have the experience history that we have in our life insurance business. As a result, our ability to predict
persistency and resulting benefit experience for long-term care insurance is more limited than for many other
products. A significant number of our long-term care insurance policies have experienced higher persistency than
we had originally assumed, which has resulted in higher claims and an adverse effect on the profitability of that
business. In addition, the impact of inflation on claims could be more pronounced for our long-term care
insurance business than our other businesses given the “long tail” nature of this business. To the extent inflation
or other factors causes these health care costs to increase, we will be required to increase our policy and claim
reserves which could negatively impact our loss recognition testing results and may result in a premium
deficiency. Although we consider the potential effects of inflation when setting premium rates, our premiums
may not fully offset the effects of inflation and may result in our underpricing of the risks we insure.

The risk that our lapse experience may differ significantly from our valuation assumptions is also significant
for our term life and term universal life insurance products. These products generally have a level premium period
for a specified period of years (e.g., 10 years to 30 years) after which the premium increases, which may be
significant. If the frequency of lapses is higher than our reserve assumptions, we would experience higher DAC
amortization and lower premiums and could experience higher benefit costs. In addition, it may be that healthy
policyholders are the ones who lapse (as they can more easily replace coverage), creating adverse selection where
less healthy policyholders remain in our portfolio. We have experienced both a greater frequency of policyholder
lapses and more severe adverse selection, after the level premium period, and this experience could continue or
worsen. For example, as our large 10- and 15-year level premium period term life insurance policies written in 1999
and 2000 transitioned to their post-level guaranteed premium rate period, we have experienced lower persistency
compared to our pricing and valuation assumptions which accelerated DAC amortization in previous years. In
addition, as our large 20-year level premium period business written in 1999 entered its post-level period, we
experienced higher lapses resulting in accelerated DAC amortization in 2019. This trend continued in the first

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quarter of 2020 for the 1999 block, as it reached the end of its level premium period. Additionally, we have
experienced a similar trend with the 20-year level premium period business written in 2000 as it entered its post-
level period during 2020 and we expect that trend to continue in 2021 albeit to a lesser extent. In the future, as
additional 10-, 15- and 20-year level premium period blocks enter their post-level guaranteed premium rate period,
we expect to experience volatility in DAC amortization, premiums and mortality experience, which we expect to
reduce profitability in our term life insurance products, in amounts that could be material, if persistency is lower
than our original assumptions. For additional information on our term life insurance reserves, including select
sensitivities, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Estimates—Insurance liabilities and reserves.”

Although some of our products permit us to increase premiums during the life of the policy or contract, we

cannot guarantee that these increases would be sufficient to maintain profitability or that such increases would be
approved by regulators or approved in a timely manner, where approval is required, and even if implemented the
premium increases may result in higher lapses. Moreover, many of our products either do not permit us to
increase premiums or limit those increases during the life of the policy or contract. Significant deviations in
experience from pricing expectations could have an adverse effect on the profitability of our products. In addition
to our annual reviews, we regularly review our methodologies and assumptions in light of emerging experience
and may be required to make further adjustments to reserves in our long-term care insurance, life insurance and/
or annuities businesses in the future. Any changes to these reserves may have a materially negative impact on our
results of operations, financial condition and business.

Loss recognition testing

We annually perform loss recognition testing for the liability for future policy benefits. Our loss recognition

testing for our long-term care insurance products is reviewed in the aggregate, excluding our acquired block of
long-term care insurance, which is tested separately. Our long-term care insurance business, excluding the
acquired block, has positive margin which is highly dependent on the assumptions we have regarding our ability
to successfully implement our in-force management strategy involving premium rate increases and associated
benefit reductions. We include future in-force rate actions in our loss recognition testing which includes
assumptions for significant premium rate increases and associated benefit reductions that have been approved or
are anticipated to be approved (including premium rate increases and associated benefit reductions not yet filed).
A change in the expected amount of premium rate increases and associated benefit reductions would impact the
results of our long-term care insurance margin testing, whereby any unexpected reduction in the amount of future
in-force rate actions would negatively impact our margins and could result in a premium deficiency which would
have a materially adverse effect on our results of operations, capital levels, RBC and financial condition. There is
no guarantee that we will be able to obtain regulatory approval for the future in-force rate actions we have
assumed in connection with our loss recognition testing. Favorable impacts on our margin from in-force rate
actions would primarily impact our long-term care insurance block, excluding the acquired block. Due to the age
of our acquired block, it would not benefit as significantly from future in-force rate actions. For our acquired
block of long-term care insurance, the impacts of any adverse changes in assumptions are likely to be recorded as
a loss as our margin for this block has been zero in the past.

The assumptions in our long-term care insurance products are sensitive to slight variability in actual
experience and small changes in assumptions could result in the margin of our long-term care insurance block,
excluding the acquired block, to decrease to at/or below zero in future years. Based on our reviews, if our margin
is negative, we would be required to recognize a loss by amortizing more DAC and/or establishing additional
benefit reserves, the impact of which may be material. A significant decrease in our loss recognition testing
margin, the need to amortize a significant amount of DAC and/or the need to significantly increase reserves
could have a material adverse effect on our business, results of operations and financial condition. For additional
information on our long-term care insurance reserves, including select sensitivities, see “Part II—Item 7—
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting
Estimates—Insurance liabilities and reserves.”

As part of our annual loss recognition testing in our long-term care insurance products, we also review

assumptions for incidence, claim severity, interest rates and in-force rate actions, among other assumptions. We

regularly review our methodologies and assumptions in light of emerging experience and may be required to

make further adjustments to our long-term care insurance claim reserves in the future, which could also impact

our loss recognition testing results.

Similar to our long-term care insurance products, we annually perform loss recognition testing for our term

and whole life insurance products in the aggregate, excluding our acquired block, which is tested separately. The

margin of our term and whole life insurance products has fluctuated over the years. Any adverse changes in our

assumptions could negatively impact the combined margin of our term and whole life insurance products. To the

extent, based on reviews, our margin is negative for our term and whole life insurance products, excluding our

acquired block, or our acquired block of term and whole life insurance products, we would be required to

recognize a loss by amortizing more DAC and/or present value of future profits (“PVFP”) as well as the

establishment of additional future policy benefit reserves if the DAC and/or PVFP was fully written off. A

significant decrease in our loss recognition testing margin, the need to amortize a significant amount of DAC

and/or PVFP or the need to significantly increase reserves could have a material adverse effect on our business,

results of operations and financial condition. For additional information on our term life insurance reserves,

including select sensitivities, see “Part II—Item 7—Management’s Discussion and Analysis of Financial

Condition and Results of Operations—Critical Accounting Estimates—Insurance liabilities and reserves.”

We will continue to monitor our experience and assumptions closely and make changes to our assumptions

and methodologies, as appropriate, for our U.S. life insurance products. As experience has emerged in the past,

we have made resulting changes to our assumptions that have had a material impact on our results of operations

and financial position. Our experience will continue to emerge and it is likely that future assumption reviews will

result in further updates.

Cash flow testing

We also perform cash flow testing or “asset adequacy analysis” separately for each of our U.S. life

insurance companies on a statutory accounting basis. To the extent that the cash flow testing margin is negative

in any of our U.S. life insurance companies, we would need to increase statutory reserves in that company, which

would decrease our RBC ratios.

As a part of our cash flow testing process for our life insurance subsidiaries, we consider incremental

benefits from expected future in-force rate actions in our long-term care insurance products that would help

mitigate the impact of deteriorating experience. There is no guarantee that we will be able to obtain regulatory

approval for the future in-force rate actions we assumed in connection with our cash flow testing for our life

insurance subsidiaries. A need to significantly further increase statutory reserves could have a material adverse

effect on our business, results of operations and financial condition.

The NYDFS, which regulates GLICNY, our New York insurance subsidiary, also requires specific

adequacy testing scenarios that are generally more severe than those deemed acceptable in other states.

Moreover, the required testing scenarios by the NYDFS have a disproportionate impact on our long-term care

insurance products. In addition, we have historically used nationwide experience for setting assumptions in our

long-term care insurance products in cash flow testing for all of our legal entities, including GLICNY.

However, we have been monitoring emerging experience with our New York policyholders, which

experience has been adverse as compared to our nationwide experience. With the benefit of additional data and

analysis, and based on discussions with the NYDFS, we are using assumptions that reflect New York specific

experience in GLICNY’s asset adequacy analysis in 2020. After discussions with the NYDFS and through the

exercise of professional actuarial judgment, GLICNY also incorporated in its 2020 asset adequacy analysis

assumptions for future in-force rate actions for long-term care insurance products to offset the emerging

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quarter of 2020 for the 1999 block, as it reached the end of its level premium period. Additionally, we have

experienced a similar trend with the 20-year level premium period business written in 2000 as it entered its post-

level period during 2020 and we expect that trend to continue in 2021 albeit to a lesser extent. In the future, as

additional 10-, 15- and 20-year level premium period blocks enter their post-level guaranteed premium rate period,

we expect to experience volatility in DAC amortization, premiums and mortality experience, which we expect to

reduce profitability in our term life insurance products, in amounts that could be material, if persistency is lower

than our original assumptions. For additional information on our term life insurance reserves, including select

sensitivities, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Critical Accounting Estimates—Insurance liabilities and reserves.”

Although some of our products permit us to increase premiums during the life of the policy or contract, we

cannot guarantee that these increases would be sufficient to maintain profitability or that such increases would be

approved by regulators or approved in a timely manner, where approval is required, and even if implemented the

premium increases may result in higher lapses. Moreover, many of our products either do not permit us to

increase premiums or limit those increases during the life of the policy or contract. Significant deviations in

experience from pricing expectations could have an adverse effect on the profitability of our products. In addition

to our annual reviews, we regularly review our methodologies and assumptions in light of emerging experience

and may be required to make further adjustments to reserves in our long-term care insurance, life insurance and/

or annuities businesses in the future. Any changes to these reserves may have a materially negative impact on our

results of operations, financial condition and business.

Loss recognition testing

We annually perform loss recognition testing for the liability for future policy benefits. Our loss recognition

testing for our long-term care insurance products is reviewed in the aggregate, excluding our acquired block of

long-term care insurance, which is tested separately. Our long-term care insurance business, excluding the

acquired block, has positive margin which is highly dependent on the assumptions we have regarding our ability

to successfully implement our in-force management strategy involving premium rate increases and associated

benefit reductions. We include future in-force rate actions in our loss recognition testing which includes

assumptions for significant premium rate increases and associated benefit reductions that have been approved or

are anticipated to be approved (including premium rate increases and associated benefit reductions not yet filed).

A change in the expected amount of premium rate increases and associated benefit reductions would impact the

results of our long-term care insurance margin testing, whereby any unexpected reduction in the amount of future

in-force rate actions would negatively impact our margins and could result in a premium deficiency which would

have a materially adverse effect on our results of operations, capital levels, RBC and financial condition. There is

no guarantee that we will be able to obtain regulatory approval for the future in-force rate actions we have

assumed in connection with our loss recognition testing. Favorable impacts on our margin from in-force rate

actions would primarily impact our long-term care insurance block, excluding the acquired block. Due to the age

of our acquired block, it would not benefit as significantly from future in-force rate actions. For our acquired

block of long-term care insurance, the impacts of any adverse changes in assumptions are likely to be recorded as

a loss as our margin for this block has been zero in the past.

The assumptions in our long-term care insurance products are sensitive to slight variability in actual

experience and small changes in assumptions could result in the margin of our long-term care insurance block,

excluding the acquired block, to decrease to at/or below zero in future years. Based on our reviews, if our margin

is negative, we would be required to recognize a loss by amortizing more DAC and/or establishing additional

benefit reserves, the impact of which may be material. A significant decrease in our loss recognition testing

margin, the need to amortize a significant amount of DAC and/or the need to significantly increase reserves

could have a material adverse effect on our business, results of operations and financial condition. For additional

information on our long-term care insurance reserves, including select sensitivities, see “Part II—Item 7—

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Estimates—Insurance liabilities and reserves.”

As part of our annual loss recognition testing in our long-term care insurance products, we also review
assumptions for incidence, claim severity, interest rates and in-force rate actions, among other assumptions. We
regularly review our methodologies and assumptions in light of emerging experience and may be required to
make further adjustments to our long-term care insurance claim reserves in the future, which could also impact
our loss recognition testing results.

Similar to our long-term care insurance products, we annually perform loss recognition testing for our term
and whole life insurance products in the aggregate, excluding our acquired block, which is tested separately. The
margin of our term and whole life insurance products has fluctuated over the years. Any adverse changes in our
assumptions could negatively impact the combined margin of our term and whole life insurance products. To the
extent, based on reviews, our margin is negative for our term and whole life insurance products, excluding our
acquired block, or our acquired block of term and whole life insurance products, we would be required to
recognize a loss by amortizing more DAC and/or present value of future profits (“PVFP”) as well as the
establishment of additional future policy benefit reserves if the DAC and/or PVFP was fully written off. A
significant decrease in our loss recognition testing margin, the need to amortize a significant amount of DAC
and/or PVFP or the need to significantly increase reserves could have a material adverse effect on our business,
results of operations and financial condition. For additional information on our term life insurance reserves,
including select sensitivities, see “Part II—Item 7—Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Critical Accounting Estimates—Insurance liabilities and reserves.”

We will continue to monitor our experience and assumptions closely and make changes to our assumptions
and methodologies, as appropriate, for our U.S. life insurance products. As experience has emerged in the past,
we have made resulting changes to our assumptions that have had a material impact on our results of operations
and financial position. Our experience will continue to emerge and it is likely that future assumption reviews will
result in further updates.

Cash flow testing

We also perform cash flow testing or “asset adequacy analysis” separately for each of our U.S. life

insurance companies on a statutory accounting basis. To the extent that the cash flow testing margin is negative
in any of our U.S. life insurance companies, we would need to increase statutory reserves in that company, which
would decrease our RBC ratios.

As a part of our cash flow testing process for our life insurance subsidiaries, we consider incremental

benefits from expected future in-force rate actions in our long-term care insurance products that would help
mitigate the impact of deteriorating experience. There is no guarantee that we will be able to obtain regulatory
approval for the future in-force rate actions we assumed in connection with our cash flow testing for our life
insurance subsidiaries. A need to significantly further increase statutory reserves could have a material adverse
effect on our business, results of operations and financial condition.

The NYDFS, which regulates GLICNY, our New York insurance subsidiary, also requires specific
adequacy testing scenarios that are generally more severe than those deemed acceptable in other states.
Moreover, the required testing scenarios by the NYDFS have a disproportionate impact on our long-term care
insurance products. In addition, we have historically used nationwide experience for setting assumptions in our
long-term care insurance products in cash flow testing for all of our legal entities, including GLICNY.

However, we have been monitoring emerging experience with our New York policyholders, which
experience has been adverse as compared to our nationwide experience. With the benefit of additional data and
analysis, and based on discussions with the NYDFS, we are using assumptions that reflect New York specific
experience in GLICNY’s asset adequacy analysis in 2020. After discussions with the NYDFS and through the
exercise of professional actuarial judgment, GLICNY also incorporated in its 2020 asset adequacy analysis
assumptions for future in-force rate actions for long-term care insurance products to offset the emerging

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adverse experience for these products. With these assumption updates, GLICNY’s 2020 asset adequacy analysis
produced a negative margin. To address the negative margin, GLICNY recorded an incremental $100 million of
additional statutory reserves in 2020. This resulted in a 200% RBC for GLICNY in 2020, a decrease of 91 RBC
points from 2019. For additional information on GLICNY asset adequacy testing, see note 17 in our consolidated
financial statements under “Item 8—Financial Statements and Supplementary Data.”

Significant adverse assumption changes could result in the cash flow testing margin in GLICNY to decrease

to at/or below zero in future years. In addition, the NYDFS annually informs the industry that it does not permit
in-force rate increases for long-term care insurance to be used in asset adequacy analysis until such increases
have been approved. However, the NYDFS has allowed GLICNY to incorporate recently filed in-force rate
actions in its asset adequacy analysis prior to approval in the past and, in 2020, allowed GLICNY to incorporate
assumptions for future in-force rate actions in its asset adequacy analysis. If the NYDFS no longer allows
GLICNY to incorporate assumptions for future in-force rate actions in its asset adequacy analysis to offset New
York specific experience, this would result in a material decrease in GLICNY’s cash flow testing margin and
would require GLICNY to significantly increase its statutory reserves further. This would have a material
adverse effect on GLICNY’s financial condition and RBC ratio.

For additional information regarding impacts to statutory capital as a result of reserve increases, see “—An

adverse change in our regulatory requirements, including risk-based capital, could have a material adverse impact
on our results of operations, financial condition and business.”

We may be required to accelerate the amortization of deferred acquisition costs and the present value of
future profits, which would increase our expenses and reduce profitability.

DAC represents costs related to the successful acquisition of our insurance policies and investment
contracts, which are deferred and amortized over the estimated life of the related insurance policies and
investment contracts. These costs primarily consist of commissions in excess of ultimate renewal commissions
and underwriting and contract and policy issuance expenses incurred on policies and contracts successfully
acquired. Under U.S. GAAP, DAC is subsequently amortized to income, over the lives of the underlying
contracts, in relation to the anticipated recognition of premiums or gross profits. In addition, when we acquire a
block of insurance policies or investment contracts, we assign a portion of the purchase price to the right to
receive future net cash flows from the acquired block of insurance and investment contracts and policies. This
intangible asset, called PVFP, represents the actuarially estimated present value of future cash flows from the
acquired policies. We amortize the value of this intangible asset in a manner similar to the amortization of DAC.

Our amortization of DAC and PVFP generally depends upon, among other items, anticipated profits from

investments, surrender and other policy and contract charges, mortality, morbidity and maintenance expense
margins. Unfavorable experience with regard to expected expenses, investment returns, mortality, morbidity,
withdrawals or lapses may cause us to increase the amortization of DAC or PVFP, or both, or to record a charge
to increase benefit reserves, and such increases could be material. For additional information regarding impacts
to DAC as a result of lapses of our term life insurance products, see “—We may be required to increase our
reserves in our long-term care insurance, life insurance and/or annuity businesses as a result of deviations from
our estimates and actuarial assumptions or other reasons, which could have a material adverse effect on our
results of operations and financial condition.”

We regularly review DAC and PVFP to determine if they are recoverable from future income. If these costs
are not recoverable, they are charged as expenses in the financial period in which we make this determination. If
we determine that we are unable to recover DAC from profits over the life of a block of insurance policies or
annuity contracts, or if withdrawals or surrender charges associated with early withdrawals do not fully offset the
unamortized acquisition costs related to those policies or annuities, we would be required to recognize the
additional DAC amortization as an expense in the current period. For example, in 2020, we recorded a DAC
impairment of $63 million in our universal life insurance products due principally to lower future estimated gross

profits. Equity market volatility could result in losses in our variable annuity products and associated hedging

programs which could challenge our ability to recover DAC on these products and could lead to further write-

offs of DAC.

For additional information on DAC and PVFP, including the financial impact of some of these risks, see

“Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—

Critical Accounting Estimates” and notes 6 and 7 in our consolidated financial statements under “Item 8—

Financial Statements and Supplementary Data.”

When we have projected profits in earlier years followed by projected losses in later years (as is currently

the case with our long-term care insurance business), we are required to increase our reserve liabilities

over time to offset the projected future losses, which could adversely affect our results of operations and

financial condition.

We calculate and maintain reserves for estimated future payments of claims to our policyholders and

contractholders in accordance with U.S. GAAP and industry accounting practices. When we conclude that our

reserves are insufficient by line of business to cover actual or expected policy and contract benefits and claim

payments as a result of changes in experience, assumptions or otherwise, we are required to increase our reserves

and incur charges in the period in which we make the determination. For certain long-duration products in our

U.S. Life Insurance segment, we are also required to accrue additional reserves over time when the overall

reserve is adequate by line of business, but profits are projected in earlier years followed by losses projected in

later years. When this pattern of profits followed by losses exists for these products, and we determine that an

additional reserve liability is required, we increase reserves in the years we expect to be profitable by the

amounts necessary to offset losses projected in later years.

In our long-term care insurance products, projected profits followed by projected losses are anticipated to

occur because U.S. GAAP requires that original assumptions be used in determining reserves for future policy

claims unless and until a premium deficiency exists. Our existing locked-in reserve assumptions do not include

assumptions for premium rate increases and associated benefit reductions, which if included in reserves, could

reduce or eliminate future projected losses. As a result of this pattern of projected profits followed by projected

losses, we are required to accrue additional future policy benefit reserves in the profitable years, currently

expected to be through 2031, by the amounts necessary to offset losses in later years. The accrual is recorded on

a quarterly basis using assumptions which are updated annually at the time we perform loss recognition testing

and is impacted by the reserve pattern and the present value of expected future losses. Likewise, the accrual is

subject to significant estimation and includes various assumptions that are sensitive to variability; small changes

in assumptions could result in volatility of the accrued amount in any given year. Moreover, the amount required

to accrue for additional future policy benefits in the profitable years may be significant and this could materially

adversely affect our results of operations and financial condition. For additional information, including the

financial impact of some of these risks, see “Part II—Item 7—Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Critical Accounting Estimates—Future policy benefits.”

Our valuation of fixed maturity, equity and trading securities uses methodologies, estimations and

assumptions that are subject to change and differing interpretations which could result in changes to

investment valuations that may materially adversely affect our results of operations and financial

condition.

We report fixed maturity, equity and trading securities at fair value on our consolidated balance sheets.

These securities represent the majority of our total cash, cash equivalents, restricted cash and invested assets. Our

portfolio of fixed maturity securities consists primarily of investment grade securities. Valuations use inputs and

assumptions that are less observable or require greater estimation, as well as valuation methods that are more

complex or require greater estimation, thereby resulting in values that are less certain and may vary significantly

from the value at which the investments may be ultimately sold. The methodologies, estimates and assumptions

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adverse experience for these products. With these assumption updates, GLICNY’s 2020 asset adequacy analysis

produced a negative margin. To address the negative margin, GLICNY recorded an incremental $100 million of

additional statutory reserves in 2020. This resulted in a 200% RBC for GLICNY in 2020, a decrease of 91 RBC

points from 2019. For additional information on GLICNY asset adequacy testing, see note 17 in our consolidated

financial statements under “Item 8—Financial Statements and Supplementary Data.”

Significant adverse assumption changes could result in the cash flow testing margin in GLICNY to decrease

to at/or below zero in future years. In addition, the NYDFS annually informs the industry that it does not permit

in-force rate increases for long-term care insurance to be used in asset adequacy analysis until such increases

have been approved. However, the NYDFS has allowed GLICNY to incorporate recently filed in-force rate

actions in its asset adequacy analysis prior to approval in the past and, in 2020, allowed GLICNY to incorporate

assumptions for future in-force rate actions in its asset adequacy analysis. If the NYDFS no longer allows

GLICNY to incorporate assumptions for future in-force rate actions in its asset adequacy analysis to offset New

York specific experience, this would result in a material decrease in GLICNY’s cash flow testing margin and

would require GLICNY to significantly increase its statutory reserves further. This would have a material

adverse effect on GLICNY’s financial condition and RBC ratio.

For additional information regarding impacts to statutory capital as a result of reserve increases, see “—An

adverse change in our regulatory requirements, including risk-based capital, could have a material adverse impact

on our results of operations, financial condition and business.”

We may be required to accelerate the amortization of deferred acquisition costs and the present value of

future profits, which would increase our expenses and reduce profitability.

DAC represents costs related to the successful acquisition of our insurance policies and investment

contracts, which are deferred and amortized over the estimated life of the related insurance policies and

investment contracts. These costs primarily consist of commissions in excess of ultimate renewal commissions

and underwriting and contract and policy issuance expenses incurred on policies and contracts successfully

acquired. Under U.S. GAAP, DAC is subsequently amortized to income, over the lives of the underlying

contracts, in relation to the anticipated recognition of premiums or gross profits. In addition, when we acquire a

block of insurance policies or investment contracts, we assign a portion of the purchase price to the right to

receive future net cash flows from the acquired block of insurance and investment contracts and policies. This

intangible asset, called PVFP, represents the actuarially estimated present value of future cash flows from the

acquired policies. We amortize the value of this intangible asset in a manner similar to the amortization of DAC.

Our amortization of DAC and PVFP generally depends upon, among other items, anticipated profits from

investments, surrender and other policy and contract charges, mortality, morbidity and maintenance expense

margins. Unfavorable experience with regard to expected expenses, investment returns, mortality, morbidity,

withdrawals or lapses may cause us to increase the amortization of DAC or PVFP, or both, or to record a charge

to increase benefit reserves, and such increases could be material. For additional information regarding impacts

to DAC as a result of lapses of our term life insurance products, see “—We may be required to increase our

reserves in our long-term care insurance, life insurance and/or annuity businesses as a result of deviations from

our estimates and actuarial assumptions or other reasons, which could have a material adverse effect on our

results of operations and financial condition.”

We regularly review DAC and PVFP to determine if they are recoverable from future income. If these costs

are not recoverable, they are charged as expenses in the financial period in which we make this determination. If

we determine that we are unable to recover DAC from profits over the life of a block of insurance policies or

annuity contracts, or if withdrawals or surrender charges associated with early withdrawals do not fully offset the

unamortized acquisition costs related to those policies or annuities, we would be required to recognize the

additional DAC amortization as an expense in the current period. For example, in 2020, we recorded a DAC

impairment of $63 million in our universal life insurance products due principally to lower future estimated gross

profits. Equity market volatility could result in losses in our variable annuity products and associated hedging
programs which could challenge our ability to recover DAC on these products and could lead to further write-
offs of DAC.

For additional information on DAC and PVFP, including the financial impact of some of these risks, see

“Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Critical Accounting Estimates” and notes 6 and 7 in our consolidated financial statements under “Item 8—
Financial Statements and Supplementary Data.”

When we have projected profits in earlier years followed by projected losses in later years (as is currently
the case with our long-term care insurance business), we are required to increase our reserve liabilities
over time to offset the projected future losses, which could adversely affect our results of operations and
financial condition.

We calculate and maintain reserves for estimated future payments of claims to our policyholders and
contractholders in accordance with U.S. GAAP and industry accounting practices. When we conclude that our
reserves are insufficient by line of business to cover actual or expected policy and contract benefits and claim
payments as a result of changes in experience, assumptions or otherwise, we are required to increase our reserves
and incur charges in the period in which we make the determination. For certain long-duration products in our
U.S. Life Insurance segment, we are also required to accrue additional reserves over time when the overall
reserve is adequate by line of business, but profits are projected in earlier years followed by losses projected in
later years. When this pattern of profits followed by losses exists for these products, and we determine that an
additional reserve liability is required, we increase reserves in the years we expect to be profitable by the
amounts necessary to offset losses projected in later years.

In our long-term care insurance products, projected profits followed by projected losses are anticipated to
occur because U.S. GAAP requires that original assumptions be used in determining reserves for future policy
claims unless and until a premium deficiency exists. Our existing locked-in reserve assumptions do not include
assumptions for premium rate increases and associated benefit reductions, which if included in reserves, could
reduce or eliminate future projected losses. As a result of this pattern of projected profits followed by projected
losses, we are required to accrue additional future policy benefit reserves in the profitable years, currently
expected to be through 2031, by the amounts necessary to offset losses in later years. The accrual is recorded on
a quarterly basis using assumptions which are updated annually at the time we perform loss recognition testing
and is impacted by the reserve pattern and the present value of expected future losses. Likewise, the accrual is
subject to significant estimation and includes various assumptions that are sensitive to variability; small changes
in assumptions could result in volatility of the accrued amount in any given year. Moreover, the amount required
to accrue for additional future policy benefits in the profitable years may be significant and this could materially
adversely affect our results of operations and financial condition. For additional information, including the
financial impact of some of these risks, see “Part II—Item 7—Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Critical Accounting Estimates—Future policy benefits.”

Our valuation of fixed maturity, equity and trading securities uses methodologies, estimations and
assumptions that are subject to change and differing interpretations which could result in changes to
investment valuations that may materially adversely affect our results of operations and financial
condition.

We report fixed maturity, equity and trading securities at fair value on our consolidated balance sheets.
These securities represent the majority of our total cash, cash equivalents, restricted cash and invested assets. Our
portfolio of fixed maturity securities consists primarily of investment grade securities. Valuations use inputs and
assumptions that are less observable or require greater estimation, as well as valuation methods that are more
complex or require greater estimation, thereby resulting in values that are less certain and may vary significantly
from the value at which the investments may be ultimately sold. The methodologies, estimates and assumptions

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we use in valuing our investment securities evolve over time and are subject to different interpretation (including
based on developments in relevant accounting literature), all of which can lead to changes in the value of our
investment securities. Rapidly changing and unanticipated interest rate, external macroeconomic, credit and
equity market conditions could materially impact the valuation of investment securities as reported within our
consolidated financial statements, and the period-to-period changes in value could vary significantly. Decreases
in value may have a material adverse effect on our results of operations or financial condition.

Liquidity, Financial Strength and Credit Ratings, and Counterparty and Credit Risks

Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be
limited or unavailable. Under such conditions, we may seek additional capital but may be unable to obtain
it.

We need liquidity to pay our operating expenses, interest on our debt, maturing debt and other obligations

and to meet any statutory capital requirements of our subsidiaries. As of December 31, 2020, Genworth Holdings
had approximately $2.7 billion of outstanding debt that matures between 2021 and 2066, including $0.3 billion
that matured in February 2021 and $0.7 billion that matures in September 2021. In addition, we have a
promissory note of approximately $0.6 billion due in 2022 to AXA associated with a settlement agreement
reached in July 2020 reported as discontinued operations. The settlement agreement also requires that certain
cash flows to Genworth Holdings above certain defined thresholds, including dividends and capital raises, would
be paid to AXA until the promissory note is fully repaid. The settlement agreement places significant constraints
on our ability to repay debt with the proceeds of new debt financing, equity offerings, asset sales or dividends
from subsidiaries until the final settlement is repaid to AXA. This could significantly reduce our ability to raise
capital which would adversely impact our liquidity. To date in 2021 and over the next year, we expect to pay
AXA approximately $53 million consisting of interest on the promissory note, assuming we do not make any
pre-payments, and a one-time payment on an unrelated liability associated with underwriting losses on a product
sold by a distributor in our former lifestyle protection insurance business. See notes 20 and 23 in “Part II—Item
8—Financial Statements and Supplementary Data” for additional details.

Our existing cash resources are not sufficient to repay all outstanding debt as it becomes due. Furthermore,
absent accessing additional liquidity through third party sources, we would not have a projected ability to meet
our financial obligations with existing cash on hand and from expected cash inflows through normal business
course for one year following the issuance of our 2020 consolidated financial statements. Therefore, we will be
required to rely on a combination of other potential liquidity sources to repay or refinance debt and meet our
financial obligations as they become due, including existing and future cash resources, new borrowings, and/or
other potential sources of liquidity such as asset sales, including our mortgage insurance business in Australia
and/or a possible partial initial public offering of our U.S. mortgage insurance business, or issuing additional debt
or equity, including the issuance of convertible or equity-linked securities. The availability of additional funding,
including an equity transaction through our U.S. mortgage insurance business or the issuance of debt, convertible
or equity-linked securities, will depend on a variety of factors such as market conditions, regulatory
considerations, the general availability of credit, the level of activity and availability of reinsurance, our credit
ratings and credit capacity and the performance of and outlook for our U.S. mortgage insurance business. Market
conditions and a variety of other factors may make it difficult or impracticable to generate additional liquidity on
favorable terms or at all. In addition, even if we are successful with additional strategic asset sales or other
transactions, we could have potential adverse actions taken against us, including litigation. Any failure to repay
or refinance our debt or meet our financial obligations as they become due would have a material adverse effect
on our business, financial condition and results of operations.

We may not be able to raise capital and/or borrowings on favorable terms or at all, based on our credit
ratings and financial condition. There is no guarantee that any of these factors will improve in the future when we
would seek additional capital. Disruptions, volatility and uncertainty in the financial markets and downgrades in

our credit ratings may force us to delay raising capital, issue shorter term securities than would be optimal, bear

an unattractive cost of capital or be unable to raise capital at any price.

We do not currently have a revolving credit facility at the Genworth Holdings level to provide liquidity. To

the extent we need additional funding to satisfy our additional liquidity needs, there can be no assurance that we

will be able to enter into a new credit facility on terms (or at targeted amounts) acceptable to us or at all.

Similarly, market conditions and a variety of other factors may make it difficult or impracticable to generate

additional liquidity through asset sales or the issuance of additional equity, and any issuance of equity in such

circumstances could be highly dilutive to our stockholders.

For a further discussion of our liquidity, see “Part II—Item 7—Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Liquidity and Capital Resources.”

As holding companies, we and Genworth Holdings depend on the ability of our respective subsidiaries to

pay dividends and make other payments and distributions to each of us and to meet our obligations.

We and Genworth Holdings each act as a holding company for our respective subsidiaries and do not have

any significant operations of our own. Dividends from our respective subsidiaries, permitted payments to us

under tax sharing and expense reimbursement arrangements with our subsidiaries and proceeds from borrowings

are our principal sources of cash to meet our obligations. These obligations include operating expenses, interest

and principal payments on current and future borrowings, and a promissory note due to AXA reported as

discontinued operations. See note 23 in “Part II—Item 8—Financial Statements and Supplementary Data” for

additional details. If the cash we receive from our respective subsidiaries pursuant to dividends and tax sharing

and expense reimbursement arrangements is insufficient to fund any of these obligations, or if a subsidiary is

unable or unwilling for any reason to pay dividends to either of us, we or Genworth Holdings would be required

to raise cash through, among other things, the incurrence of debt (including convertible or exchangeable debt),

the sale of assets or the issuance of equity.

The payment of dividends and other distributions by our insurance subsidiaries is dependent on, among

other things, the performance of the subsidiaries, capital preservation as a result of the uncertainty regarding the

impact of COVID-19, corporate law restrictions, insurance laws and regulations and maintaining adequate capital

to meet the requirements mandated by PMIERs, including recent restrictions imposed by the GSEs on our U.S.

mortgage insurance business. See “—If we are unable to continue to meet the requirements mandated by

PMIERs because the GSEs amend them or the GSEs’ interpretation of the financial requirements requires us to

hold amounts of capital that are higher than we have planned or otherwise, we may not be eligible to write new

insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of

operations and financial condition” and “Regulation—Mortgage Insurance Regulation” for additional details. In

general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory

approval. In addition, insurance regulators may prohibit the payment of ordinary dividends or other payments by

the insurance subsidiaries (such as a payment under a tax sharing agreement or for employee or other services,

including expense reimbursements) if they determine that such payment could be adverse to policyholders or

contractholders. Moreover, regulators that have governance over our Australian mortgage insurance subsidiaries

may impose additional restrictions over such subsidiaries using the broad prudential authorities available to them.

Courts typically grant regulators significant deference when considering challenges of an insurance company to a

determination by insurance regulators to grant or withhold approvals with respect to dividends and other

distributions.

Our liquidity and capital positions are highly dependent on the performance of our mortgage insurance

subsidiaries and their ability to pay future dividends to us as anticipated. Given the performance of our U.S. life

insurance businesses, dividends will not be paid by these businesses for the foreseeable future. The evaluation of

future dividend sources, including determining which businesses will provide such dividends, and our overall

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we use in valuing our investment securities evolve over time and are subject to different interpretation (including

based on developments in relevant accounting literature), all of which can lead to changes in the value of our

investment securities. Rapidly changing and unanticipated interest rate, external macroeconomic, credit and

equity market conditions could materially impact the valuation of investment securities as reported within our

consolidated financial statements, and the period-to-period changes in value could vary significantly. Decreases

in value may have a material adverse effect on our results of operations or financial condition.

Liquidity, Financial Strength and Credit Ratings, and Counterparty and Credit Risks

Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be

limited or unavailable. Under such conditions, we may seek additional capital but may be unable to obtain

it.

We need liquidity to pay our operating expenses, interest on our debt, maturing debt and other obligations

and to meet any statutory capital requirements of our subsidiaries. As of December 31, 2020, Genworth Holdings

had approximately $2.7 billion of outstanding debt that matures between 2021 and 2066, including $0.3 billion

that matured in February 2021 and $0.7 billion that matures in September 2021. In addition, we have a

promissory note of approximately $0.6 billion due in 2022 to AXA associated with a settlement agreement

reached in July 2020 reported as discontinued operations. The settlement agreement also requires that certain

cash flows to Genworth Holdings above certain defined thresholds, including dividends and capital raises, would

be paid to AXA until the promissory note is fully repaid. The settlement agreement places significant constraints

on our ability to repay debt with the proceeds of new debt financing, equity offerings, asset sales or dividends

from subsidiaries until the final settlement is repaid to AXA. This could significantly reduce our ability to raise

capital which would adversely impact our liquidity. To date in 2021 and over the next year, we expect to pay

AXA approximately $53 million consisting of interest on the promissory note, assuming we do not make any

pre-payments, and a one-time payment on an unrelated liability associated with underwriting losses on a product

sold by a distributor in our former lifestyle protection insurance business. See notes 20 and 23 in “Part II—Item

8—Financial Statements and Supplementary Data” for additional details.

Our existing cash resources are not sufficient to repay all outstanding debt as it becomes due. Furthermore,

absent accessing additional liquidity through third party sources, we would not have a projected ability to meet

our financial obligations with existing cash on hand and from expected cash inflows through normal business

course for one year following the issuance of our 2020 consolidated financial statements. Therefore, we will be

required to rely on a combination of other potential liquidity sources to repay or refinance debt and meet our

financial obligations as they become due, including existing and future cash resources, new borrowings, and/or

other potential sources of liquidity such as asset sales, including our mortgage insurance business in Australia

and/or a possible partial initial public offering of our U.S. mortgage insurance business, or issuing additional debt

or equity, including the issuance of convertible or equity-linked securities. The availability of additional funding,

including an equity transaction through our U.S. mortgage insurance business or the issuance of debt, convertible

or equity-linked securities, will depend on a variety of factors such as market conditions, regulatory

considerations, the general availability of credit, the level of activity and availability of reinsurance, our credit

ratings and credit capacity and the performance of and outlook for our U.S. mortgage insurance business. Market

conditions and a variety of other factors may make it difficult or impracticable to generate additional liquidity on

favorable terms or at all. In addition, even if we are successful with additional strategic asset sales or other

transactions, we could have potential adverse actions taken against us, including litigation. Any failure to repay

or refinance our debt or meet our financial obligations as they become due would have a material adverse effect

on our business, financial condition and results of operations.

We may not be able to raise capital and/or borrowings on favorable terms or at all, based on our credit

ratings and financial condition. There is no guarantee that any of these factors will improve in the future when we

would seek additional capital. Disruptions, volatility and uncertainty in the financial markets and downgrades in

our credit ratings may force us to delay raising capital, issue shorter term securities than would be optimal, bear
an unattractive cost of capital or be unable to raise capital at any price.

We do not currently have a revolving credit facility at the Genworth Holdings level to provide liquidity. To
the extent we need additional funding to satisfy our additional liquidity needs, there can be no assurance that we
will be able to enter into a new credit facility on terms (or at targeted amounts) acceptable to us or at all.

Similarly, market conditions and a variety of other factors may make it difficult or impracticable to generate

additional liquidity through asset sales or the issuance of additional equity, and any issuance of equity in such
circumstances could be highly dilutive to our stockholders.

For a further discussion of our liquidity, see “Part II—Item 7—Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Liquidity and Capital Resources.”

As holding companies, we and Genworth Holdings depend on the ability of our respective subsidiaries to
pay dividends and make other payments and distributions to each of us and to meet our obligations.

We and Genworth Holdings each act as a holding company for our respective subsidiaries and do not have

any significant operations of our own. Dividends from our respective subsidiaries, permitted payments to us
under tax sharing and expense reimbursement arrangements with our subsidiaries and proceeds from borrowings
are our principal sources of cash to meet our obligations. These obligations include operating expenses, interest
and principal payments on current and future borrowings, and a promissory note due to AXA reported as
discontinued operations. See note 23 in “Part II—Item 8—Financial Statements and Supplementary Data” for
additional details. If the cash we receive from our respective subsidiaries pursuant to dividends and tax sharing
and expense reimbursement arrangements is insufficient to fund any of these obligations, or if a subsidiary is
unable or unwilling for any reason to pay dividends to either of us, we or Genworth Holdings would be required
to raise cash through, among other things, the incurrence of debt (including convertible or exchangeable debt),
the sale of assets or the issuance of equity.

The payment of dividends and other distributions by our insurance subsidiaries is dependent on, among
other things, the performance of the subsidiaries, capital preservation as a result of the uncertainty regarding the
impact of COVID-19, corporate law restrictions, insurance laws and regulations and maintaining adequate capital
to meet the requirements mandated by PMIERs, including recent restrictions imposed by the GSEs on our U.S.
mortgage insurance business. See “—If we are unable to continue to meet the requirements mandated by
PMIERs because the GSEs amend them or the GSEs’ interpretation of the financial requirements requires us to
hold amounts of capital that are higher than we have planned or otherwise, we may not be eligible to write new
insurance on loans acquired by the GSEs, which would have a material adverse effect on our business, results of
operations and financial condition” and “Regulation—Mortgage Insurance Regulation” for additional details. In
general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory
approval. In addition, insurance regulators may prohibit the payment of ordinary dividends or other payments by
the insurance subsidiaries (such as a payment under a tax sharing agreement or for employee or other services,
including expense reimbursements) if they determine that such payment could be adverse to policyholders or
contractholders. Moreover, regulators that have governance over our Australian mortgage insurance subsidiaries
may impose additional restrictions over such subsidiaries using the broad prudential authorities available to them.
Courts typically grant regulators significant deference when considering challenges of an insurance company to a
determination by insurance regulators to grant or withhold approvals with respect to dividends and other
distributions.

Our liquidity and capital positions are highly dependent on the performance of our mortgage insurance
subsidiaries and their ability to pay future dividends to us as anticipated. Given the performance of our U.S. life
insurance businesses, dividends will not be paid by these businesses for the foreseeable future. The evaluation of
future dividend sources, including determining which businesses will provide such dividends, and our overall

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liquidity plans are subject to current and future market conditions and the economic recovery from COVID-19,
among other factors, which are subject to change.

In addition, as a public company that is traded on the ASX, Genworth Australia and its subsidiaries are
subject to Australian securities laws and regulations, as well as the rules of the ASX. These applicable laws,
regulations and rules include but are not limited to, obligations and procedures in respect of the equal and fair
treatment of all shareholders of Genworth Australia. Although the board of directors of Genworth Australia is
currently composed of a majority of Genworth designated directors, under Australian law each director has an
obligation to exercise their powers and discharge their duties in good faith in the best interests of Genworth
Australia and for a proper purpose. Accordingly, actions taken by Genworth Australia and its board of directors
(including the payment of dividends to us) are subject to, and may be limited by, the laws, rules and regulations
of the entity.

Adverse rating agency actions have resulted in a loss of business and adversely affected our results of
operations, financial condition and business and future adverse rating actions could have a further and
more significant adverse impact on us.

Financial strength ratings, which various rating agencies publish as measures of an insurance company’s
ability to meet contractholder and policyholder obligations, are important to maintaining public confidence in our
products, the ability to market our products and our competitive position. Credit ratings, which rating agencies
publish as measures of an entity’s ability to repay its indebtedness, are important to our ability to raise capital
through the issuance of debt and other forms of credit and to the cost of such financing.

Over the last several years, the ratings of our holding companies and all of our insurance subsidiaries, have

been downgraded, placed on negative outlook and/or put on review for potential downgrade on various
occasions. A ratings downgrade, negative outlook or review could occur (and has occurred) for a variety of
reasons, including reasons specifically related to our company, generally related to our industry or the broader
financial services industry or as a result of changes by the rating agencies in their methodologies or rating
criteria. We may be at risk of additional ratings downgrades in the future. A negative outlook on our ratings or a
downgrade in any of our financial strength or credit ratings, the announcement of a potential downgrade,
negative outlook or review, or customer, investor, regulator or other concerns about the possibility of a
downgrade, negative outlook or review, could have a material adverse effect on our results of operations,
financial condition and business.

See “Item 1—Business—Ratings” for information regarding the current financial strength ratings of our

principal insurance subsidiaries.

The direct or indirect effects of such adverse ratings actions or any future actions could include, but are not

limited to:

•

•

•

•

ceasing and/or reducing new sales of our products or limiting the business opportunities we are
presented with;

adversely affecting our relationships with distributors, including the loss of exclusivity under certain
agreements with our independent sales intermediaries and distribution partners;

causing us to lose key distributors that have ratings requirements that we may no longer satisfy (or
resulting in our renegotiation of new, less favorable arrangements with those distributors);

requiring us to modify some of our existing products or services to remain competitive, or introduce
new products or services;

• materially increasing the number or amount of policy surrenders, withdrawals and loans by

contractholders and policyholders;

•

•

•

•

•

•

•

requiring us to post additional collateral for our derivatives or hedging agreements tied to the credit

ratings of our holding companies;

requiring us to provide support, or to arrange for third-party support, in the form of collateral, capital

contributions or letters of credit under the terms of certain of our reinsurance, securitization and other

agreements, or otherwise securing our commercial counterparties for the perceived risk of our financial

strength;

adversely affecting our ability to maintain reinsurance or obtain new reinsurance or obtain it on

reasonable pricing and other terms;

increasing the capital charge associated with affiliated investments within certain of our U.S. life

insurance businesses thereby lowering capital and RBC of these subsidiaries and negatively impacting

our financial flexibility;

regulators requiring certain of our subsidiaries to maintain additional capital, limiting thereby our

financial flexibility and requiring us to raise additional capital;

adversely affecting our ability to raise capital;

increasing our cost of borrowing and making it more difficult to borrow in the public debt markets or

enter into a credit agreement; and

• making it more difficult to execute strategic plans to effectively address our current business

challenges.

Under PMIERs, the GSEs require maintenance of at least one rating with a rating agency acceptable to the

respective GSEs. The current PMIERs do not include a specific ratings requirement with respect to eligibility,

but if this were to change in the future, we may become subject to a ratings requirement in order to retain our

eligibility status under PMIERs. Ratings downgrades that result in our inability to insure new mortgage loans

sold to the GSEs, or the transfer by the GSEs of our existing policies to an alternative mortgage insurer, would

have a material adverse effect on our business, results of operations and financial condition. See “—If we are

unable to continue to meet the requirements mandated by PMIERs because the GSEs amend them or the GSEs’

interpretation of the financial requirements requires us to hold amounts of capital that are higher than we have

planned or otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which

would have a material adverse effect on our business, results of operations and financial condition” for additional

information regarding the requirements under PMIERs. Our relationships with our mortgage insurance customers

may be adversely affected by the ratings assigned to our holding company or other operating subsidiaries which

could have a material adverse effect on our business, financial condition and results of operations. Furthermore,

our U.S. mortgage insurance business has financial strength ratings below its competitors. Any assigned financial

strength rating that remains below other private mortgage insurers could hinder our competitiveness in the

marketplace and could result in an adverse impact to our business. Moreover, any future downgrade in the

financial strength ratings of our U.S. mortgage insurance business or the announcement of a potential downgrade

could have a material adverse impact on our business, results of operations and financial condition.

Defaults by counterparties to our reinsurance arrangements or to derivative instruments we use to hedge

our business risks, or defaults by us on agreements we have with these counterparties, may expose us to

risks we sought to mitigate, which could have a material adverse effect on our results of operations and

financial condition.

We routinely execute reinsurance and derivative transactions with reinsurers, brokers/dealers, commercial

banks, investment banks and other institutional counterparties to mitigate our risks in various circumstances and

to hedge various business risks. Many of these transactions expose us to credit risk in the event of default of our

counterparty or client or change in collateral value. Reinsurance does not relieve us of our direct liability to our

policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit risk with respect to our

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liquidity plans are subject to current and future market conditions and the economic recovery from COVID-19,

among other factors, which are subject to change.

In addition, as a public company that is traded on the ASX, Genworth Australia and its subsidiaries are

subject to Australian securities laws and regulations, as well as the rules of the ASX. These applicable laws,

regulations and rules include but are not limited to, obligations and procedures in respect of the equal and fair

treatment of all shareholders of Genworth Australia. Although the board of directors of Genworth Australia is

currently composed of a majority of Genworth designated directors, under Australian law each director has an

obligation to exercise their powers and discharge their duties in good faith in the best interests of Genworth

Australia and for a proper purpose. Accordingly, actions taken by Genworth Australia and its board of directors

(including the payment of dividends to us) are subject to, and may be limited by, the laws, rules and regulations

of the entity.

Adverse rating agency actions have resulted in a loss of business and adversely affected our results of

operations, financial condition and business and future adverse rating actions could have a further and

more significant adverse impact on us.

Financial strength ratings, which various rating agencies publish as measures of an insurance company’s

ability to meet contractholder and policyholder obligations, are important to maintaining public confidence in our

products, the ability to market our products and our competitive position. Credit ratings, which rating agencies

publish as measures of an entity’s ability to repay its indebtedness, are important to our ability to raise capital

through the issuance of debt and other forms of credit and to the cost of such financing.

Over the last several years, the ratings of our holding companies and all of our insurance subsidiaries, have

been downgraded, placed on negative outlook and/or put on review for potential downgrade on various

occasions. A ratings downgrade, negative outlook or review could occur (and has occurred) for a variety of

reasons, including reasons specifically related to our company, generally related to our industry or the broader

financial services industry or as a result of changes by the rating agencies in their methodologies or rating

criteria. We may be at risk of additional ratings downgrades in the future. A negative outlook on our ratings or a

downgrade in any of our financial strength or credit ratings, the announcement of a potential downgrade,

negative outlook or review, or customer, investor, regulator or other concerns about the possibility of a

downgrade, negative outlook or review, could have a material adverse effect on our results of operations,

financial condition and business.

principal insurance subsidiaries.

limited to:

presented with;

See “Item 1—Business—Ratings” for information regarding the current financial strength ratings of our

The direct or indirect effects of such adverse ratings actions or any future actions could include, but are not

•

•

•

•

ceasing and/or reducing new sales of our products or limiting the business opportunities we are

adversely affecting our relationships with distributors, including the loss of exclusivity under certain

agreements with our independent sales intermediaries and distribution partners;

causing us to lose key distributors that have ratings requirements that we may no longer satisfy (or

resulting in our renegotiation of new, less favorable arrangements with those distributors);

requiring us to modify some of our existing products or services to remain competitive, or introduce

new products or services;

• materially increasing the number or amount of policy surrenders, withdrawals and loans by

contractholders and policyholders;

•

•

•

•

•

•

•

requiring us to post additional collateral for our derivatives or hedging agreements tied to the credit
ratings of our holding companies;

requiring us to provide support, or to arrange for third-party support, in the form of collateral, capital
contributions or letters of credit under the terms of certain of our reinsurance, securitization and other
agreements, or otherwise securing our commercial counterparties for the perceived risk of our financial
strength;

adversely affecting our ability to maintain reinsurance or obtain new reinsurance or obtain it on
reasonable pricing and other terms;

increasing the capital charge associated with affiliated investments within certain of our U.S. life
insurance businesses thereby lowering capital and RBC of these subsidiaries and negatively impacting
our financial flexibility;

regulators requiring certain of our subsidiaries to maintain additional capital, limiting thereby our
financial flexibility and requiring us to raise additional capital;

adversely affecting our ability to raise capital;

increasing our cost of borrowing and making it more difficult to borrow in the public debt markets or
enter into a credit agreement; and

• making it more difficult to execute strategic plans to effectively address our current business

challenges.

Under PMIERs, the GSEs require maintenance of at least one rating with a rating agency acceptable to the

respective GSEs. The current PMIERs do not include a specific ratings requirement with respect to eligibility,
but if this were to change in the future, we may become subject to a ratings requirement in order to retain our
eligibility status under PMIERs. Ratings downgrades that result in our inability to insure new mortgage loans
sold to the GSEs, or the transfer by the GSEs of our existing policies to an alternative mortgage insurer, would
have a material adverse effect on our business, results of operations and financial condition. See “—If we are
unable to continue to meet the requirements mandated by PMIERs because the GSEs amend them or the GSEs’
interpretation of the financial requirements requires us to hold amounts of capital that are higher than we have
planned or otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which
would have a material adverse effect on our business, results of operations and financial condition” for additional
information regarding the requirements under PMIERs. Our relationships with our mortgage insurance customers
may be adversely affected by the ratings assigned to our holding company or other operating subsidiaries which
could have a material adverse effect on our business, financial condition and results of operations. Furthermore,
our U.S. mortgage insurance business has financial strength ratings below its competitors. Any assigned financial
strength rating that remains below other private mortgage insurers could hinder our competitiveness in the
marketplace and could result in an adverse impact to our business. Moreover, any future downgrade in the
financial strength ratings of our U.S. mortgage insurance business or the announcement of a potential downgrade
could have a material adverse impact on our business, results of operations and financial condition.

Defaults by counterparties to our reinsurance arrangements or to derivative instruments we use to hedge
our business risks, or defaults by us on agreements we have with these counterparties, may expose us to
risks we sought to mitigate, which could have a material adverse effect on our results of operations and
financial condition.

We routinely execute reinsurance and derivative transactions with reinsurers, brokers/dealers, commercial
banks, investment banks and other institutional counterparties to mitigate our risks in various circumstances and
to hedge various business risks. Many of these transactions expose us to credit risk in the event of default of our
counterparty or client or change in collateral value. Reinsurance does not relieve us of our direct liability to our
policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit risk with respect to our

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reinsurers. We cannot be sure that our reinsurers will pay the reinsurance recoverable owed to us now or in the
future or that they will pay these recoverables on a timely basis. A reinsurer’s insolvency, inability or
unwillingness to make payments under the terms of its reinsurance agreement with us could have a material
adverse effect on our financial condition and results of operations. Collateral is often posted by the counterparty
to offset this risk; however, we bear the risk that the collateral declines in value or otherwise is inadequate to
fully compensate us in the event of a default. We also enter into a variety of derivative instruments, including
options, swaps, forwards, and interest rate and currency swaps with a number of counterparties. If our
counterparties fail or refuse to honor their obligations under the derivative instruments, and collateral posted, if
any, is inadequate, our hedges of the related risk will be ineffective. In addition, if we trigger downgrade
provisions on risk-hedging or reinsurance arrangements, the counterparties to these arrangements may be able to
terminate our arrangements with them or require us to take other measures, such as post additional collateral,
contribute capital or provide letters of credit. We have agreed to new terms with almost all of our counterparties
concerning our collateral arrangements given our ratings decline. In most cases, we have agreed to post excess
collateral to maintain our existing derivative agreements. Beginning in 2018, we renegotiated with many of our
counterparties to remove the credit downgrade provisions from the master swap agreements entirely or replace
them with a provision that allows the counterparty to terminate the derivative transaction if the RBC ratio of the
applicable insurance company goes below a certain threshold. In 2019, we successfully completed these
negotiations and as a result, none of our insurance company master swap agreements have credit downgrade
provisions. Although we believe this has allowed us to maintain effective hedging relationships with our
counterparties, it has added additional strain on liquidity and collateral sufficiency. Furthermore, there is no
assurance that we can maintain these current arrangements in the foreseeable future or at all. If counterparties
exercise their rights to terminate transactions, we may be required to make cash payments to the counterparty
based on the current contract value, which would hinder our ability to manage future risks.

We ceded to UFLIC our in-force structured settlements block of business issued prior to 2004, certain

variable annuity business issued prior to 2004 and the long-term care insurance business assumed from legal
entities now a part of Brighthouse Life Insurance Company. UFLIC has established trust accounts for our benefit
to secure its obligations under the reinsurance arrangements. GE is obligated to maintain UFLIC’s RBC above a
specified minimum level pursuant to a Capital Maintenance Agreement. If UFLIC becomes insolvent
notwithstanding this agreement, and the amounts in the trust accounts are insufficient to pay UFLIC’s obligations
to us, it could have a material adverse effect on our financial condition and results of operations. The loss of
material risk-hedging or reinsurance arrangements could have a material adverse effect on our financial condition
and results of operations. For additional information on UFLIC reinsurance, see note 8 in our consolidated
financial statements under “Item 8—Financial Statements and Supplementary Data.”

Defaults or other events impacting the value of our fixed maturity securities portfolio may reduce our
income.

We are subject to the risk that the issuers or guarantors of investment securities we own may default on
principal or interest payments they owe us. As of December 31, 2020, fixed maturity securities of $65.8 billion in
our investment portfolio represented 82% of our total cash, cash equivalents, restricted cash and invested assets.
Events reducing the value of our investment portfolio other than on a temporary basis could have a material
adverse effect on our business, results of operations and financial condition. Levels of write-downs or expected
credit losses are impacted by our assessment of the financial condition of the issuer, whether or not the issuer is
expected to pay its principal and interest obligations, our expected recoveries in the event of a default or
circumstances that would require us to sell securities which have declined in value.

Risks Relating to Economic, Market and Political Conditions

Interest rates and changes in rates could materially adversely affect our business and profitability.

profitability. For example, as part of our annual review of assumptions for our universal and term universal life

insurance products, we increased the liability for policyholder account balances in 2019 and 2018 as a result of

lower expected growth in interest rates and a prolonged low interest rate environment. For additional

information, including the historical financial impact of these updates, see “Part II—Item 7—Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—

Policyholder account balances.” Persistent low interest rates have also adversely impacted the margins of our

fixed immediate annuity products. In 2019 and 2018, we performed loss recognition testing and determined that

we had premium deficiencies in our fixed immediate annuity products primarily driven by the low interest rate

environment. For additional information, including the historical financial impact of the premium deficiencies,

see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Critical Accounting Estimates—Future policy benefits.” Sustained low interest rates also impacted

our long-term care insurance margin, which is sensitive to assumption changes, including future investment

returns. If interest rates remain at historic lows, our future profitability and business would be adversely

impacted.

Our insurance and investment products are sensitive to interest rate fluctuations and expose us to the risk

that declines in interest rates or tightening credit spreads will reduce our interest rate margin (the difference

between the returns we earn on the investments that support our obligations under these products and the

amounts that we pay to policyholders and contractholders). We may reduce the interest rates we credit on most of

these products only at limited, pre-established intervals, and some contracts have guaranteed minimum interest

crediting rates. As a result of recent historic low interest rates, declines in our interest rate margin on these

products have adversely impacted our business and profitability.

During periods of increasing market interest rates, we may increase crediting rates on interest-sensitive

in-force products, such as universal life insurance and fixed annuities. Rapidly rising interest rates may lead to

increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for

policy loans, as policyholders and contractholders shift assets into higher yielding investments. Increases in

crediting rates, as well as surrenders and withdrawals, could have a material adverse effect on our financial

condition and results of operations, including the requirement to liquidate fixed-income investments in an

unrealized loss position to satisfy surrenders or withdrawals.

In our U.S. mortgage insurance business, declining interest rates historically have increased the rate at

which borrowers refinance their existing mortgages, resulting in cancellations of the mortgage insurance

covering the refinanced loans. Declining interest rates have also contributed to home price appreciation, which

may provide borrowers in the United States with the option of cancelling their mortgage insurance coverage

earlier than we anticipated when pricing that coverage. In addition, during 2020 as a result of the low interest rate

environment, our U.S. mortgage insurance business experienced a decline in persistency rates. Lower persistency

rates result in reduced insurance in-force and earned premiums, which could have a significant adverse impact on

our results of operations. See “—A decrease in the volume of high loan-to-value home mortgage originations or

an increase in the volume of mortgage insurance cancellations could result in a decline in our revenue in our

mortgage insurance businesses.”

In both the United States and international mortgage markets, rising interest rates generally reduce the

volume of new mortgage originations. A decline in the volume of new mortgage originations would have an

adverse effect on our new insurance written. Rising interest rates also can increase the monthly mortgage

payments for homeowners with insured loans that have adjustable rate mortgages (“ARMs”) that could have the

effect of increasing default rates on ARM loans, thereby increasing our exposure on our mortgage insurance

policies. This is particularly relevant in our Australia mortgage insurance business where ARMs and shorter-term

fixed rate loans are the predominant mortgage products. Higher interest rates can lead to an increase in defaults

as borrowers at risk of default will find it harder to qualify for a replacement loan.

Our products and investment portfolio are impacted by interest rate fluctuations and/or a sustained period of

low interest rates. In recent years, historic low interest rates have adversely impacted our business and

Interest rate fluctuations could have an adverse effect on our investment portfolio, by increasing

reinvestment risk and reducing our ability to achieve adequate investment returns. During periods of declining

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reinsurers. We cannot be sure that our reinsurers will pay the reinsurance recoverable owed to us now or in the

future or that they will pay these recoverables on a timely basis. A reinsurer’s insolvency, inability or

unwillingness to make payments under the terms of its reinsurance agreement with us could have a material

adverse effect on our financial condition and results of operations. Collateral is often posted by the counterparty

to offset this risk; however, we bear the risk that the collateral declines in value or otherwise is inadequate to

fully compensate us in the event of a default. We also enter into a variety of derivative instruments, including

options, swaps, forwards, and interest rate and currency swaps with a number of counterparties. If our

counterparties fail or refuse to honor their obligations under the derivative instruments, and collateral posted, if

any, is inadequate, our hedges of the related risk will be ineffective. In addition, if we trigger downgrade

provisions on risk-hedging or reinsurance arrangements, the counterparties to these arrangements may be able to

terminate our arrangements with them or require us to take other measures, such as post additional collateral,

contribute capital or provide letters of credit. We have agreed to new terms with almost all of our counterparties

concerning our collateral arrangements given our ratings decline. In most cases, we have agreed to post excess

collateral to maintain our existing derivative agreements. Beginning in 2018, we renegotiated with many of our

counterparties to remove the credit downgrade provisions from the master swap agreements entirely or replace

them with a provision that allows the counterparty to terminate the derivative transaction if the RBC ratio of the

applicable insurance company goes below a certain threshold. In 2019, we successfully completed these

negotiations and as a result, none of our insurance company master swap agreements have credit downgrade

provisions. Although we believe this has allowed us to maintain effective hedging relationships with our

counterparties, it has added additional strain on liquidity and collateral sufficiency. Furthermore, there is no

assurance that we can maintain these current arrangements in the foreseeable future or at all. If counterparties

exercise their rights to terminate transactions, we may be required to make cash payments to the counterparty

based on the current contract value, which would hinder our ability to manage future risks.

We ceded to UFLIC our in-force structured settlements block of business issued prior to 2004, certain

variable annuity business issued prior to 2004 and the long-term care insurance business assumed from legal

entities now a part of Brighthouse Life Insurance Company. UFLIC has established trust accounts for our benefit

to secure its obligations under the reinsurance arrangements. GE is obligated to maintain UFLIC’s RBC above a

specified minimum level pursuant to a Capital Maintenance Agreement. If UFLIC becomes insolvent

notwithstanding this agreement, and the amounts in the trust accounts are insufficient to pay UFLIC’s obligations

to us, it could have a material adverse effect on our financial condition and results of operations. The loss of

material risk-hedging or reinsurance arrangements could have a material adverse effect on our financial condition

and results of operations. For additional information on UFLIC reinsurance, see note 8 in our consolidated

financial statements under “Item 8—Financial Statements and Supplementary Data.”

Defaults or other events impacting the value of our fixed maturity securities portfolio may reduce our

income.

We are subject to the risk that the issuers or guarantors of investment securities we own may default on

principal or interest payments they owe us. As of December 31, 2020, fixed maturity securities of $65.8 billion in

our investment portfolio represented 82% of our total cash, cash equivalents, restricted cash and invested assets.

Events reducing the value of our investment portfolio other than on a temporary basis could have a material

adverse effect on our business, results of operations and financial condition. Levels of write-downs or expected

credit losses are impacted by our assessment of the financial condition of the issuer, whether or not the issuer is

expected to pay its principal and interest obligations, our expected recoveries in the event of a default or

circumstances that would require us to sell securities which have declined in value.

Risks Relating to Economic, Market and Political Conditions

Interest rates and changes in rates could materially adversely affect our business and profitability.

profitability. For example, as part of our annual review of assumptions for our universal and term universal life
insurance products, we increased the liability for policyholder account balances in 2019 and 2018 as a result of
lower expected growth in interest rates and a prolonged low interest rate environment. For additional
information, including the historical financial impact of these updates, see “Part II—Item 7—Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—
Policyholder account balances.” Persistent low interest rates have also adversely impacted the margins of our
fixed immediate annuity products. In 2019 and 2018, we performed loss recognition testing and determined that
we had premium deficiencies in our fixed immediate annuity products primarily driven by the low interest rate
environment. For additional information, including the historical financial impact of the premium deficiencies,
see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Estimates—Future policy benefits.” Sustained low interest rates also impacted
our long-term care insurance margin, which is sensitive to assumption changes, including future investment
returns. If interest rates remain at historic lows, our future profitability and business would be adversely
impacted.

Our insurance and investment products are sensitive to interest rate fluctuations and expose us to the risk

that declines in interest rates or tightening credit spreads will reduce our interest rate margin (the difference
between the returns we earn on the investments that support our obligations under these products and the
amounts that we pay to policyholders and contractholders). We may reduce the interest rates we credit on most of
these products only at limited, pre-established intervals, and some contracts have guaranteed minimum interest
crediting rates. As a result of recent historic low interest rates, declines in our interest rate margin on these
products have adversely impacted our business and profitability.

During periods of increasing market interest rates, we may increase crediting rates on interest-sensitive

in-force products, such as universal life insurance and fixed annuities. Rapidly rising interest rates may lead to
increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for
policy loans, as policyholders and contractholders shift assets into higher yielding investments. Increases in
crediting rates, as well as surrenders and withdrawals, could have a material adverse effect on our financial
condition and results of operations, including the requirement to liquidate fixed-income investments in an
unrealized loss position to satisfy surrenders or withdrawals.

In our U.S. mortgage insurance business, declining interest rates historically have increased the rate at

which borrowers refinance their existing mortgages, resulting in cancellations of the mortgage insurance
covering the refinanced loans. Declining interest rates have also contributed to home price appreciation, which
may provide borrowers in the United States with the option of cancelling their mortgage insurance coverage
earlier than we anticipated when pricing that coverage. In addition, during 2020 as a result of the low interest rate
environment, our U.S. mortgage insurance business experienced a decline in persistency rates. Lower persistency
rates result in reduced insurance in-force and earned premiums, which could have a significant adverse impact on
our results of operations. See “—A decrease in the volume of high loan-to-value home mortgage originations or
an increase in the volume of mortgage insurance cancellations could result in a decline in our revenue in our
mortgage insurance businesses.”

In both the United States and international mortgage markets, rising interest rates generally reduce the
volume of new mortgage originations. A decline in the volume of new mortgage originations would have an
adverse effect on our new insurance written. Rising interest rates also can increase the monthly mortgage
payments for homeowners with insured loans that have adjustable rate mortgages (“ARMs”) that could have the
effect of increasing default rates on ARM loans, thereby increasing our exposure on our mortgage insurance
policies. This is particularly relevant in our Australia mortgage insurance business where ARMs and shorter-term
fixed rate loans are the predominant mortgage products. Higher interest rates can lead to an increase in defaults
as borrowers at risk of default will find it harder to qualify for a replacement loan.

Our products and investment portfolio are impacted by interest rate fluctuations and/or a sustained period of

low interest rates. In recent years, historic low interest rates have adversely impacted our business and

Interest rate fluctuations could have an adverse effect on our investment portfolio, by increasing

reinvestment risk and reducing our ability to achieve adequate investment returns. During periods of declining

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market interest rates, the interest we receive on variable interest rate investments decreases. In addition, during
those periods, we reinvest the cash we receive as interest or return of principal on our investments in lower-
yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of fixed-
income securities may decide to prepay their obligations in order to borrow at lower market rates, which
exacerbates our reinvestment risk. Low interest rates reduce the returns we earn on the investments that support
our obligations under long-term care insurance, life insurance and annuity products, which increases
reinvestment risk and reduces our ability to achieve our targeted investment returns. The pricing and expected
future profitability of these products are based in part on expected investment returns. Generally, life and long-
term care insurance products are expected to initially produce positive cash flows as customers pay periodic
premiums, which we invest as they are received. The premiums, along with accumulated investment earnings, are
needed to pay claims, which are generally expected to exceed premiums in later years. Low interest rates
increase reinvestment risk and reduce our ability to achieve our targeted investment margins and adversely
affects the profitability of our life insurance, long-term care insurance and fixed annuity products and may
increase hedging costs on our in-force block of variable annuity products. Given the average life of our assets is
shorter than the average life of the liabilities on these products, our reinvestment risk is also greater in low
interest rate environments as a significant portion of cash flows used to pay benefits to our policyholders and
contractholders comes from investment returns. During periods of increasing interest rates, market values of
lower-yielding assets will decline resulting in unrealized losses on our investment portfolio. In addition, our
interest rate hedges could decline which would require us to post additional collateral with our derivative
counterparties. Posting additional collateral could materially adversely affect our financial condition and results
of operations by reducing our liquidity and net investment income, to the extent that the additional collateral
posting requires us to invest in higher-quality, lower-yielding investments.

A low interest rate environment also negatively impacts the sufficiency of our margins on both our DAC

and PVFP. If interest rates remain at historic lows for a prolonged period, it could result in an impairment of
these assets, and may reduce funds available to pay claims, including life and long-term care insurance claims,
requiring an increase in our reserve liabilities, which could be significant. In addition, certain statutory capital
requirements for our U.S. life insurance companies are based on models that consider interest rates. Prolonged
periods of low interest rates may increase the statutory reserves we are required to hold as well as the amount of
assets and capital we must maintain to support amounts of statutory reserves in these companies. Interest rate
fluctuations could also impact our capital or solvency ratios in our Australia mortgage insurance business where
the required or available capital could be adversely impacted by increases in interest rates.

In 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from
the London Interbank Offered Rate (“LIBOR”), with its full elimination to occur after 2021. The announcement
indicates that LIBOR may not continue to be available on the current basis (or at all) after 2021. We have
LIBOR-based derivative instruments and investments, as well as debt (Junior Subordinated Notes and Federal
Home Loan Bank loans), reinsurance agreements and institutional products within the Runoff segment.
Regulatory and industry initiatives to eliminate LIBOR as an interest rate benchmark may create uncertainty in
the valuation of our LIBOR-based derivative instruments and investments. At this time, we cannot predict the
ultimate impact the elimination of LIBOR will have on financial markets, nor our investment and derivative
valuations, hedge accounting, reinsurance agreements and liquidity; however, it is possible we may be unable to
negotiate or amend our existing contracts with terms that are favorable to us which could adversely impact our
results of operations and financial condition. See “Part II—Item 7—Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Investments and Derivative Instruments” for additional
information about the transition from LIBOR.

See “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” for additional

information about interest rate risk.

A deterioration in economic conditions or a decline in home prices may adversely affect our loss

experience in our mortgage insurance businesses.

Losses in our mortgage insurance businesses generally result from events, such as a borrower’s reduction of

income, unemployment, underemployment, divorce, illness, inability to manage credit, or a change in interest

rate levels or home values, that reduce a borrower’s willingness or ability to continue to make mortgage

payments. Rising unemployment rates and deteriorations in economic conditions, including as a result of

COVID-19, increase the likelihood of borrower defaults and can also adversely affect housing values, which

increases our risk of loss. A decline in home values typically makes it more difficult for borrowers to sell or

refinance their homes, increasing the likelihood of a default followed by a claim if borrowers experience a job

loss or other life events that reduce their incomes or increase their expenses. In addition, declines in home values

may also decrease the willingness of borrowers with sufficient resources to make mortgage payments when their

mortgage balances exceed the values of their homes. Declines in home values typically increase the severity of

any claims we may pay. A decline in home prices, whether or not in conjunction with deteriorating economic

conditions, may increase our risk of loss. Furthermore, our estimates of claims-paying resources and claim

obligations are based on various assumptions, which include the timing of the receipt of claims on loans in our

delinquency inventory and future claims that we anticipate will ultimately be received, our anticipated loss

mitigation activities, premiums, housing prices and unemployment rates. These assumptions are subject to

inherent uncertainty and require judgment by management. Any of these events may have a material adverse

effect on our business, results of operations and financial condition.

The amount of the loss we could suffer depends, in part, on whether the home of a borrower who defaults on

a mortgage can be sold for an amount that will cover the unpaid principal balance, interest and the expenses of

the sale. In previous economic slowdowns in the United States we experienced a pronounced weakness in the

housing market, as well as declines in home prices. These economic slowdowns and the resulting impact on the

housing market drove high levels of delinquencies. Any delays in foreclosure processes, including foreclosure

moratoriums imposed by state and local governments due to COVID-19, could cause our losses to increase as

expenses accrue for longer periods or if the value of foreclosed homes further decline during such delays. If we

experience an increase in the number or the cost of delinquencies that are higher than expected, our business,

results of operations and financial condition could be adversely affected.

In the past, low commodity prices, particularly oil, have resulted in a rise in unemployment in countries and

certain regions within those countries where we conduct business. The adverse economic conditions in these

countries and certain regions within those countries could deteriorate like we have experienced in the past which

could impact the broader economies in those countries as well as the global economy, resulting in higher

delinquencies as well as declines in home prices, which could have an unfavorable impact on the results of our

operations for those businesses affected.

Regulatory and Legal Risks

Our insurance businesses are extensively regulated and changes in regulation may reduce our profitability

and limit our growth.

Our insurance operations are subject to a wide variety of laws and regulations and are extensively regulated.

State insurance laws regulate most aspects of our U.S. insurance businesses, and our insurance subsidiaries are

regulated by the insurance departments of the states in which they are domiciled and licensed. Our international

operations are principally regulated by insurance regulatory authorities in the jurisdictions in which they are

domiciled. Failure to comply with applicable regulations or to obtain or maintain appropriate authorizations or

exemptions under any applicable laws could result in restrictions on our ability to do business or engage in

activities regulated in one or more jurisdictions in which we operate and could subject us to fines and other

sanctions which could have a material adverse effect on our business. In addition, the nature and extent of

regulation of our activities in applicable jurisdictions could materially change causing a material adverse effect

on our business.

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market interest rates, the interest we receive on variable interest rate investments decreases. In addition, during

those periods, we reinvest the cash we receive as interest or return of principal on our investments in lower-

yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of fixed-

income securities may decide to prepay their obligations in order to borrow at lower market rates, which

exacerbates our reinvestment risk. Low interest rates reduce the returns we earn on the investments that support

our obligations under long-term care insurance, life insurance and annuity products, which increases

reinvestment risk and reduces our ability to achieve our targeted investment returns. The pricing and expected

future profitability of these products are based in part on expected investment returns. Generally, life and long-

term care insurance products are expected to initially produce positive cash flows as customers pay periodic

premiums, which we invest as they are received. The premiums, along with accumulated investment earnings, are

needed to pay claims, which are generally expected to exceed premiums in later years. Low interest rates

increase reinvestment risk and reduce our ability to achieve our targeted investment margins and adversely

affects the profitability of our life insurance, long-term care insurance and fixed annuity products and may

increase hedging costs on our in-force block of variable annuity products. Given the average life of our assets is

shorter than the average life of the liabilities on these products, our reinvestment risk is also greater in low

interest rate environments as a significant portion of cash flows used to pay benefits to our policyholders and

contractholders comes from investment returns. During periods of increasing interest rates, market values of

lower-yielding assets will decline resulting in unrealized losses on our investment portfolio. In addition, our

interest rate hedges could decline which would require us to post additional collateral with our derivative

counterparties. Posting additional collateral could materially adversely affect our financial condition and results

of operations by reducing our liquidity and net investment income, to the extent that the additional collateral

posting requires us to invest in higher-quality, lower-yielding investments.

A low interest rate environment also negatively impacts the sufficiency of our margins on both our DAC

and PVFP. If interest rates remain at historic lows for a prolonged period, it could result in an impairment of

these assets, and may reduce funds available to pay claims, including life and long-term care insurance claims,

requiring an increase in our reserve liabilities, which could be significant. In addition, certain statutory capital

requirements for our U.S. life insurance companies are based on models that consider interest rates. Prolonged

periods of low interest rates may increase the statutory reserves we are required to hold as well as the amount of

assets and capital we must maintain to support amounts of statutory reserves in these companies. Interest rate

fluctuations could also impact our capital or solvency ratios in our Australia mortgage insurance business where

the required or available capital could be adversely impacted by increases in interest rates.

In 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from

the London Interbank Offered Rate (“LIBOR”), with its full elimination to occur after 2021. The announcement

indicates that LIBOR may not continue to be available on the current basis (or at all) after 2021. We have

LIBOR-based derivative instruments and investments, as well as debt (Junior Subordinated Notes and Federal

Home Loan Bank loans), reinsurance agreements and institutional products within the Runoff segment.

Regulatory and industry initiatives to eliminate LIBOR as an interest rate benchmark may create uncertainty in

the valuation of our LIBOR-based derivative instruments and investments. At this time, we cannot predict the

ultimate impact the elimination of LIBOR will have on financial markets, nor our investment and derivative

valuations, hedge accounting, reinsurance agreements and liquidity; however, it is possible we may be unable to

negotiate or amend our existing contracts with terms that are favorable to us which could adversely impact our

results of operations and financial condition. See “Part II—Item 7—Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Investments and Derivative Instruments” for additional

information about the transition from LIBOR.

See “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” for additional

information about interest rate risk.

A deterioration in economic conditions or a decline in home prices may adversely affect our loss
experience in our mortgage insurance businesses.

Losses in our mortgage insurance businesses generally result from events, such as a borrower’s reduction of

income, unemployment, underemployment, divorce, illness, inability to manage credit, or a change in interest
rate levels or home values, that reduce a borrower’s willingness or ability to continue to make mortgage
payments. Rising unemployment rates and deteriorations in economic conditions, including as a result of
COVID-19, increase the likelihood of borrower defaults and can also adversely affect housing values, which
increases our risk of loss. A decline in home values typically makes it more difficult for borrowers to sell or
refinance their homes, increasing the likelihood of a default followed by a claim if borrowers experience a job
loss or other life events that reduce their incomes or increase their expenses. In addition, declines in home values
may also decrease the willingness of borrowers with sufficient resources to make mortgage payments when their
mortgage balances exceed the values of their homes. Declines in home values typically increase the severity of
any claims we may pay. A decline in home prices, whether or not in conjunction with deteriorating economic
conditions, may increase our risk of loss. Furthermore, our estimates of claims-paying resources and claim
obligations are based on various assumptions, which include the timing of the receipt of claims on loans in our
delinquency inventory and future claims that we anticipate will ultimately be received, our anticipated loss
mitigation activities, premiums, housing prices and unemployment rates. These assumptions are subject to
inherent uncertainty and require judgment by management. Any of these events may have a material adverse
effect on our business, results of operations and financial condition.

The amount of the loss we could suffer depends, in part, on whether the home of a borrower who defaults on

a mortgage can be sold for an amount that will cover the unpaid principal balance, interest and the expenses of
the sale. In previous economic slowdowns in the United States we experienced a pronounced weakness in the
housing market, as well as declines in home prices. These economic slowdowns and the resulting impact on the
housing market drove high levels of delinquencies. Any delays in foreclosure processes, including foreclosure
moratoriums imposed by state and local governments due to COVID-19, could cause our losses to increase as
expenses accrue for longer periods or if the value of foreclosed homes further decline during such delays. If we
experience an increase in the number or the cost of delinquencies that are higher than expected, our business,
results of operations and financial condition could be adversely affected.

In the past, low commodity prices, particularly oil, have resulted in a rise in unemployment in countries and

certain regions within those countries where we conduct business. The adverse economic conditions in these
countries and certain regions within those countries could deteriorate like we have experienced in the past which
could impact the broader economies in those countries as well as the global economy, resulting in higher
delinquencies as well as declines in home prices, which could have an unfavorable impact on the results of our
operations for those businesses affected.

Regulatory and Legal Risks

Our insurance businesses are extensively regulated and changes in regulation may reduce our profitability
and limit our growth.

Our insurance operations are subject to a wide variety of laws and regulations and are extensively regulated.

State insurance laws regulate most aspects of our U.S. insurance businesses, and our insurance subsidiaries are
regulated by the insurance departments of the states in which they are domiciled and licensed. Our international
operations are principally regulated by insurance regulatory authorities in the jurisdictions in which they are
domiciled. Failure to comply with applicable regulations or to obtain or maintain appropriate authorizations or
exemptions under any applicable laws could result in restrictions on our ability to do business or engage in
activities regulated in one or more jurisdictions in which we operate and could subject us to fines and other
sanctions which could have a material adverse effect on our business. In addition, the nature and extent of
regulation of our activities in applicable jurisdictions could materially change causing a material adverse effect
on our business.

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Insurance regulatory authorities in the United States and internationally have broad administrative powers,

Litigation and regulatory investigations or other actions are common in the insurance business and may

which at times, are coordinated and communicated across regulatory bodies. These administrative powers
include, but are not limited to:

•

•

licensing companies and agents to transact business;

calculating the value of assets and determining the eligibility of assets to determine compliance with
statutory requirements;

operate.

• mandating certain insurance benefits;

•

•

•

•

•

•

•

•

•

•

•

•

regulating certain premium rates;

reviewing and approving policy forms;

regulating discrimination in pricing and coverage terms and unfair trade and claims practices, including
through the imposition of restrictions on marketing and sales practices, distribution arrangements and
payment of inducements;

establishing and revising statutory capital and reserve requirements and solvency standards;

fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting
rates on life insurance policies and annuity contracts;

approving premium increases and associated benefit reductions;

evaluating enterprise risk to an insurer;

approving changes in control of insurance companies;

restricting the payment of dividends and other transactions between affiliates;

law violations.

regulating the types, amounts and valuation of investments;

restricting the types of insurance products that may be offered; and

imposing insurance eligibility criteria.

State insurance regulators and the NAIC regularly re-examine existing laws and regulations, specifically

focusing on modifications to SAP, interpretations of existing laws and the development of new laws and
regulations applicable to insurance companies and their products. Any proposed or future legislation or NAIC
initiatives, if adopted, may be more restrictive on our ability to conduct business than current regulatory
requirements or may result in higher costs or increased statutory capital and reserve requirements. Further,
because laws and regulations can be complex and sometimes inexact, there is also a risk that any particular
regulator’s or enforcement authority’s interpretation of a legal, accounting or reserving issue may change over
time to our detriment, or expose us to different or additional regulatory risks. The application of these regulations
and guidelines by insurers involves interpretations and judgments that may differ from those of state insurance
departments. We cannot provide assurance that such differences of opinion will not result in regulatory, tax or
other challenges to the actions we have taken to date. The result of those potential challenges could require us to
increase levels of statutory capital and reserves or incur higher operating costs and/or have implications on
certain tax positions.

Regulators in the United States and internationally have developed criteria under which they are subjecting
non-bank financial companies, including insurance companies, that are deemed systemically important to higher
regulatory capital requirements and stricter prudential standards. Although neither we nor any of our subsidiaries
have been designated systemically important, we cannot predict whether we or any of our subsidiaries will be
deemed systemically important in the future or how such a designation would impact our business, results of
operations, cash flows or financial condition.

result in financial losses and harm our reputation.

We face the risk of litigation and regulatory investigations or other actions in the ordinary course of

operating our businesses, including class action lawsuits. Our pending legal and regulatory actions include

proceedings specific to us and others generally applicable to business practices in the industries in which we

In our insurance operations, we are, have been, or may become subject to class actions and individual suits

alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term

care and life insurance premiums, payment of contingent or other sales commissions, claims payments and

procedures, cancellation or rescission of coverage, product design, product disclosure, product administration,

additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging

excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing

structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements

with lenders and contract underwriting services, violations of RESPA or related state anti-inducement laws and

breaching fiduciary or other duties to customers. In our investment-related operations, we are subject to litigation

involving commercial disputes with counterparties. In addition, we are also subject to various regulatory

inquiries, such as information requests, subpoenas, books and record examinations and market conduct and

financial examinations, from state, federal and international regulators and other authorities. Plaintiffs in class

action and other lawsuits against us, as well as regulators, may seek very large or indeterminate amounts, which

may remain unknown for substantial periods of time.

We are also subject to litigation arising out of our general business activities such as our contractual and

employment relationships and we are also subject to shareholder putative class action lawsuits alleging securities

A substantial legal liability or a significant regulatory action (including uncertainty about the outcome of

pending legal and regulatory investigations and actions) against us could have a material adverse effect on our

financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory

action or investigation, we could suffer significant reputational harm and incur significant legal expenses, which

could have a material adverse effect on our business, financial condition or results of operations. At this time, it

is not feasible to predict, nor determine, the ultimate outcomes of any pending investigations and legal

proceedings, nor to provide reasonable ranges of possible losses other than those that have been disclosed.

For a further discussion of certain current investigations and proceedings in which we are involved, see note

20 in “Part II—Item 8—Financial Statements and Supplementary Data.” We cannot assure you that these

investigations and proceedings will not have a material adverse effect on our liquidity, business, financial

condition or results of operations. It is also possible that we could become subject to further investigations and

have lawsuits filed or enforcement actions initiated against us. In addition, increased regulatory scrutiny and any

resulting investigations or legal proceedings could result in new legal precedents and industry-wide regulations

or practices that could materially adversely affect our business, financial condition and results of operations.

An adverse change in our regulatory requirements, including risk-based capital, could have a material

adverse impact on our results of operations, financial condition and business.

Our U.S. life insurance subsidiaries are subject to the NAIC’s RBC standards and other minimum statutory

capital and surplus requirements imposed under the laws of their respective states of domicile. The failure of our

insurance subsidiaries to meet applicable RBC requirements or minimum statutory capital and surplus

requirements could subject our insurance subsidiaries to further examination or corrective action imposed by

state insurance regulators, including limitations on their ability to write additional business, or the addition of

state regulatory supervision, rehabilitation, seizure or liquidation. As of December 31, 2020, the RBC of each of

68

69

Insurance regulatory authorities in the United States and internationally have broad administrative powers,

which at times, are coordinated and communicated across regulatory bodies. These administrative powers

Litigation and regulatory investigations or other actions are common in the insurance business and may
result in financial losses and harm our reputation.

•

•

•

•

•

•

•

•

•

•

•

•

•

•

include, but are not limited to:

licensing companies and agents to transact business;

calculating the value of assets and determining the eligibility of assets to determine compliance with

statutory requirements;

• mandating certain insurance benefits;

regulating certain premium rates;

reviewing and approving policy forms;

regulating discrimination in pricing and coverage terms and unfair trade and claims practices, including

through the imposition of restrictions on marketing and sales practices, distribution arrangements and

payment of inducements;

establishing and revising statutory capital and reserve requirements and solvency standards;

fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting

rates on life insurance policies and annuity contracts;

approving premium increases and associated benefit reductions;

evaluating enterprise risk to an insurer;

approving changes in control of insurance companies;

restricting the payment of dividends and other transactions between affiliates;

regulating the types, amounts and valuation of investments;

restricting the types of insurance products that may be offered; and

imposing insurance eligibility criteria.

State insurance regulators and the NAIC regularly re-examine existing laws and regulations, specifically

focusing on modifications to SAP, interpretations of existing laws and the development of new laws and

regulations applicable to insurance companies and their products. Any proposed or future legislation or NAIC

initiatives, if adopted, may be more restrictive on our ability to conduct business than current regulatory

requirements or may result in higher costs or increased statutory capital and reserve requirements. Further,

because laws and regulations can be complex and sometimes inexact, there is also a risk that any particular

regulator’s or enforcement authority’s interpretation of a legal, accounting or reserving issue may change over

time to our detriment, or expose us to different or additional regulatory risks. The application of these regulations

and guidelines by insurers involves interpretations and judgments that may differ from those of state insurance

departments. We cannot provide assurance that such differences of opinion will not result in regulatory, tax or

other challenges to the actions we have taken to date. The result of those potential challenges could require us to

increase levels of statutory capital and reserves or incur higher operating costs and/or have implications on

certain tax positions.

Regulators in the United States and internationally have developed criteria under which they are subjecting

non-bank financial companies, including insurance companies, that are deemed systemically important to higher

regulatory capital requirements and stricter prudential standards. Although neither we nor any of our subsidiaries

have been designated systemically important, we cannot predict whether we or any of our subsidiaries will be

deemed systemically important in the future or how such a designation would impact our business, results of

operations, cash flows or financial condition.

We face the risk of litigation and regulatory investigations or other actions in the ordinary course of

operating our businesses, including class action lawsuits. Our pending legal and regulatory actions include
proceedings specific to us and others generally applicable to business practices in the industries in which we
operate.

In our insurance operations, we are, have been, or may become subject to class actions and individual suits

alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term
care and life insurance premiums, payment of contingent or other sales commissions, claims payments and
procedures, cancellation or rescission of coverage, product design, product disclosure, product administration,
additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging
excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing
structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements
with lenders and contract underwriting services, violations of RESPA or related state anti-inducement laws and
breaching fiduciary or other duties to customers. In our investment-related operations, we are subject to litigation
involving commercial disputes with counterparties. In addition, we are also subject to various regulatory
inquiries, such as information requests, subpoenas, books and record examinations and market conduct and
financial examinations, from state, federal and international regulators and other authorities. Plaintiffs in class
action and other lawsuits against us, as well as regulators, may seek very large or indeterminate amounts, which
may remain unknown for substantial periods of time.

We are also subject to litigation arising out of our general business activities such as our contractual and
employment relationships and we are also subject to shareholder putative class action lawsuits alleging securities
law violations.

A substantial legal liability or a significant regulatory action (including uncertainty about the outcome of
pending legal and regulatory investigations and actions) against us could have a material adverse effect on our
financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory
action or investigation, we could suffer significant reputational harm and incur significant legal expenses, which
could have a material adverse effect on our business, financial condition or results of operations. At this time, it
is not feasible to predict, nor determine, the ultimate outcomes of any pending investigations and legal
proceedings, nor to provide reasonable ranges of possible losses other than those that have been disclosed.

For a further discussion of certain current investigations and proceedings in which we are involved, see note

20 in “Part II—Item 8—Financial Statements and Supplementary Data.” We cannot assure you that these
investigations and proceedings will not have a material adverse effect on our liquidity, business, financial
condition or results of operations. It is also possible that we could become subject to further investigations and
have lawsuits filed or enforcement actions initiated against us. In addition, increased regulatory scrutiny and any
resulting investigations or legal proceedings could result in new legal precedents and industry-wide regulations
or practices that could materially adversely affect our business, financial condition and results of operations.

An adverse change in our regulatory requirements, including risk-based capital, could have a material
adverse impact on our results of operations, financial condition and business.

Our U.S. life insurance subsidiaries are subject to the NAIC’s RBC standards and other minimum statutory
capital and surplus requirements imposed under the laws of their respective states of domicile. The failure of our
insurance subsidiaries to meet applicable RBC requirements or minimum statutory capital and surplus
requirements could subject our insurance subsidiaries to further examination or corrective action imposed by
state insurance regulators, including limitations on their ability to write additional business, or the addition of
state regulatory supervision, rehabilitation, seizure or liquidation. As of December 31, 2020, the RBC of each of

68

69

our U.S. life insurance subsidiaries exceeded the level of RBC that would require any of them to take or become
subject to any corrective action in their respective domiciliary state. However, the RBC ratio of our U.S. life
insurance subsidiaries has declined over the past few years as a result of statutory losses driven by the declining
performance of the business and increases in our statutory reserves, including results of Actuarial Guideline 38,
cash flow testing and assumption reviews particularly in our long-term care and life insurance products. Any
future statutory losses would decrease the RBC ratio of our U.S. life insurance subsidiaries. We continue to face
challenges in our principal life insurance subsidiaries, particularly those subsidiaries that rely heavily on in-force
rate actions as a source of earnings and capital. We may see variability in statutory results and a further decline in
the RBC ratios of these subsidiaries given the time lag between the approval of in-force rate actions versus when
the benefits from the in-force rate actions (including premium rate increases and associated benefit reductions)
are fully realized in our financial results. Further declines in the RBC ratio of our life insurance subsidiaries
could result in heightened supervision and regulatory action.

Our U.S. mortgage insurers are not subject to the NAIC’s RBC requirements but are required by certain

states and other regulators to maintain a certain risk-to-capital ratio. In addition, PMIERs includes financial
requirements for mortgage insurers under which a mortgage insurer’s “Available Assets” (generally only the
most liquid assets of an insurer) must meet or exceed “Minimum Required Assets” (which are based on an
insurer’s risk-in-force and are calculated from tables of factors with several risk dimensions and are subject to a
floor amount). The failure of our U.S. mortgage insurance subsidiaries to meet their regulatory requirements, and
additionally the PMIERs financial requirements, could limit our ability to write new business. For further
discussion of the importance of financial requirements to our U.S. mortgage insurance subsidiaries, see “—If we
are unable to continue to meet the requirements mandated by PMIERs because the GSEs amend them or the
GSEs’ interpretation of the financial requirements requires us to hold amounts of capital that are higher than we
have planned or otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which
would have a material adverse effect on our business, results of operations and financial condition” and “—Our
U.S. mortgage insurance subsidiaries are subject to minimum statutory capital requirements, which if not met or
waived, would result in restrictions or prohibitions on our doing business and could have a material adverse
impact on our results of operations.”

A further adverse change in our RBC, risk-to-capital ratio or other minimum regulatory requirements could

cause rating agencies to further downgrade the financial strength ratings of our insurance subsidiaries and the
credit ratings of Genworth Holdings, which would have an adverse impact on our ability to write and retain
business, and could cause regulators to take regulatory or supervisory actions with respect to our businesses, limit
the financial flexibility of our holding company, all of which could have a material adverse effect on our results
of operations, financial condition and business.

Changes to the role of the GSEs or to the charters or business practices of the GSEs, including actions or
decisions to decrease or discontinue the use of mortgage insurance, could adversely affect our financial
condition and results of operations or significantly impact our business.

The requirements and practices of the GSEs impact the operating results and financial performance of
approved mortgage insurers, including us. Changes in the charters or business practices of Freddie Mac or Fannie
Mae could materially reduce the number of mortgages they purchase that are insured by us and consequently
diminish the value of our business. The GSEs could be directed to make such changes by the FHFA, which was
appointed as their conservator in September 2008 and has the authority to control and direct the operations of the
GSEs.

With the GSEs in a prolonged conservatorship, there has been ongoing debate over the future role and

purpose of the GSEs in the United States housing market. Congress may legislate, or the administration may
implement through administrative reform, structural and other changes to the GSEs and the functioning of the
secondary mortgage market. Since 2011, there have been numerous legislative proposals intended to
incrementally scale back the GSEs (such as a statutory mandate for the GSEs to transfer mortgage credit risk to

the private sector) or to completely reform the United States housing finance system. Congress, however, has not

enacted any legislation to date. Recently, there has been increased focus on and discussion of administrative

reform independent of legislative action. The proposals vary with regard to the government’s role in the housing

market, and more specifically, with regard to the existence of an explicit or implicit government guarantee. If any

GSE reform is adopted, whether through legislation or administrative action, it could impact the current role of

private mortgage insurance as a credit enhancement, including its reduction or elimination, which would have an

adverse effect on our revenue, business, financial condition and results of operations. As a result of these matters,

it is uncertain what role private capital, including mortgage insurance, will play in the U.S. residential housing

finance system in the future or the impact any such changes could have on our business. Any changes to the

charters or statutory authorities of the GSEs would likely require Congressional action to implement. Passage and

timing of any comprehensive GSE reform or incremental change (legislative or administrative) is uncertain,

making the actual impact on us and our industry difficult to predict. Any such changes that come to pass could

have a significant impact on our business, results of operations and financial condition.

In recent years, the FHFA has set goals for the GSEs to transfer significant portions of the GSE’ mortgage

credit risk to the private sector. This mandate builds upon the goals set in each of the last five years for the GSEs to

increase the role of private capital by experimenting with different forms of transactions and structures. We have

participated in credit risk transfer programs developed by Fannie Mae and Freddie Mac on a limited basis. In 2018,

Freddie Mac and Fannie Mae announced the launch of limited pilot programs, Integrated Mortgage Insurance

(“IMAGIN”) and Enterprise Paid Mortgage Insurance (“EPMI”), respectively, as alternative ways for lenders to sell

to the GSEs loans with loan-to-value ratios greater than 80%. These investor-paid mortgage insurance programs, in

which insurance is acquired directly by each GSE, have many of the same features and represent an alternative to

traditional private mortgage insurance products that are provided to individual lenders. Participants in IMAGIN and

EPMI are not subject to compliance with the current PMIERs, which may create a competitive disadvantage for

private mortgage insurers if these pilot programs are expanded. To the extent these credit risk products evolve in a

manner that displaces primary mortgage insurance coverage, the amount of insurance we write may be reduced. It is

difficult to predict the impact of alternative credit risk transfer products, if any, that are developed to meet the goals

established by the FHFA. In addition, in December 2020, the FHFA published a final rule of its Enterprise

Regulatory Capital Framework. The Enterprise Regulatory Capital Framework imposes a new capital framework on

the GSEs, which significantly increases capital requirements and reduces capital credit on credit risk transfer

transactions as compared to the previous framework. Although the Enterprise Regulatory Capital Framework will

not be fully effective until the GSEs are released from conservatorship, the FHFA expects the GSEs to begin

operating under relevant provisions beginning in February 2021. The final rule could cause the GSEs to increase

their guarantee pricing in order to meet the new capital requirements. If the GSEs increase their guarantee pricing in

order to meet the higher capital requirements, that increase could have a negative impact on the private mortgage

insurance market and our business. Furthermore, higher GSE capital requirements could ultimately lead to increased

costs to borrowers for GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender

portfolios. Such a shift could result in a smaller market size for private mortgage insurance. This rule could also

accelerate the recent diversification of the GSE’s risk transfer programs to encompass a broader array of instruments

beyond private mortgage insurance which could adversely impact our business.

Freddie Mac and Fannie Mae also possess substantial market power, which enables them to influence our

U.S. mortgage insurance business and the mortgage insurance industry in general. Although we actively monitor

and develop our relationships with Freddie Mac and Fannie Mae, a deterioration in any of these relationships, or

the loss of business or opportunities for new business, could have a material adverse effect on our financial

condition and results of operations.

70

71

our U.S. life insurance subsidiaries exceeded the level of RBC that would require any of them to take or become

subject to any corrective action in their respective domiciliary state. However, the RBC ratio of our U.S. life

insurance subsidiaries has declined over the past few years as a result of statutory losses driven by the declining

performance of the business and increases in our statutory reserves, including results of Actuarial Guideline 38,

cash flow testing and assumption reviews particularly in our long-term care and life insurance products. Any

future statutory losses would decrease the RBC ratio of our U.S. life insurance subsidiaries. We continue to face

challenges in our principal life insurance subsidiaries, particularly those subsidiaries that rely heavily on in-force

rate actions as a source of earnings and capital. We may see variability in statutory results and a further decline in

the RBC ratios of these subsidiaries given the time lag between the approval of in-force rate actions versus when

the benefits from the in-force rate actions (including premium rate increases and associated benefit reductions)

are fully realized in our financial results. Further declines in the RBC ratio of our life insurance subsidiaries

could result in heightened supervision and regulatory action.

Our U.S. mortgage insurers are not subject to the NAIC’s RBC requirements but are required by certain

states and other regulators to maintain a certain risk-to-capital ratio. In addition, PMIERs includes financial

requirements for mortgage insurers under which a mortgage insurer’s “Available Assets” (generally only the

most liquid assets of an insurer) must meet or exceed “Minimum Required Assets” (which are based on an

insurer’s risk-in-force and are calculated from tables of factors with several risk dimensions and are subject to a

floor amount). The failure of our U.S. mortgage insurance subsidiaries to meet their regulatory requirements, and

additionally the PMIERs financial requirements, could limit our ability to write new business. For further

discussion of the importance of financial requirements to our U.S. mortgage insurance subsidiaries, see “—If we

are unable to continue to meet the requirements mandated by PMIERs because the GSEs amend them or the

GSEs’ interpretation of the financial requirements requires us to hold amounts of capital that are higher than we

have planned or otherwise, we may not be eligible to write new insurance on loans acquired by the GSEs, which

would have a material adverse effect on our business, results of operations and financial condition” and “—Our

U.S. mortgage insurance subsidiaries are subject to minimum statutory capital requirements, which if not met or

waived, would result in restrictions or prohibitions on our doing business and could have a material adverse

impact on our results of operations.”

A further adverse change in our RBC, risk-to-capital ratio or other minimum regulatory requirements could

cause rating agencies to further downgrade the financial strength ratings of our insurance subsidiaries and the

credit ratings of Genworth Holdings, which would have an adverse impact on our ability to write and retain

business, and could cause regulators to take regulatory or supervisory actions with respect to our businesses, limit

the financial flexibility of our holding company, all of which could have a material adverse effect on our results

of operations, financial condition and business.

Changes to the role of the GSEs or to the charters or business practices of the GSEs, including actions or

decisions to decrease or discontinue the use of mortgage insurance, could adversely affect our financial

condition and results of operations or significantly impact our business.

The requirements and practices of the GSEs impact the operating results and financial performance of

approved mortgage insurers, including us. Changes in the charters or business practices of Freddie Mac or Fannie

Mae could materially reduce the number of mortgages they purchase that are insured by us and consequently

diminish the value of our business. The GSEs could be directed to make such changes by the FHFA, which was

appointed as their conservator in September 2008 and has the authority to control and direct the operations of the

GSEs.

With the GSEs in a prolonged conservatorship, there has been ongoing debate over the future role and

purpose of the GSEs in the United States housing market. Congress may legislate, or the administration may

implement through administrative reform, structural and other changes to the GSEs and the functioning of the

secondary mortgage market. Since 2011, there have been numerous legislative proposals intended to

incrementally scale back the GSEs (such as a statutory mandate for the GSEs to transfer mortgage credit risk to

the private sector) or to completely reform the United States housing finance system. Congress, however, has not
enacted any legislation to date. Recently, there has been increased focus on and discussion of administrative
reform independent of legislative action. The proposals vary with regard to the government’s role in the housing
market, and more specifically, with regard to the existence of an explicit or implicit government guarantee. If any
GSE reform is adopted, whether through legislation or administrative action, it could impact the current role of
private mortgage insurance as a credit enhancement, including its reduction or elimination, which would have an
adverse effect on our revenue, business, financial condition and results of operations. As a result of these matters,
it is uncertain what role private capital, including mortgage insurance, will play in the U.S. residential housing
finance system in the future or the impact any such changes could have on our business. Any changes to the
charters or statutory authorities of the GSEs would likely require Congressional action to implement. Passage and
timing of any comprehensive GSE reform or incremental change (legislative or administrative) is uncertain,
making the actual impact on us and our industry difficult to predict. Any such changes that come to pass could
have a significant impact on our business, results of operations and financial condition.

In recent years, the FHFA has set goals for the GSEs to transfer significant portions of the GSE’ mortgage
credit risk to the private sector. This mandate builds upon the goals set in each of the last five years for the GSEs to
increase the role of private capital by experimenting with different forms of transactions and structures. We have
participated in credit risk transfer programs developed by Fannie Mae and Freddie Mac on a limited basis. In 2018,
Freddie Mac and Fannie Mae announced the launch of limited pilot programs, Integrated Mortgage Insurance
(“IMAGIN”) and Enterprise Paid Mortgage Insurance (“EPMI”), respectively, as alternative ways for lenders to sell
to the GSEs loans with loan-to-value ratios greater than 80%. These investor-paid mortgage insurance programs, in
which insurance is acquired directly by each GSE, have many of the same features and represent an alternative to
traditional private mortgage insurance products that are provided to individual lenders. Participants in IMAGIN and
EPMI are not subject to compliance with the current PMIERs, which may create a competitive disadvantage for
private mortgage insurers if these pilot programs are expanded. To the extent these credit risk products evolve in a
manner that displaces primary mortgage insurance coverage, the amount of insurance we write may be reduced. It is
difficult to predict the impact of alternative credit risk transfer products, if any, that are developed to meet the goals
established by the FHFA. In addition, in December 2020, the FHFA published a final rule of its Enterprise
Regulatory Capital Framework. The Enterprise Regulatory Capital Framework imposes a new capital framework on
the GSEs, which significantly increases capital requirements and reduces capital credit on credit risk transfer
transactions as compared to the previous framework. Although the Enterprise Regulatory Capital Framework will
not be fully effective until the GSEs are released from conservatorship, the FHFA expects the GSEs to begin
operating under relevant provisions beginning in February 2021. The final rule could cause the GSEs to increase
their guarantee pricing in order to meet the new capital requirements. If the GSEs increase their guarantee pricing in
order to meet the higher capital requirements, that increase could have a negative impact on the private mortgage
insurance market and our business. Furthermore, higher GSE capital requirements could ultimately lead to increased
costs to borrowers for GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender
portfolios. Such a shift could result in a smaller market size for private mortgage insurance. This rule could also
accelerate the recent diversification of the GSE’s risk transfer programs to encompass a broader array of instruments
beyond private mortgage insurance which could adversely impact our business.

Freddie Mac and Fannie Mae also possess substantial market power, which enables them to influence our

U.S. mortgage insurance business and the mortgage insurance industry in general. Although we actively monitor
and develop our relationships with Freddie Mac and Fannie Mae, a deterioration in any of these relationships, or
the loss of business or opportunities for new business, could have a material adverse effect on our financial
condition and results of operations.

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If we are unable to continue to meet the requirements mandated by PMIERs because the GSEs amend
them or the GSEs’ interpretation of the financial requirements requires us to hold amounts of capital that
are higher than we have planned or otherwise, we may not be eligible to write new insurance on loans
acquired by the GSEs, which would have a material adverse effect on our business, results of operations
and financial condition.

In furtherance of Fannie Mae and Freddie Mac’s respective charter requirements, each GSE adopted
PMIERs effective December 31, 2015. Amendments to PMIERs have occurred periodically since its inception.
Most recently, in December 2020, the GSEs issued a revised and restated version of PMIERs that was effective
on December 31, 2020. The PMIERs include financial requirements for mortgage insurers under which a
mortgage insurer’s “Available Assets” (generally only the most liquid assets of an insurer) must meet or exceed
“Minimum Required Assets” (which are based on an insurer’s risk-in-force and are calculated from tables of
factors with several risk dimensions and are subject to a floor amount) and otherwise generally establish when a
mortgage insurer is qualified to issue coverage that will be acceptable to the respective GSE for acquisition of
high loan-to-value mortgages. The GSEs may amend or waive PMIERs at their discretion, impose additional
conditions or restrictions on us, and also have broad discretion to interpret PMIERs, which could impact the
calculation of our available assets and/or minimum required assets.

The amount of capital that may be required in the future to maintain the Minimum Required Assets, as

defined in PMIERs, and operate our business is dependent upon, among other things: (i) the way PMIERs are
applied and interpreted by the GSEs and FHFA as and after they are implemented; (ii) the future performance of
the U.S. housing market, including as a result of COVID-19 and the length and speed of recovery; (iii) our
generation of earnings in our U.S. mortgage insurance business, available assets and risk-based required assets,
reducing risk in-force and reducing delinquencies as anticipated, and writing anticipated amounts and types of
new U.S. mortgage insurance business; and (iv) our overall financial performance, capital and liquidity levels.
Depending on our actual experience, the amount of capital required under PMIERs for our U.S. mortgage
insurance business may be higher than currently anticipated. In the absence of a premium increase, if we hold
more capital relative to insured loans, our returns will be lower. We may be unable to increase premium rates for
various reasons, principally due to competition. Our inability, on the other hand, to increase the capital as
required in the anticipated timeframes and on the anticipated terms, and to realize the anticipated benefits, could
have a material adverse impact on our business, results of operations and financial condition. More particularly,
our ability to continue to meet the PMIERs financial requirements and maintain a prudent amount of capital in
excess of those requirements, given the dynamic nature of asset valuations and requirement changes over time, is
dependent upon, among other things: (i) our ability to complete credit risk transfer transactions on our anticipated
terms and timetable, which are subject to market conditions, third-party approvals and other actions (including
approval by regulators and the GSEs), and other factors which are outside of our control; and (ii) our ability to
contribute holding company cash or other sources of capital to satisfy the portion of the financial requirements
that are not satisfied through these transactions. In addition, another potential capital source includes, but is not
limited to, the issuance of securities by Genworth Financial, Genworth Holdings or GMHI, which could
materially adversely impact our business, shareholders and debtholders.

The most recent PMIERs amendments included temporary capital preservation provisions effective through

June 30, 2021, that require an approved insurer to obtain prior written GSE approval before paying any
dividends, pledging or transferring assets to an affiliate or entering into any new, or altering any existing
arrangements under tax sharing and intercompany expense-sharing agreements, even if such insurer has a surplus
of available assets. These PMIERs amendments have restricted and may continue to restrict our U.S. mortgage
insurance business from paying dividends to us. See “—As holding companies, we and Genworth Holdings
depend on the ability of our respective subsidiaries to pay dividends and make other payments and distributions
to each of us and to meet our obligations.” It is unclear what, if any, further actions the GSEs may take in the
event COVID-19 financial hardships continue into the middle half of 2021. If the temporary provisions of the
PMIERs amendment are not extended to include new delinquencies occurring after April 1, 2021, or borrower
forbearance plans are not extended beyond 15 months, it could have a material effect on our business, results of
operations and financial condition.

In September 2020, subsequent to the issuance of GMHIs senior notes, the GSEs imposed certain conditions

and restrictions on our U.S. mortgage insurance business with respect to its capital. See “Regulation—Mortgage

Insurance Regulation” for additional details. These additional conditions and restrictions imposed by the GSEs

could limit the operating flexibility of our U.S. mortgage insurance business, particularly in the areas in which

new business is written and may adversely impact its competitive position, its ability to meet and maintain

compliance with the PMIERs requirements and Genworth’s overall business. Moreover, it further restricts the

ability of our U.S. mortgage insurance business to pay dividends and requires the retention of higher capital

levels limiting the availability of capital to be utilized elsewhere in the business.

Our assessment of PMIERs compliance is based on a number of factors, including affiliate asset valuations

under PMIERs and our understanding of the GSEs’ interpretation of the PMIERs financial requirements.

Although we believe we have sufficient capital in our U.S. mortgage insurance business as required under

PMIERs and we remain an approved insurer, there can be no assurance these conditions will continue. In

addition, there can be no assurance we will continue to meet the conditions contained in the GSE letters granting

PMIERs credit for reinsurance and other credit risk transfer transactions including, but not limited to, our ability

to remain below a statutory risk-to-capital ratio of 18:1. The GSEs also reserve the right to reevaluate the credit

for reinsurance and other credit risk transfer transactions available under PMIERs. If we are unable to continue to

meet the requirements mandated by PMIERs, the GSE restrictions discussed above or any additional restrictions

imposed on us by the GSEs, whether because the GSEs amend them or the GSE’s interpretation of the financial

requirements requires us to hold amounts of capital that are higher than we have planned or otherwise, we may

not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect

on our business, results of operations and financial condition.

Additionally, compliance with PMIERs requires us to seek the GSEs’ prior approval before taking many

actions, including implementing certain new products or services or entering into inter-company agreements

among others. PMIERs’ prior approval requirements could prohibit, materially modify or delay us in our

intended course of action. Further, the GSEs may modify or change their interpretation of terms they require us

to include in our mortgage insurance coverage for loans purchased by them, requiring us to modify our terms of

coverage or operational procedures to remain an approved insurer, and such changes could have a material

adverse impact on our financial position and operating results. It is possible the GSEs could, at their own

discretion, require additional limitations and/or conditions on certain of our activities and practices that are not

currently in the PMIERs in order for us to remain an approved insurer. Additional requirements or conditions

imposed by the GSEs could limit our operating flexibility and the areas in which we may write new business.

Any of these events would have a material adverse effect on our business, results of operations and financial

condition.

Our U.S. mortgage insurance subsidiaries are subject to minimum statutory capital requirements, which if

not met or waived, would result in restrictions or prohibitions on our doing business and could have a

material adverse impact on our results of operations.

Certain states have insurance laws or regulations which require a mortgage insurer to maintain a minimum

amount of statutory capital relative to its level of risk in-force. While formulations of minimum capital vary in

certain states, the most common measure applied allows for a maximum permitted risk-to-capital ratio of 25:1. If

one of our U.S. mortgage insurance subsidiaries that is writing business in a particular state fails to maintain that

state’s required minimum capital level, we would generally be required to immediately stop writing new business

in the state until the insurer re-establishes the required level of capital or receives a waiver of the requirement

from the state’s insurance regulator, or until we establish an alternative source of underwriting capacity

acceptable to the regulator. As of December 31, 2020 and 2019, GMICO’s risk-to-capital ratio was

approximately 12.3:1 and 12.5:1, respectively. If GMICO exceeds required risk-to-capital levels in the future, we

would seek required regulatory and GSE forbearance and approvals or seek approval for the utilization of

alternative insurance vehicles. However, there can be no assurance if, and on what terms, such forbearance and

approvals may be obtained.

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If we are unable to continue to meet the requirements mandated by PMIERs because the GSEs amend

them or the GSEs’ interpretation of the financial requirements requires us to hold amounts of capital that

are higher than we have planned or otherwise, we may not be eligible to write new insurance on loans

acquired by the GSEs, which would have a material adverse effect on our business, results of operations

and financial condition.

In furtherance of Fannie Mae and Freddie Mac’s respective charter requirements, each GSE adopted

PMIERs effective December 31, 2015. Amendments to PMIERs have occurred periodically since its inception.

Most recently, in December 2020, the GSEs issued a revised and restated version of PMIERs that was effective

on December 31, 2020. The PMIERs include financial requirements for mortgage insurers under which a

mortgage insurer’s “Available Assets” (generally only the most liquid assets of an insurer) must meet or exceed

“Minimum Required Assets” (which are based on an insurer’s risk-in-force and are calculated from tables of

factors with several risk dimensions and are subject to a floor amount) and otherwise generally establish when a

mortgage insurer is qualified to issue coverage that will be acceptable to the respective GSE for acquisition of

high loan-to-value mortgages. The GSEs may amend or waive PMIERs at their discretion, impose additional

conditions or restrictions on us, and also have broad discretion to interpret PMIERs, which could impact the

calculation of our available assets and/or minimum required assets.

The amount of capital that may be required in the future to maintain the Minimum Required Assets, as

defined in PMIERs, and operate our business is dependent upon, among other things: (i) the way PMIERs are

applied and interpreted by the GSEs and FHFA as and after they are implemented; (ii) the future performance of

the U.S. housing market, including as a result of COVID-19 and the length and speed of recovery; (iii) our

generation of earnings in our U.S. mortgage insurance business, available assets and risk-based required assets,

reducing risk in-force and reducing delinquencies as anticipated, and writing anticipated amounts and types of

new U.S. mortgage insurance business; and (iv) our overall financial performance, capital and liquidity levels.

Depending on our actual experience, the amount of capital required under PMIERs for our U.S. mortgage

insurance business may be higher than currently anticipated. In the absence of a premium increase, if we hold

more capital relative to insured loans, our returns will be lower. We may be unable to increase premium rates for

various reasons, principally due to competition. Our inability, on the other hand, to increase the capital as

required in the anticipated timeframes and on the anticipated terms, and to realize the anticipated benefits, could

have a material adverse impact on our business, results of operations and financial condition. More particularly,

our ability to continue to meet the PMIERs financial requirements and maintain a prudent amount of capital in

excess of those requirements, given the dynamic nature of asset valuations and requirement changes over time, is

dependent upon, among other things: (i) our ability to complete credit risk transfer transactions on our anticipated

terms and timetable, which are subject to market conditions, third-party approvals and other actions (including

approval by regulators and the GSEs), and other factors which are outside of our control; and (ii) our ability to

contribute holding company cash or other sources of capital to satisfy the portion of the financial requirements

that are not satisfied through these transactions. In addition, another potential capital source includes, but is not

limited to, the issuance of securities by Genworth Financial, Genworth Holdings or GMHI, which could

materially adversely impact our business, shareholders and debtholders.

The most recent PMIERs amendments included temporary capital preservation provisions effective through

June 30, 2021, that require an approved insurer to obtain prior written GSE approval before paying any

dividends, pledging or transferring assets to an affiliate or entering into any new, or altering any existing

arrangements under tax sharing and intercompany expense-sharing agreements, even if such insurer has a surplus

of available assets. These PMIERs amendments have restricted and may continue to restrict our U.S. mortgage

insurance business from paying dividends to us. See “—As holding companies, we and Genworth Holdings

depend on the ability of our respective subsidiaries to pay dividends and make other payments and distributions

to each of us and to meet our obligations.” It is unclear what, if any, further actions the GSEs may take in the

event COVID-19 financial hardships continue into the middle half of 2021. If the temporary provisions of the

PMIERs amendment are not extended to include new delinquencies occurring after April 1, 2021, or borrower

forbearance plans are not extended beyond 15 months, it could have a material effect on our business, results of

operations and financial condition.

In September 2020, subsequent to the issuance of GMHIs senior notes, the GSEs imposed certain conditions
and restrictions on our U.S. mortgage insurance business with respect to its capital. See “Regulation—Mortgage
Insurance Regulation” for additional details. These additional conditions and restrictions imposed by the GSEs
could limit the operating flexibility of our U.S. mortgage insurance business, particularly in the areas in which
new business is written and may adversely impact its competitive position, its ability to meet and maintain
compliance with the PMIERs requirements and Genworth’s overall business. Moreover, it further restricts the
ability of our U.S. mortgage insurance business to pay dividends and requires the retention of higher capital
levels limiting the availability of capital to be utilized elsewhere in the business.

Our assessment of PMIERs compliance is based on a number of factors, including affiliate asset valuations

under PMIERs and our understanding of the GSEs’ interpretation of the PMIERs financial requirements.
Although we believe we have sufficient capital in our U.S. mortgage insurance business as required under
PMIERs and we remain an approved insurer, there can be no assurance these conditions will continue. In
addition, there can be no assurance we will continue to meet the conditions contained in the GSE letters granting
PMIERs credit for reinsurance and other credit risk transfer transactions including, but not limited to, our ability
to remain below a statutory risk-to-capital ratio of 18:1. The GSEs also reserve the right to reevaluate the credit
for reinsurance and other credit risk transfer transactions available under PMIERs. If we are unable to continue to
meet the requirements mandated by PMIERs, the GSE restrictions discussed above or any additional restrictions
imposed on us by the GSEs, whether because the GSEs amend them or the GSE’s interpretation of the financial
requirements requires us to hold amounts of capital that are higher than we have planned or otherwise, we may
not be eligible to write new insurance on loans acquired by the GSEs, which would have a material adverse effect
on our business, results of operations and financial condition.

Additionally, compliance with PMIERs requires us to seek the GSEs’ prior approval before taking many
actions, including implementing certain new products or services or entering into inter-company agreements
among others. PMIERs’ prior approval requirements could prohibit, materially modify or delay us in our
intended course of action. Further, the GSEs may modify or change their interpretation of terms they require us
to include in our mortgage insurance coverage for loans purchased by them, requiring us to modify our terms of
coverage or operational procedures to remain an approved insurer, and such changes could have a material
adverse impact on our financial position and operating results. It is possible the GSEs could, at their own
discretion, require additional limitations and/or conditions on certain of our activities and practices that are not
currently in the PMIERs in order for us to remain an approved insurer. Additional requirements or conditions
imposed by the GSEs could limit our operating flexibility and the areas in which we may write new business.
Any of these events would have a material adverse effect on our business, results of operations and financial
condition.

Our U.S. mortgage insurance subsidiaries are subject to minimum statutory capital requirements, which if
not met or waived, would result in restrictions or prohibitions on our doing business and could have a
material adverse impact on our results of operations.

Certain states have insurance laws or regulations which require a mortgage insurer to maintain a minimum
amount of statutory capital relative to its level of risk in-force. While formulations of minimum capital vary in
certain states, the most common measure applied allows for a maximum permitted risk-to-capital ratio of 25:1. If
one of our U.S. mortgage insurance subsidiaries that is writing business in a particular state fails to maintain that
state’s required minimum capital level, we would generally be required to immediately stop writing new business
in the state until the insurer re-establishes the required level of capital or receives a waiver of the requirement
from the state’s insurance regulator, or until we establish an alternative source of underwriting capacity
acceptable to the regulator. As of December 31, 2020 and 2019, GMICO’s risk-to-capital ratio was
approximately 12.3:1 and 12.5:1, respectively. If GMICO exceeds required risk-to-capital levels in the future, we
would seek required regulatory and GSE forbearance and approvals or seek approval for the utilization of
alternative insurance vehicles. However, there can be no assurance if, and on what terms, such forbearance and
approvals may be obtained.

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The NAIC established the MGIWG to determine and make recommendations to the NAIC’s Financial

Condition Committee as to what, if any, changes to make to the solvency and other regulations relating to
mortgage guaranty insurers. The MGIWG continues to work on revisions to the MGI Model. The proposed
amendments of the MGI Model relate to, among other things: (i) capital and reserve standards, including
increased minimum capital and surplus requirements, mortgage guaranty-specific RBC standards, dividend
restrictions and contingency and premium deficiency reserves; (ii) limitations on the geographic concentration of
mortgage guaranty risk, including state-based limitations; (iii) restrictions on mortgage insurers’ investments in
notes secured by mortgages; (iv) prudent underwriting standards and formal underwriting guidelines to be
approved by the insurer’s board; (v) the establishment of formal, internal “Mortgage Guaranty Quality Control
Programs” with respect to in-force business; (vi) prohibitions on captive reinsurance arrangements; and
(vii) incorporation of an NAIC “Mortgage Guaranty Insurance Standards Manual.” The MGIWG is also working
on the development of the mortgage guaranty insurance capital model, which is needed to determine the RBC
and loan-level capital standards for the amended MGI Model. At this time, we cannot predict the outcome of this
process, the effect changes, if any, will have on the mortgage guaranty insurance market generally, or on our
businesses specifically, the additional costs associated with compliance with any such changes, or any changes to
our operations that may be necessary to comply, any of which could have a material adverse effect on our
business, results of operations or financial condition. We also cannot predict whether other regulatory initiatives
will be adopted or what impact, if any, such initiatives, if adopted as laws, may have on our business, results of
operations or financial condition.

Changes in regulations that adversely affect the mortgage insurance markets in which we operate could
affect our operations significantly and could reduce the demand for mortgage insurance.

In addition to the general regulatory risks that are described under “—Our insurance businesses are
extensively regulated and changes in regulation may reduce our profitability and limit our growth,” we are also
affected by various additional regulations relating particularly to our mortgage insurance operations.

United States

In the United States, federal and state regulations affect the scope of our U.S. competitors’ operations,
which has an effect on the size of the U.S. mortgage insurance market and the intensity of the competition in our
U.S. mortgage insurance business. This competition includes not only other private mortgage insurers, but also
U.S. federal and state governmental and quasi-governmental agencies, principally the FHA and the VA, which
are governed by federal regulations. Increases in the maximum loan amount that the FHA can insure, and
reductions in the mortgage insurance premiums the FHA charges, can reduce the demand for private mortgage
insurance. Decreases in the maximum loan amounts the GSEs will purchase or guarantee, increases in GSE fees
or decreases in the maximum loan-to-value ratio for loans the GSEs will purchase can also reduce demand for
private mortgage insurance. Legislative, regulatory or administrative changes could cause demand for private
mortgage insurance to decrease. In addition, there is uncertainty surrounding the implementation of the Basel
framework and whether its rules will be implemented in the United States. It is possible that its implementation
could occur in the United States and its rules could discourage the use of mortgage insurance. See “—Basel
Framework” below for further details.

Our U.S. mortgage insurance business, as a credit enhancement provider in the residential mortgage lending

industry, is also subject to compliance with various federal and state consumer protection and insurance laws,
including RESPA, the ECOA, the FHA, the Homeowners Protection Act, the FCRA, the Fair Debt Collection
Practices Act and others. Among other things, these laws prohibit payments for referrals of settlement service
business, providing services to lenders for no or reduced fees or payments for services not actually performed,
require fairness and non-discrimination in granting or facilitating the granting of credit, require cancellation of
insurance and refund of unearned premiums under certain circumstances, govern the circumstances under which
companies may obtain and use consumer credit information, and define the manner in which companies may
pursue collection activities. Changes in these laws or regulations, changes in the appropriate regulator’s

interpretation of these laws or regulations or heightened enforcement activity could materially adversely affect

the operations and profitability of our U.S. mortgage insurance business.

Australia

In Australia, APRA regulates all ADIs and life, general and mortgage insurance companies. APRA also

determines the minimum regulatory capital requirements for ADIs. APRA’s current regulations provide for

reduced capital requirements for certain ADIs that insure residential mortgages with an “acceptable” mortgage

insurer (which currently includes our Australian mortgage insurance companies) for all non-standard mortgages

and for standard mortgages with loan-to-value ratios above 80%. APRA’s regulations currently set out a number

of circumstances in which a loan may be considered to be non-standard from an ADI’s perspective. The capital

levels for Australian IRB ADIs are determined by their APRA-approved IRB models, which may or may not

allocate capital credit for LMI. APRA and the IRB ADIs have not yet finalized internal models for residential

mortgage risk and we do not believe that the IRB ADIs currently benefit from an explicit reduction in their

capital requirements for mortgages covered by mortgage insurance.

Under APRA rules, ADIs in Australia that are accredited as standardized, receive reduced capital

recognition for using mortgage insurance for high loan-to-value mortgage loans in Australia. ADIs that are

considered to be advanced accredited and determine their own capital estimates, are currently working with the

mortgage insurers and APRA to determine the appropriate level of recognition mortgage insurance will provide

for high loan-to-value mortgage loans. The rules also provide that ADIs would be able to acquire mortgage

insurance covering less of the exposure to the loan than existing requirements with reduced capital recognition.

Accordingly, lenders in Australia may be able to reduce their use of mortgage insurance for high loan-to-value

ratio mortgages or limit their use to the higher risk portions of their portfolios, which may have an adverse effect

on our mortgage insurance business in Australia.

Uncertainty remains surrounding the implementation of the Basel framework. In March 2020, the Basel

Committee revised the target date for implementation to January 1, 2023. It is too early to determine the ultimate

impact these regulatory changes will have on our mortgage insurance business in Australia, but it is possible that

its rules could discourage the use of mortgage insurance.

On December 8, 2020, APRA released a discussion paper on its proposed changes to bank capital standards

in Australia. For more information about APRA and its proposed bank capital standards changes, see

“Regulation—Mortgage Insurance Regulation—Australia regulation.”

Basel Framework

In December 2017, the Basel Committee published the finalization of the post-crisis reforms to the Basel

framework. Among other issues, the Basel Committee addressed variability in risk-weighted assets, including

residential real estate. Currently national supervisors are considering how to implement these reforms. Because

these reforms are not yet implemented by national supervisors, we cannot predict the mortgage insurance benefits, if

any, that ultimately will be provided to lenders, or how any such benefits may affect the opportunities for the

growth of mortgage insurance. If countries implement the Basel framework in a manner that does not reward

lenders for using mortgage insurance on high loan-to-value mortgage loans, or if lenders conclude that mortgage

insurance does not provide sufficient capital incentives, then we may have to revise our product offerings to meet

the new requirements and our business and results of operations may be materially adversely affected.

We may not be able to continue to mitigate the impact of Regulations XXX or AXXX and, therefore, we

may incur higher operating costs that could have a material adverse effect on our financial condition and

results of operations.

We have increased term and universal life insurance statutory reserves in response to Regulations XXX and

AXXX and have taken steps to mitigate the impact these regulations have had on our business, including

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The NAIC established the MGIWG to determine and make recommendations to the NAIC’s Financial

Condition Committee as to what, if any, changes to make to the solvency and other regulations relating to

mortgage guaranty insurers. The MGIWG continues to work on revisions to the MGI Model. The proposed

amendments of the MGI Model relate to, among other things: (i) capital and reserve standards, including

increased minimum capital and surplus requirements, mortgage guaranty-specific RBC standards, dividend

restrictions and contingency and premium deficiency reserves; (ii) limitations on the geographic concentration of

mortgage guaranty risk, including state-based limitations; (iii) restrictions on mortgage insurers’ investments in

notes secured by mortgages; (iv) prudent underwriting standards and formal underwriting guidelines to be

approved by the insurer’s board; (v) the establishment of formal, internal “Mortgage Guaranty Quality Control

Programs” with respect to in-force business; (vi) prohibitions on captive reinsurance arrangements; and

(vii) incorporation of an NAIC “Mortgage Guaranty Insurance Standards Manual.” The MGIWG is also working

on the development of the mortgage guaranty insurance capital model, which is needed to determine the RBC

and loan-level capital standards for the amended MGI Model. At this time, we cannot predict the outcome of this

process, the effect changes, if any, will have on the mortgage guaranty insurance market generally, or on our

businesses specifically, the additional costs associated with compliance with any such changes, or any changes to

our operations that may be necessary to comply, any of which could have a material adverse effect on our

business, results of operations or financial condition. We also cannot predict whether other regulatory initiatives

will be adopted or what impact, if any, such initiatives, if adopted as laws, may have on our business, results of

operations or financial condition.

Changes in regulations that adversely affect the mortgage insurance markets in which we operate could

affect our operations significantly and could reduce the demand for mortgage insurance.

In addition to the general regulatory risks that are described under “—Our insurance businesses are

extensively regulated and changes in regulation may reduce our profitability and limit our growth,” we are also

affected by various additional regulations relating particularly to our mortgage insurance operations.

United States

In the United States, federal and state regulations affect the scope of our U.S. competitors’ operations,

which has an effect on the size of the U.S. mortgage insurance market and the intensity of the competition in our

U.S. mortgage insurance business. This competition includes not only other private mortgage insurers, but also

U.S. federal and state governmental and quasi-governmental agencies, principally the FHA and the VA, which

are governed by federal regulations. Increases in the maximum loan amount that the FHA can insure, and

reductions in the mortgage insurance premiums the FHA charges, can reduce the demand for private mortgage

insurance. Decreases in the maximum loan amounts the GSEs will purchase or guarantee, increases in GSE fees

or decreases in the maximum loan-to-value ratio for loans the GSEs will purchase can also reduce demand for

private mortgage insurance. Legislative, regulatory or administrative changes could cause demand for private

mortgage insurance to decrease. In addition, there is uncertainty surrounding the implementation of the Basel

framework and whether its rules will be implemented in the United States. It is possible that its implementation

could occur in the United States and its rules could discourage the use of mortgage insurance. See “—Basel

Framework” below for further details.

Our U.S. mortgage insurance business, as a credit enhancement provider in the residential mortgage lending

industry, is also subject to compliance with various federal and state consumer protection and insurance laws,

including RESPA, the ECOA, the FHA, the Homeowners Protection Act, the FCRA, the Fair Debt Collection

Practices Act and others. Among other things, these laws prohibit payments for referrals of settlement service

business, providing services to lenders for no or reduced fees or payments for services not actually performed,

require fairness and non-discrimination in granting or facilitating the granting of credit, require cancellation of

insurance and refund of unearned premiums under certain circumstances, govern the circumstances under which

companies may obtain and use consumer credit information, and define the manner in which companies may

pursue collection activities. Changes in these laws or regulations, changes in the appropriate regulator’s

interpretation of these laws or regulations or heightened enforcement activity could materially adversely affect
the operations and profitability of our U.S. mortgage insurance business.

Australia

In Australia, APRA regulates all ADIs and life, general and mortgage insurance companies. APRA also

determines the minimum regulatory capital requirements for ADIs. APRA’s current regulations provide for
reduced capital requirements for certain ADIs that insure residential mortgages with an “acceptable” mortgage
insurer (which currently includes our Australian mortgage insurance companies) for all non-standard mortgages
and for standard mortgages with loan-to-value ratios above 80%. APRA’s regulations currently set out a number
of circumstances in which a loan may be considered to be non-standard from an ADI’s perspective. The capital
levels for Australian IRB ADIs are determined by their APRA-approved IRB models, which may or may not
allocate capital credit for LMI. APRA and the IRB ADIs have not yet finalized internal models for residential
mortgage risk and we do not believe that the IRB ADIs currently benefit from an explicit reduction in their
capital requirements for mortgages covered by mortgage insurance.

Under APRA rules, ADIs in Australia that are accredited as standardized, receive reduced capital
recognition for using mortgage insurance for high loan-to-value mortgage loans in Australia. ADIs that are
considered to be advanced accredited and determine their own capital estimates, are currently working with the
mortgage insurers and APRA to determine the appropriate level of recognition mortgage insurance will provide
for high loan-to-value mortgage loans. The rules also provide that ADIs would be able to acquire mortgage
insurance covering less of the exposure to the loan than existing requirements with reduced capital recognition.
Accordingly, lenders in Australia may be able to reduce their use of mortgage insurance for high loan-to-value
ratio mortgages or limit their use to the higher risk portions of their portfolios, which may have an adverse effect
on our mortgage insurance business in Australia.

Uncertainty remains surrounding the implementation of the Basel framework. In March 2020, the Basel
Committee revised the target date for implementation to January 1, 2023. It is too early to determine the ultimate
impact these regulatory changes will have on our mortgage insurance business in Australia, but it is possible that
its rules could discourage the use of mortgage insurance.

On December 8, 2020, APRA released a discussion paper on its proposed changes to bank capital standards

in Australia. For more information about APRA and its proposed bank capital standards changes, see
“Regulation—Mortgage Insurance Regulation—Australia regulation.”

Basel Framework

In December 2017, the Basel Committee published the finalization of the post-crisis reforms to the Basel
framework. Among other issues, the Basel Committee addressed variability in risk-weighted assets, including
residential real estate. Currently national supervisors are considering how to implement these reforms. Because
these reforms are not yet implemented by national supervisors, we cannot predict the mortgage insurance benefits, if
any, that ultimately will be provided to lenders, or how any such benefits may affect the opportunities for the
growth of mortgage insurance. If countries implement the Basel framework in a manner that does not reward
lenders for using mortgage insurance on high loan-to-value mortgage loans, or if lenders conclude that mortgage
insurance does not provide sufficient capital incentives, then we may have to revise our product offerings to meet
the new requirements and our business and results of operations may be materially adversely affected.

We may not be able to continue to mitigate the impact of Regulations XXX or AXXX and, therefore, we
may incur higher operating costs that could have a material adverse effect on our financial condition and
results of operations.

We have increased term and universal life insurance statutory reserves in response to Regulations XXX and

AXXX and have taken steps to mitigate the impact these regulations have had on our business, including

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increasing premium rates and implementing reserve funding structures. One way that we and other insurance
companies have mitigated the impact of these regulations is through captive reinsurance companies and/or
special purpose vehicles. If we were to discontinue our use of captive life reinsurance subsidiaries to finance
statutory reserves in response to regulatory changes on a prospective basis, the reasonably likely impact would be
increased costs related to alternative financing, such as third-party reinsurance, which would adversely impact
our consolidated results of operations and financial condition. In addition, we cannot be certain that affordable
alternative financing would be available.

On March 7, 2016, we suspended sales of our traditional life insurance products. While we are no longer

writing new life insurance business, we cannot provide assurance that we will be able to continue to implement
actions to mitigate the impacts of Regulations XXX or AXXX on our in-force term and universal life insurance
products which are not currently part of reserve funding structures or which may be part of existing reserve
arrangements and need refinancing.

Additionally, there may be future regulatory, tax or other impacts to existing reserve funding structures and/

or future refinancing, which could require us to increase statutory reserves or incur higher operating and/or tax
costs. For example, effective January 1, 2017, the NAIC adopted an amended version of AG 48, which was
subsequently codified in the Term and Universal Life Insurance Reserve Financing Model Regulation. This
regulation becomes effective when formally adopted by the states, however, it is not clear what additional
changes or state variations may emerge as the states continue to adopt this regulation. As a result, there is the
potential for additional requirements making it more difficult and/or expensive for us to mitigate the impact of
Regulations XXX and AXXX. To date, four states have implemented the Term and Universal Life Insurance
Reserve Financing Model Regulation, including Virginia, which is the state regulator for GLAIC, one of our
principal life insurance subsidiaries.

Changes in accounting and reporting standards issued by the Financial Accounting Standards Board or
other standard-setting bodies and insurance regulators could materially adversely affect our financial
condition and results of operations.

Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or
expanded. Accordingly, from time to time, we are required to adopt new or revised accounting standards issued
by recognized authoritative bodies, including the Financial Accounting Standards Board. It is possible that future
accounting and reporting standards we are required to adopt could change the current accounting treatment that
we apply to our financial statements and that such changes could have a material adverse effect on our financial
condition and results of operations. In addition, the required adoption of future accounting and reporting
standards may result in significant costs to implement. For example, new accounting guidance (that is not yet
effective for us) related to long-duration insurance contracts will likely materially impact our financial position
and could result in increased volatility in our results of operations, as well as other comprehensive income (loss).
In addition, we may be unable to implement this new accounting guidance or other proposals by the adoption
date which would materially adversely impact our business. Furthermore, the implementation of this new
accounting guidance or other proposals could require us to make significant changes to systems and use
additional resources, resulting in significant incremental costs. See note 2 in “Part II—Item 8—Financial
Statements and Supplementary Data” for additional details.

Operational Risks

If we are unable to retain, attract and motivate qualified employees or senior management, our results of
operations, financial condition and business operations may be adversely impacted.

Our success is largely dependent on our ability to retain, attract and motivate qualified employees and senior

management. We face intense competition in our industry for key employees with demonstrated ability,
including actuarial, finance, legal, investment, risk, compliance and other professionals. Our ability to retain,

attract and motivate experienced and qualified employees and senior management has been more challenging in

light of our financial difficulties, announcements concerning expense reductions, as well as the demands being

placed on our employees. In addition, our ability to attract, recruit, retain and motivate current and prospective

employees may be adversely impacted by the repeated delays in the China Oceanwide transaction, the ensuing

uncertainty and/or the potential alternative strategic direction the company may go. Furthermore, as the future of

work evolves and work arrangements, such as a remote work environment become more flexible and

commonplace, our ability to compete for qualified employees could be further challenged. A remote work

environment could expand competition among employers and may put us at a disadvantage if we are unable or

unwilling to implement certain of these policies. We cannot be sure we will be able to attract, retain and motivate

the desired workforce, and our failure to do so could have a material adverse effect on results of operations,

financial condition and business operations. In addition, we may not be able to meet regulatory requirements

relating to required expertise in various professional positions.

Managing key employee succession and retention is also critical to our success. We would be adversely

affected if we fail to adequately plan for the succession of our senior management and other key employees.

While we have succession plans and long-term compensation plans, including retention programs, designed to

retain our employees, our succession plans may not operate effectively and our compensation plans cannot

guarantee that the services of these employees will continue to be available to us.

Our reliance on key customer or distribution relationships could cause us to lose significant sales if one or

more of those relationships terminate or are reduced.

Our businesses depend on our relationships with our customers, and in particular, our relationships with our

largest lending customers in our mortgage insurance businesses. Our customers place insurance with us directly

on loans that they originate and they also do business with us indirectly, primarily in the United States, through

purchases of loans that already have our mortgage insurance coverage. Our relationships with our customers may

influence both the amount of business they do with us directly and also their willingness to continue to approve

us as a mortgage insurance provider for loans that they purchase. Particularly in Australia where a large portion

of our business is concentrated with a small number of customers, the loss of business from significant customers

has had and could in the future have an adverse effect on the amount of new business we are able to write and

consequently, our financial condition and results of operations. Maintaining our business relationships and

business volumes with our largest lending customers remains critical to the success of our business.

We cannot be certain that any loss of business from significant customers, or any single lender, would be

replaced by other customers, existing or new. As a result of current market conditions and increased regulatory

requirements, our lending customers may decide to write business only with a limited number of mortgage

insurers or only with certain mortgage insurers, based on their views with respect to an insurer’s pricing, service

levels, underwriting guidelines, loss mitigation practices, financial strength, ratings or other factors.

As discussed in “Part I—Item 1—Business,” our mortgage insurance business in Australia is highly

concentrated in a small number of key lender customers, which increases our risks and exposure in the event one

or more of these customers terminate or reduce their relationship with us. Any termination, reduction or material

change in relationship with a key lender customer could have a material adverse effect on our future sales for one

or more products. In addition, some lenders self-insure certain high loan-to-value mortgage risks. If our lending

customers in this market increase the self-insurance or other alternatives to mortgage insurance, this could have

an unfavorable impact on the amount of new business we are able to write and consequently, our financial

condition and results of operations.

We distribute our products through a wide variety of distribution methods, including through relationships

with key distribution partners (including lender customers of our mortgage insurance businesses). These

distribution partners are an integral part of our business model. We are at risk that key distribution partners may

merge, change their distribution model affecting how our products are sold, or terminate their distribution

76

77

increasing premium rates and implementing reserve funding structures. One way that we and other insurance

companies have mitigated the impact of these regulations is through captive reinsurance companies and/or

special purpose vehicles. If we were to discontinue our use of captive life reinsurance subsidiaries to finance

statutory reserves in response to regulatory changes on a prospective basis, the reasonably likely impact would be

increased costs related to alternative financing, such as third-party reinsurance, which would adversely impact

our consolidated results of operations and financial condition. In addition, we cannot be certain that affordable

alternative financing would be available.

On March 7, 2016, we suspended sales of our traditional life insurance products. While we are no longer

writing new life insurance business, we cannot provide assurance that we will be able to continue to implement

actions to mitigate the impacts of Regulations XXX or AXXX on our in-force term and universal life insurance

products which are not currently part of reserve funding structures or which may be part of existing reserve

arrangements and need refinancing.

Additionally, there may be future regulatory, tax or other impacts to existing reserve funding structures and/

or future refinancing, which could require us to increase statutory reserves or incur higher operating and/or tax

costs. For example, effective January 1, 2017, the NAIC adopted an amended version of AG 48, which was

subsequently codified in the Term and Universal Life Insurance Reserve Financing Model Regulation. This

regulation becomes effective when formally adopted by the states, however, it is not clear what additional

changes or state variations may emerge as the states continue to adopt this regulation. As a result, there is the

potential for additional requirements making it more difficult and/or expensive for us to mitigate the impact of

Regulations XXX and AXXX. To date, four states have implemented the Term and Universal Life Insurance

Reserve Financing Model Regulation, including Virginia, which is the state regulator for GLAIC, one of our

principal life insurance subsidiaries.

Changes in accounting and reporting standards issued by the Financial Accounting Standards Board or

other standard-setting bodies and insurance regulators could materially adversely affect our financial

condition and results of operations.

Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or

expanded. Accordingly, from time to time, we are required to adopt new or revised accounting standards issued

by recognized authoritative bodies, including the Financial Accounting Standards Board. It is possible that future

accounting and reporting standards we are required to adopt could change the current accounting treatment that

we apply to our financial statements and that such changes could have a material adverse effect on our financial

condition and results of operations. In addition, the required adoption of future accounting and reporting

standards may result in significant costs to implement. For example, new accounting guidance (that is not yet

effective for us) related to long-duration insurance contracts will likely materially impact our financial position

and could result in increased volatility in our results of operations, as well as other comprehensive income (loss).

In addition, we may be unable to implement this new accounting guidance or other proposals by the adoption

date which would materially adversely impact our business. Furthermore, the implementation of this new

accounting guidance or other proposals could require us to make significant changes to systems and use

additional resources, resulting in significant incremental costs. See note 2 in “Part II—Item 8—Financial

Statements and Supplementary Data” for additional details.

Operational Risks

If we are unable to retain, attract and motivate qualified employees or senior management, our results of

operations, financial condition and business operations may be adversely impacted.

Our success is largely dependent on our ability to retain, attract and motivate qualified employees and senior

management. We face intense competition in our industry for key employees with demonstrated ability,

including actuarial, finance, legal, investment, risk, compliance and other professionals. Our ability to retain,

attract and motivate experienced and qualified employees and senior management has been more challenging in
light of our financial difficulties, announcements concerning expense reductions, as well as the demands being
placed on our employees. In addition, our ability to attract, recruit, retain and motivate current and prospective
employees may be adversely impacted by the repeated delays in the China Oceanwide transaction, the ensuing
uncertainty and/or the potential alternative strategic direction the company may go. Furthermore, as the future of
work evolves and work arrangements, such as a remote work environment become more flexible and
commonplace, our ability to compete for qualified employees could be further challenged. A remote work
environment could expand competition among employers and may put us at a disadvantage if we are unable or
unwilling to implement certain of these policies. We cannot be sure we will be able to attract, retain and motivate
the desired workforce, and our failure to do so could have a material adverse effect on results of operations,
financial condition and business operations. In addition, we may not be able to meet regulatory requirements
relating to required expertise in various professional positions.

Managing key employee succession and retention is also critical to our success. We would be adversely
affected if we fail to adequately plan for the succession of our senior management and other key employees.
While we have succession plans and long-term compensation plans, including retention programs, designed to
retain our employees, our succession plans may not operate effectively and our compensation plans cannot
guarantee that the services of these employees will continue to be available to us.

Our reliance on key customer or distribution relationships could cause us to lose significant sales if one or
more of those relationships terminate or are reduced.

Our businesses depend on our relationships with our customers, and in particular, our relationships with our
largest lending customers in our mortgage insurance businesses. Our customers place insurance with us directly
on loans that they originate and they also do business with us indirectly, primarily in the United States, through
purchases of loans that already have our mortgage insurance coverage. Our relationships with our customers may
influence both the amount of business they do with us directly and also their willingness to continue to approve
us as a mortgage insurance provider for loans that they purchase. Particularly in Australia where a large portion
of our business is concentrated with a small number of customers, the loss of business from significant customers
has had and could in the future have an adverse effect on the amount of new business we are able to write and
consequently, our financial condition and results of operations. Maintaining our business relationships and
business volumes with our largest lending customers remains critical to the success of our business.

We cannot be certain that any loss of business from significant customers, or any single lender, would be
replaced by other customers, existing or new. As a result of current market conditions and increased regulatory
requirements, our lending customers may decide to write business only with a limited number of mortgage
insurers or only with certain mortgage insurers, based on their views with respect to an insurer’s pricing, service
levels, underwriting guidelines, loss mitigation practices, financial strength, ratings or other factors.

As discussed in “Part I—Item 1—Business,” our mortgage insurance business in Australia is highly

concentrated in a small number of key lender customers, which increases our risks and exposure in the event one
or more of these customers terminate or reduce their relationship with us. Any termination, reduction or material
change in relationship with a key lender customer could have a material adverse effect on our future sales for one
or more products. In addition, some lenders self-insure certain high loan-to-value mortgage risks. If our lending
customers in this market increase the self-insurance or other alternatives to mortgage insurance, this could have
an unfavorable impact on the amount of new business we are able to write and consequently, our financial
condition and results of operations.

We distribute our products through a wide variety of distribution methods, including through relationships

with key distribution partners (including lender customers of our mortgage insurance businesses). These
distribution partners are an integral part of our business model. We are at risk that key distribution partners may
merge, change their distribution model affecting how our products are sold, or terminate their distribution

76

77

contracts or relationships with us. In addition, timing of key distributor adoption of our new product offerings
may impact sales of those products. Some distributors have, and in the future others may, elect to terminate or
reduce their distribution relationships with us for a variety of reasons, such as the result of our recent financial
challenges (including adverse ratings actions). Likewise, in the future, other distributors may terminate or
reduce their relationships with us as a result of, among other things, these challenges as well as future adverse
developments in our business or adverse rating agency actions or concerns about market-related risks,
commission levels or the breadth of our product offerings.

We compete with government-owned and government-sponsored enterprises in our mortgage insurance
businesses, and this may put us at a competitive disadvantage on pricing and other terms and conditions.

Our U.S. mortgage insurance business competes with the FHA and the VA, as well as certain local- and
state-level housing finance agencies. Separately, the government-owned and government-sponsored enterprises,
including Fannie Mae and Freddie Mac, compete with our U.S. mortgage insurance business through certain of
their risk-sharing insurance programs. Those competitors may establish pricing terms and business practices that
may be influenced by motives such as advancing social housing policy or stabilizing the mortgage lending
industry, which may not be consistent with maximizing return on capital or other profitability measures. In
addition, those governmental enterprises typically do not have the same capital requirements that we and other
mortgage insurance companies have and therefore may have financial flexibility in their pricing and capacity that
could put us at a competitive disadvantage. In the event that a government-owned or sponsored entity in one of
our markets determines to change prices significantly or alter the terms and conditions of its mortgage insurance
or other credit enhancement products in furtherance of social or other goals rather than a profit or risk
management motive, we may be unable to compete in that market effectively, which could have a material
adverse effect on our business, financial condition and results of operations.

Our Australia mortgage insurance business operates in a similar market as that of the National Housing Finance

and Investment Corporation (“NHFIC”), which is an Australian government-owned enterprise. In addition, we also
compete with lender captives and direct mortgage insurers. The NHFIC may establish pricing terms and business
practices, including offering a competitive product at no cost, that may be influenced by motives such as advancing
social housing policy or stabilizing the mortgage lending industry, which may not be consistent with maximizing
return on capital or other profitability measures. In the event that a government-owned or sponsored program or entity
in one of our markets determines to alter the terms and conditions of its credit enhancement products in furtherance of
social or other goals rather than a profit motive, we may be unable to compete in that market effectively, which could
have a material adverse effect on our business, financial condition and results of operations.

On January 1, 2020, the NHFIC launched the FHLDS, which is a program offered to support eligible first-

time home buyers at no cost. For more information on FHLDS, see “Regulation—Mortgage Insurance
Regulation—Australia Regulation.”

Our business could be adversely impacted from deficiencies in our disclosure controls and procedures or
internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial
reporting may not prevent all errors, misstatements or misrepresentations, particularly given our current remote
work environment and the increased risk that our employees may be unable to properly perform and execute
controls. While management continually reviews the effectiveness of our disclosure controls and procedures and
internal control over financial reporting, there can be no guarantee that our internal control over financial
reporting will be effective in accomplishing all control objectives all of the time. Any material weaknesses in
internal control over financial reporting, such as those we have reported in the past, or any other failure to
maintain effective disclosure controls and procedures could result in material errors or restatements in our
historical financial statements or untimely filings, which could cause investors to lose confidence in our reported
financial information, that would result in a material adverse impact on our business and financial condition.

Our computer systems may fail or be compromised, and unanticipated problems could materially

adversely impact our disaster recovery systems and business continuity plans, which could damage our

reputation, impair our ability to conduct business effectively and materially adversely affect our financial

condition and results of operations.

Our business is highly dependent upon the effective operation of our computer systems. We also have

arrangements in place with our partners and other third-party service providers through which we share and

receive information. We rely on these systems throughout our business for a variety of functions, including

processing claims and applications, providing information to customers and distributors, performing actuarial

analyses and maintaining financial records. Despite the implementation of security and back-up measures, our

computer systems and those of our partners and third-party service providers have been, and may be in the future,

vulnerable to physical or electronic intrusions, computer viruses or other attacks, programming errors and similar

disruptive problems. The failure of these systems for any reason could cause significant interruptions to our

operations, which could result in a material adverse effect on our business, financial condition or results of

operations.

Technology continues to expand and plays an ever increasing role in our business. While it is our goal to

safeguard information assets from physical theft and cybersecurity threats, there can be no assurance that our

information security will detect and protect information assets from these ever increasing risks. Information

assets include both information itself in the form of computer data, written materials, knowledge and supporting

processes, and the information technology systems, networks, other electronic devices and storage media used to

store, process, retrieve and transmit that information. As more information is used and shared by our employees,

customers and suppliers, both within and outside our company, cybersecurity threats become expansive in nature.

Confidentiality, integrity and availability of information are essential to maintaining our reputation, legal position

and ability to conduct our operations. Although we have implemented controls and continue to train our

employees, a cybersecurity event could still occur which would cause damage to our reputation with our

customers, distributors and other stakeholders and could have a material adverse effect on our business, financial

condition or results of operations.

We retain confidential information in our computer systems, and we rely on commercial technologies to

maintain the security of those systems, including computers or mobile devices. Anyone who is able to

circumvent our security measures and penetrate our computer systems or misuse authorized access could access,

view, misappropriate, alter, or delete any information in the systems, including personally identifiable

information, personal health information and proprietary business information. Our employees, distribution

partners and other vendors use portable computers or mobile devices which may contain similar information to

that in our computer systems, and these devices have been and can be lost, stolen or damaged, and therefore

subject to the same risks as our other computer systems. In addition, an increasing number of states and foreign

countries require that affected parties be notified or other actions be taken (which could involve significant costs

to us) if a security breach results in the inappropriate disclosure of personally identifiable information. We have

experienced occasional, actual or attempted breaches of our cybersecurity, although to date none of these

breaches has had a material effect on our business, operations or reputation. Any compromise of the security of

our computer systems or those of our partners and third-party service providers that results in inappropriate

disclosure of personally identifiable customer information could damage our reputation in the marketplace, deter

people from purchasing our products, subject us to significant civil and criminal liability and require us to incur

significant technical, legal and other expenses.

The area of cybersecurity has come under increased scrutiny in recent years, with various countries,

government agencies and insurance regulators introducing and/or passing legislation in an attempt to safeguard

personal information from the escalating cybersecurity treats. For additional details, see “Item 1. Business—

Regulation—Other Laws and Regulations—Cybersecurity.”

In addition, unanticipated problems with, or failures of, our disaster recovery systems and business

continuity plans could have a material adverse impact on our ability to conduct business and on our results of

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79

contracts or relationships with us. In addition, timing of key distributor adoption of our new product offerings

may impact sales of those products. Some distributors have, and in the future others may, elect to terminate or

reduce their distribution relationships with us for a variety of reasons, such as the result of our recent financial

challenges (including adverse ratings actions). Likewise, in the future, other distributors may terminate or

reduce their relationships with us as a result of, among other things, these challenges as well as future adverse

developments in our business or adverse rating agency actions or concerns about market-related risks,

commission levels or the breadth of our product offerings.

We compete with government-owned and government-sponsored enterprises in our mortgage insurance

businesses, and this may put us at a competitive disadvantage on pricing and other terms and conditions.

Our U.S. mortgage insurance business competes with the FHA and the VA, as well as certain local- and

state-level housing finance agencies. Separately, the government-owned and government-sponsored enterprises,

including Fannie Mae and Freddie Mac, compete with our U.S. mortgage insurance business through certain of

their risk-sharing insurance programs. Those competitors may establish pricing terms and business practices that

may be influenced by motives such as advancing social housing policy or stabilizing the mortgage lending

industry, which may not be consistent with maximizing return on capital or other profitability measures. In

addition, those governmental enterprises typically do not have the same capital requirements that we and other

mortgage insurance companies have and therefore may have financial flexibility in their pricing and capacity that

could put us at a competitive disadvantage. In the event that a government-owned or sponsored entity in one of

our markets determines to change prices significantly or alter the terms and conditions of its mortgage insurance

or other credit enhancement products in furtherance of social or other goals rather than a profit or risk

management motive, we may be unable to compete in that market effectively, which could have a material

adverse effect on our business, financial condition and results of operations.

Our Australia mortgage insurance business operates in a similar market as that of the National Housing Finance

and Investment Corporation (“NHFIC”), which is an Australian government-owned enterprise. In addition, we also

compete with lender captives and direct mortgage insurers. The NHFIC may establish pricing terms and business

practices, including offering a competitive product at no cost, that may be influenced by motives such as advancing

social housing policy or stabilizing the mortgage lending industry, which may not be consistent with maximizing

return on capital or other profitability measures. In the event that a government-owned or sponsored program or entity

in one of our markets determines to alter the terms and conditions of its credit enhancement products in furtherance of

social or other goals rather than a profit motive, we may be unable to compete in that market effectively, which could

have a material adverse effect on our business, financial condition and results of operations.

On January 1, 2020, the NHFIC launched the FHLDS, which is a program offered to support eligible first-

time home buyers at no cost. For more information on FHLDS, see “Regulation—Mortgage Insurance

Regulation—Australia Regulation.”

Our business could be adversely impacted from deficiencies in our disclosure controls and procedures or

internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial

reporting may not prevent all errors, misstatements or misrepresentations, particularly given our current remote

work environment and the increased risk that our employees may be unable to properly perform and execute

controls. While management continually reviews the effectiveness of our disclosure controls and procedures and

internal control over financial reporting, there can be no guarantee that our internal control over financial

reporting will be effective in accomplishing all control objectives all of the time. Any material weaknesses in

internal control over financial reporting, such as those we have reported in the past, or any other failure to

maintain effective disclosure controls and procedures could result in material errors or restatements in our

historical financial statements or untimely filings, which could cause investors to lose confidence in our reported

financial information, that would result in a material adverse impact on our business and financial condition.

Our computer systems may fail or be compromised, and unanticipated problems could materially
adversely impact our disaster recovery systems and business continuity plans, which could damage our
reputation, impair our ability to conduct business effectively and materially adversely affect our financial
condition and results of operations.

Our business is highly dependent upon the effective operation of our computer systems. We also have
arrangements in place with our partners and other third-party service providers through which we share and
receive information. We rely on these systems throughout our business for a variety of functions, including
processing claims and applications, providing information to customers and distributors, performing actuarial
analyses and maintaining financial records. Despite the implementation of security and back-up measures, our
computer systems and those of our partners and third-party service providers have been, and may be in the future,
vulnerable to physical or electronic intrusions, computer viruses or other attacks, programming errors and similar
disruptive problems. The failure of these systems for any reason could cause significant interruptions to our
operations, which could result in a material adverse effect on our business, financial condition or results of
operations.

Technology continues to expand and plays an ever increasing role in our business. While it is our goal to
safeguard information assets from physical theft and cybersecurity threats, there can be no assurance that our
information security will detect and protect information assets from these ever increasing risks. Information
assets include both information itself in the form of computer data, written materials, knowledge and supporting
processes, and the information technology systems, networks, other electronic devices and storage media used to
store, process, retrieve and transmit that information. As more information is used and shared by our employees,
customers and suppliers, both within and outside our company, cybersecurity threats become expansive in nature.
Confidentiality, integrity and availability of information are essential to maintaining our reputation, legal position
and ability to conduct our operations. Although we have implemented controls and continue to train our
employees, a cybersecurity event could still occur which would cause damage to our reputation with our
customers, distributors and other stakeholders and could have a material adverse effect on our business, financial
condition or results of operations.

We retain confidential information in our computer systems, and we rely on commercial technologies to

maintain the security of those systems, including computers or mobile devices. Anyone who is able to
circumvent our security measures and penetrate our computer systems or misuse authorized access could access,
view, misappropriate, alter, or delete any information in the systems, including personally identifiable
information, personal health information and proprietary business information. Our employees, distribution
partners and other vendors use portable computers or mobile devices which may contain similar information to
that in our computer systems, and these devices have been and can be lost, stolen or damaged, and therefore
subject to the same risks as our other computer systems. In addition, an increasing number of states and foreign
countries require that affected parties be notified or other actions be taken (which could involve significant costs
to us) if a security breach results in the inappropriate disclosure of personally identifiable information. We have
experienced occasional, actual or attempted breaches of our cybersecurity, although to date none of these
breaches has had a material effect on our business, operations or reputation. Any compromise of the security of
our computer systems or those of our partners and third-party service providers that results in inappropriate
disclosure of personally identifiable customer information could damage our reputation in the marketplace, deter
people from purchasing our products, subject us to significant civil and criminal liability and require us to incur
significant technical, legal and other expenses.

The area of cybersecurity has come under increased scrutiny in recent years, with various countries,
government agencies and insurance regulators introducing and/or passing legislation in an attempt to safeguard
personal information from the escalating cybersecurity treats. For additional details, see “Item 1. Business—
Regulation—Other Laws and Regulations—Cybersecurity.”

In addition, unanticipated problems with, or failures of, our disaster recovery systems and business
continuity plans could have a material adverse impact on our ability to conduct business and on our results of

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79

operations and financial condition, particularly if those problems affect our information technology systems and
destroy, lose or otherwise compromise valuable data. Furthermore, in the event that a significant number of our
employees were unavailable in the event of a disaster or a pandemic, our ability to effectively conduct business
could be severely compromised. The failure of our disaster recovery systems and business continuity plans could
adversely impact our profitability and our business.

Insurance and Product-Related Risks

We may be unable to maintain or increase the capital needed in our U.S. mortgage insurance business in a
timely manner, on anticipated terms or at all, including through improved business performance,
reinsurance or similar transactions, asset sales, securities offerings or otherwise, in each case as and when
required.

We intend to continue to support the increased capital needs of our U.S. mortgage insurance business
resulting from PMIERs. As of December 31, 2020 and 2019, our U.S. mortgage insurance business met the
PMIERs financial and operational requirements. In order to continue to provide a prudent level of financial
flexibility in connection with the PMIERs capital requirements given the dynamic nature of asset valuations,
requirement changes over time and recent conditions and restrictions imposed on us by the GSEs, our U.S.
mortgage insurance business may be required to execute future capital transactions, including additional credit
risk transfer transactions and contributions of holding company cash. See “—If we are unable to continue to meet
the requirements mandated by PMIERs because the GSEs amend them or the GSEs’ interpretation of the
financial requirements requires us to hold amounts of capital that are higher than we have planned or otherwise,
we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material
adverse effect on our business, results of operations and financial condition.”

The implementation of any further credit risk transfer transactions depends on a number of factors,
including but not limited to: the outcome of the China Oceanwide transaction, market conditions, third-party
approvals or other actions (including approval by regulators and the GSEs), and other factors which are outside
of our control, and therefore we cannot be sure we will be able to successfully implement these actions on the
anticipated timetable and terms, or at all. Even if we are able to successfully implement these actions, there is no
assurance we will be able to achieve the anticipated benefits from the actions. For a discussion of risks related to
our strategic plans, see “—We may be unable to successfully execute strategic plans to effectively address our
current business challenges.”

Our financial condition, results of operations, long-term care insurance products and/or our reputation in
the market may be adversely affected if we are unable to implement premium rate increases and
associated benefit reductions on our in-force long-term care insurance policies by enough or quickly
enough.

The continued viability of our long-term care insurance business, as well as that of GLIC and GLICNY, is

based on our ability to obtain significant premium rate increases and associated benefit reductions on our in-force
long-term care insurance products, as warranted and actuarially justified. The adequacy of our current long-term
care insurance reserves also depends significantly on certain assumptions regarding our ability to successfully
execute our in-force management rate action plan through premium rate increases and associated benefit reductions.
We include assumptions for future in-force rate actions, which includes assumptions for significant premium rate
increases and associated benefit reductions that have been approved or are anticipated to be approved (including
premium rate increases and associated benefit reductions not yet filed), in our determination of loss recognition
testing of our long-term care insurance reserves under U.S. GAAP and asset adequacy testing of our statutory long-
term care insurance reserves. In 2020, our long-term care insurance block, excluding our acquired block, includes an
assumption for future in-force rate actions (anticipated to be approved, including premium rate increases and
associated benefit reductions not yet filed) of approximately $8.0 billion in its loss recognition testing.

Although the terms of our long-term care insurance policies permit us to increase premiums under certain

circumstances during the premium-paying period, these increases generally require regulatory approval, which

can often take a long time to obtain and may not be obtained in all relevant jurisdictions or for the full amounts

requested. In addition, some states are considering adopting long-term care insurance rate increase legislation

that would further limit increases in long-term care insurance premium rates beyond the rate stability legislation

previously adopted in certain states, which would adversely impact our ability to achieve anticipated rate

increases. Furthermore, some states have refused to approve actuarially justified rate actions.

We will not be able to realize our future premium rate increases and associated benefit reductions in the

future if we cannot obtain the required regulatory approvals. In this event, we would have to increase our long-

term care insurance reserves by amounts that would likely be material and would result in a material adverse

impact. Moreover, we may not be able to sufficiently mitigate the impact of unexpected adverse experience

through premium rate increases and associated benefit reductions. Given the ongoing pressure to earnings from

higher incurred claims in our long-term care insurance business, absent the future premium rate increases and

associated benefit reductions, our results of operations, capital levels, RBC and financial condition would be

materially adversely affected. In addition, if the timing of our future premium rate increases and associated

benefit reductions takes longer to achieve than originally assumed, we would likely record higher reserves with

no offsetting premiums and associated benefit reductions from in-force rate actions to mitigate the negative

impact, which would likely result in an operating loss for our long-term care insurance business.

Policyholders may be unwilling or unable to pay the increased premium rates we will seek to charge. We

cannot predict how our policyholders and regulators may react to any in-force rate increases, nor can we predict

if regulators will approve requested in-force rate increases.

Reinsurance may not be available, affordable or adequate to protect us against losses.

As part of our overall risk and capital management strategy, we purchase reinsurance from external

reinsurers, use credit risk transfer transactions and provide internal reinsurance support for certain risks

underwritten by our various business segments. These reinsurance arrangements and credit risk transfer

transactions are intended to enable our businesses to transfer risks in exchange for some of the associated

economic benefits and, as a result, improve our statutory capital position, manage risk to within our tolerance

level and improve the PMIERs position of our U.S. mortgage insurance business. Some of these reinsurance

arrangements are indefinite, but others require periodic renewals (such as reinsurance contracts in Australia). For

these arrangements, at the end of the base term, we can elect a runoff term to continue coverage, with reducing

amounts of regulatory capital benefits, or attempt to negotiate a renewal. The availability and cost of reinsurance

protection are impacted by our operating and financial performance, including ratings, as well as conditions

beyond our control. For example, our financial challenges and adverse rating actions may reduce the availability

of certain types of reinsurance and make it more costly when it is available, as reinsurers are less willing to take

on credit risk in a volatile market. Accordingly, we may be forced to incur additional expenses for reinsurance or

may not be able to obtain new reinsurance or renew existing reinsurance arrangements on acceptable terms, or at

all, which could increase our risk and adversely affect our ability to obtain statutory capital credit for new

reinsurance or could require us to make capital contributions to maintain regulatory capital requirements.

Likewise, our U.S. mortgage insurance business has incurred higher expenses associated with credit risk transfer

transactions during 2020 for a variety of reasons, including COVID-19 and may be unable to obtain new

transactions on acceptable terms or at all in the future. Absent the availability and affordability to enter into new

credit risk transfer transactions, the ability of our U.S. mortgage insurance business to obtain PMIERs or

statutory credit for new transactions could be adversely impacted. See “—If we are unable to continue to meet

the requirements mandated by PMIERs because the GSEs amend them or the GSEs’ interpretation of the

financial requirements requires us to hold amounts of capital that are higher than we have planned or otherwise,

we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material

adverse effect on our business, results of operations and financial condition.”

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operations and financial condition, particularly if those problems affect our information technology systems and

destroy, lose or otherwise compromise valuable data. Furthermore, in the event that a significant number of our

employees were unavailable in the event of a disaster or a pandemic, our ability to effectively conduct business

could be severely compromised. The failure of our disaster recovery systems and business continuity plans could

adversely impact our profitability and our business.

Insurance and Product-Related Risks

We may be unable to maintain or increase the capital needed in our U.S. mortgage insurance business in a

timely manner, on anticipated terms or at all, including through improved business performance,

reinsurance or similar transactions, asset sales, securities offerings or otherwise, in each case as and when

required.

We intend to continue to support the increased capital needs of our U.S. mortgage insurance business

resulting from PMIERs. As of December 31, 2020 and 2019, our U.S. mortgage insurance business met the

PMIERs financial and operational requirements. In order to continue to provide a prudent level of financial

flexibility in connection with the PMIERs capital requirements given the dynamic nature of asset valuations,

requirement changes over time and recent conditions and restrictions imposed on us by the GSEs, our U.S.

mortgage insurance business may be required to execute future capital transactions, including additional credit

risk transfer transactions and contributions of holding company cash. See “—If we are unable to continue to meet

the requirements mandated by PMIERs because the GSEs amend them or the GSEs’ interpretation of the

financial requirements requires us to hold amounts of capital that are higher than we have planned or otherwise,

we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material

adverse effect on our business, results of operations and financial condition.”

The implementation of any further credit risk transfer transactions depends on a number of factors,

including but not limited to: the outcome of the China Oceanwide transaction, market conditions, third-party

approvals or other actions (including approval by regulators and the GSEs), and other factors which are outside

of our control, and therefore we cannot be sure we will be able to successfully implement these actions on the

anticipated timetable and terms, or at all. Even if we are able to successfully implement these actions, there is no

assurance we will be able to achieve the anticipated benefits from the actions. For a discussion of risks related to

our strategic plans, see “—We may be unable to successfully execute strategic plans to effectively address our

current business challenges.”

Our financial condition, results of operations, long-term care insurance products and/or our reputation in

the market may be adversely affected if we are unable to implement premium rate increases and

associated benefit reductions on our in-force long-term care insurance policies by enough or quickly

enough.

The continued viability of our long-term care insurance business, as well as that of GLIC and GLICNY, is

based on our ability to obtain significant premium rate increases and associated benefit reductions on our in-force

long-term care insurance products, as warranted and actuarially justified. The adequacy of our current long-term

care insurance reserves also depends significantly on certain assumptions regarding our ability to successfully

execute our in-force management rate action plan through premium rate increases and associated benefit reductions.

We include assumptions for future in-force rate actions, which includes assumptions for significant premium rate

increases and associated benefit reductions that have been approved or are anticipated to be approved (including

premium rate increases and associated benefit reductions not yet filed), in our determination of loss recognition

testing of our long-term care insurance reserves under U.S. GAAP and asset adequacy testing of our statutory long-

term care insurance reserves. In 2020, our long-term care insurance block, excluding our acquired block, includes an

assumption for future in-force rate actions (anticipated to be approved, including premium rate increases and

associated benefit reductions not yet filed) of approximately $8.0 billion in its loss recognition testing.

Although the terms of our long-term care insurance policies permit us to increase premiums under certain
circumstances during the premium-paying period, these increases generally require regulatory approval, which
can often take a long time to obtain and may not be obtained in all relevant jurisdictions or for the full amounts
requested. In addition, some states are considering adopting long-term care insurance rate increase legislation
that would further limit increases in long-term care insurance premium rates beyond the rate stability legislation
previously adopted in certain states, which would adversely impact our ability to achieve anticipated rate
increases. Furthermore, some states have refused to approve actuarially justified rate actions.

We will not be able to realize our future premium rate increases and associated benefit reductions in the

future if we cannot obtain the required regulatory approvals. In this event, we would have to increase our long-
term care insurance reserves by amounts that would likely be material and would result in a material adverse
impact. Moreover, we may not be able to sufficiently mitigate the impact of unexpected adverse experience
through premium rate increases and associated benefit reductions. Given the ongoing pressure to earnings from
higher incurred claims in our long-term care insurance business, absent the future premium rate increases and
associated benefit reductions, our results of operations, capital levels, RBC and financial condition would be
materially adversely affected. In addition, if the timing of our future premium rate increases and associated
benefit reductions takes longer to achieve than originally assumed, we would likely record higher reserves with
no offsetting premiums and associated benefit reductions from in-force rate actions to mitigate the negative
impact, which would likely result in an operating loss for our long-term care insurance business.

Policyholders may be unwilling or unable to pay the increased premium rates we will seek to charge. We

cannot predict how our policyholders and regulators may react to any in-force rate increases, nor can we predict
if regulators will approve requested in-force rate increases.

Reinsurance may not be available, affordable or adequate to protect us against losses.

As part of our overall risk and capital management strategy, we purchase reinsurance from external
reinsurers, use credit risk transfer transactions and provide internal reinsurance support for certain risks
underwritten by our various business segments. These reinsurance arrangements and credit risk transfer
transactions are intended to enable our businesses to transfer risks in exchange for some of the associated
economic benefits and, as a result, improve our statutory capital position, manage risk to within our tolerance
level and improve the PMIERs position of our U.S. mortgage insurance business. Some of these reinsurance
arrangements are indefinite, but others require periodic renewals (such as reinsurance contracts in Australia). For
these arrangements, at the end of the base term, we can elect a runoff term to continue coverage, with reducing
amounts of regulatory capital benefits, or attempt to negotiate a renewal. The availability and cost of reinsurance
protection are impacted by our operating and financial performance, including ratings, as well as conditions
beyond our control. For example, our financial challenges and adverse rating actions may reduce the availability
of certain types of reinsurance and make it more costly when it is available, as reinsurers are less willing to take
on credit risk in a volatile market. Accordingly, we may be forced to incur additional expenses for reinsurance or
may not be able to obtain new reinsurance or renew existing reinsurance arrangements on acceptable terms, or at
all, which could increase our risk and adversely affect our ability to obtain statutory capital credit for new
reinsurance or could require us to make capital contributions to maintain regulatory capital requirements.
Likewise, our U.S. mortgage insurance business has incurred higher expenses associated with credit risk transfer
transactions during 2020 for a variety of reasons, including COVID-19 and may be unable to obtain new
transactions on acceptable terms or at all in the future. Absent the availability and affordability to enter into new
credit risk transfer transactions, the ability of our U.S. mortgage insurance business to obtain PMIERs or
statutory credit for new transactions could be adversely impacted. See “—If we are unable to continue to meet
the requirements mandated by PMIERs because the GSEs amend them or the GSEs’ interpretation of the
financial requirements requires us to hold amounts of capital that are higher than we have planned or otherwise,
we may not be eligible to write new insurance on loans acquired by the GSEs, which would have a material
adverse effect on our business, results of operations and financial condition.”

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We also manage risk and capital allocated to our long-term care insurance business through utilization of
external reinsurance in the form of coinsurance. We executed external reinsurance agreements to reinsure 20% of
all sales of our individual long-term care insurance products that have been introduced since early 2013. External
new business reinsurance is dependent on a number of factors, including price, availability, risk tolerance and
capital levels. Over time, there can be no assurance that affordable, or any, reinsurance will continue to be
available. We also have external reinsurance on some older blocks of business which includes a treaty on a yearly
renewable term basis on business that was written between 1998 and 2003. This yearly renewable term
reinsurance provides coverage for claims on those policies for 15 years after the policy was written. After 15
years, reinsurance coverage ends for policies not on claim, while reinsurance coverage continues for policies on
claim until the claim ends. The 15-year coverage on the policies written in 2003 expired in 2018; therefore, any
new claims will not have reinsurance coverage under this treaty. Since 2013, we have seen, and may continue to
see, an increase in our benefit costs as policies with reinsurance coverage exhaust their benefits or terminate and
policies which are not covered by reinsurance go on claim.

A decrease in the volume of high loan-to-value home mortgage originations or an increase in the volume of
mortgage insurance cancellations could result in a decline in our revenue in our mortgage insurance
businesses.

We provide mortgage insurance primarily for high loan-to-value mortgages. Factors that could lead to a

decrease in the volume of high loan-to-value mortgage originations include, but are not limited to:

•

•

•

•

•

•

•

•

an increase in the level of home mortgage interest rates and, in the United States, a reduction or loss of
mortgage interest deductibility for federal income tax purposes;

implementation of more rigorous mortgage lending regulation, such as under APRA Prudential Practice
Guides in Australia;

a decline in economic conditions generally, or in conditions in regional and local economies;

the level of consumer confidence, which may be adversely affected by economic instability, war or
terrorist events;

an increase in the price of homes relative to income levels;

adverse population trends, including lower homeownership rates;

high rates of home price appreciation, which for refinancings affect whether refinanced loans have
loan-to-value ratios that require mortgage insurance; and

changes in government housing policy encouraging loans to first-time home buyers.

A decline in the volume of high loan-to-value mortgage originations would reduce the demand for mortgage
insurance and, therefore, could have a material adverse effect on our financial condition and results of operations.

In addition, a significant percentage of the premiums we earn each year in our U.S. mortgage insurance

business are renewal premiums from insurance policies written in previous years. We estimate that
approximately 85% of our U.S. gross premiums earned for the year ended December 31, 2020 were renewal
premiums compared to approximately 88% for both the years ended December 31, 2019 and 2018. As a result,
the length of time insurance remains in-force is an important determinant of our mortgage insurance revenues.
Fannie Mae, Freddie Mac and many other mortgage investors in the United States generally permit a homeowner
to ask the loan servicer to cancel the borrower’s obligation to pay for mortgage insurance when the principal
amount of the mortgage falls below 80% of the home’s value. Factors that tend to reduce the length of time our
mortgage insurance remains in-force include:

•

declining interest rates, which may result in the refinancing of the mortgages underlying our insurance
policies with new mortgage loans that may not require mortgage insurance or that we do not insure;

requirements.

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•

•

•

•

•

•

•

significant appreciation in the value of homes, which causes the size of the mortgage to decrease below

80% of the value of the home and enables the borrower to request cancellation of the mortgage

insurance; and

changes in mortgage insurance cancellation requirements under applicable federal law or mortgage

insurance cancellation practices by mortgage lenders and investors.

Our U.S. mortgage primary persistency rates were 59%, 76% and 82% for the years ended December 31,

2020, 2019 and 2018, respectively. A decrease in persistency in the U.S. market generally would reduce the

amount of our insurance in-force and could have a material adverse effect on our financial condition and results

of operations. However, higher persistency on certain products, especially A minus, Alt-A, ARMs and certain

100% loan-to-value loans, could have a material adverse effect if claims generated by such products remain

elevated or increase.

The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage

insurance are used or lower coverage levels of mortgage insurance are selected.

There are a variety of alternatives to private mortgage insurance that may reduce the amount of mortgage

insurance we write. These alternatives include:

•

originating mortgages in the United States that consist of two simultaneous loans, known as

“simultaneous seconds,” comprising a first mortgage with a loan-to-value ratio of 80% and a

simultaneous second mortgage for the excess portion of the loan, instead of a single mortgage with a

loan-to-value ratio of more than 80%;

using government mortgage insurance programs;

holding mortgages in the lenders’ own loan portfolios and self-insuring;

using programs, such as those offered by Fannie Mae and Freddie Mac in the United States, requiring

lower mortgage insurance coverage levels;

originating and securitizing loans in mortgage-backed securities whose underlying mortgages are not

insured with private mortgage insurance or which are structured so that the risk of default lies with the

investor, rather than a private mortgage insurer; and

using risk-sharing insurance programs, credit default swaps or similar instruments, instead of private

mortgage insurance, to transfer credit risk on mortgages.

The degree to which lenders or borrowers may select these alternatives now, or in the future, is difficult to

predict. As one or more of the alternatives described above, or new alternatives that enter the market, are chosen

over mortgage insurance, our revenues could be adversely impacted. The loss of business in general or the

specific loss of more profitable business could have a material adverse effect on our results of operations and

financial condition.

Potential liabilities in connection with our U.S. contract underwriting services could have a material

adverse effect on our financial condition and results of operations.

We offer contract underwriting services to certain of our mortgage lenders in the United States, pursuant to

which our employees and contractors work directly with the lender to determine whether the data relating to a

borrower and a proposed loan contained in a mortgage loan application file complies with the lender’s loan

underwriting guidelines or the investor’s loan purchase requirements. In connection with that service, we also

compile the application data and submit it to the automated underwriting systems of Fannie Mae and Freddie

Mac, which independently analyze the data to determine if the proposed loan complies with their investor

We also manage risk and capital allocated to our long-term care insurance business through utilization of

external reinsurance in the form of coinsurance. We executed external reinsurance agreements to reinsure 20% of

all sales of our individual long-term care insurance products that have been introduced since early 2013. External

new business reinsurance is dependent on a number of factors, including price, availability, risk tolerance and

capital levels. Over time, there can be no assurance that affordable, or any, reinsurance will continue to be

available. We also have external reinsurance on some older blocks of business which includes a treaty on a yearly

renewable term basis on business that was written between 1998 and 2003. This yearly renewable term

reinsurance provides coverage for claims on those policies for 15 years after the policy was written. After 15

years, reinsurance coverage ends for policies not on claim, while reinsurance coverage continues for policies on

claim until the claim ends. The 15-year coverage on the policies written in 2003 expired in 2018; therefore, any

new claims will not have reinsurance coverage under this treaty. Since 2013, we have seen, and may continue to

see, an increase in our benefit costs as policies with reinsurance coverage exhaust their benefits or terminate and

policies which are not covered by reinsurance go on claim.

A decrease in the volume of high loan-to-value home mortgage originations or an increase in the volume of

mortgage insurance cancellations could result in a decline in our revenue in our mortgage insurance

businesses.

We provide mortgage insurance primarily for high loan-to-value mortgages. Factors that could lead to a

decrease in the volume of high loan-to-value mortgage originations include, but are not limited to:

an increase in the level of home mortgage interest rates and, in the United States, a reduction or loss of

mortgage interest deductibility for federal income tax purposes;

implementation of more rigorous mortgage lending regulation, such as under APRA Prudential Practice

Guides in Australia;

terrorist events;

a decline in economic conditions generally, or in conditions in regional and local economies;

the level of consumer confidence, which may be adversely affected by economic instability, war or

an increase in the price of homes relative to income levels;

adverse population trends, including lower homeownership rates;

high rates of home price appreciation, which for refinancings affect whether refinanced loans have

loan-to-value ratios that require mortgage insurance; and

changes in government housing policy encouraging loans to first-time home buyers.

•

•

•

•

•

•

•

•

A decline in the volume of high loan-to-value mortgage originations would reduce the demand for mortgage

insurance and, therefore, could have a material adverse effect on our financial condition and results of operations.

In addition, a significant percentage of the premiums we earn each year in our U.S. mortgage insurance

business are renewal premiums from insurance policies written in previous years. We estimate that

approximately 85% of our U.S. gross premiums earned for the year ended December 31, 2020 were renewal

premiums compared to approximately 88% for both the years ended December 31, 2019 and 2018. As a result,

the length of time insurance remains in-force is an important determinant of our mortgage insurance revenues.

Fannie Mae, Freddie Mac and many other mortgage investors in the United States generally permit a homeowner

to ask the loan servicer to cancel the borrower’s obligation to pay for mortgage insurance when the principal

amount of the mortgage falls below 80% of the home’s value. Factors that tend to reduce the length of time our

mortgage insurance remains in-force include:

•

declining interest rates, which may result in the refinancing of the mortgages underlying our insurance

policies with new mortgage loans that may not require mortgage insurance or that we do not insure;

•

•

significant appreciation in the value of homes, which causes the size of the mortgage to decrease below
80% of the value of the home and enables the borrower to request cancellation of the mortgage
insurance; and

changes in mortgage insurance cancellation requirements under applicable federal law or mortgage
insurance cancellation practices by mortgage lenders and investors.

Our U.S. mortgage primary persistency rates were 59%, 76% and 82% for the years ended December 31,

2020, 2019 and 2018, respectively. A decrease in persistency in the U.S. market generally would reduce the
amount of our insurance in-force and could have a material adverse effect on our financial condition and results
of operations. However, higher persistency on certain products, especially A minus, Alt-A, ARMs and certain
100% loan-to-value loans, could have a material adverse effect if claims generated by such products remain
elevated or increase.

The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage
insurance are used or lower coverage levels of mortgage insurance are selected.

There are a variety of alternatives to private mortgage insurance that may reduce the amount of mortgage

insurance we write. These alternatives include:

•

•

•

•

•

•

originating mortgages in the United States that consist of two simultaneous loans, known as
“simultaneous seconds,” comprising a first mortgage with a loan-to-value ratio of 80% and a
simultaneous second mortgage for the excess portion of the loan, instead of a single mortgage with a
loan-to-value ratio of more than 80%;

using government mortgage insurance programs;

holding mortgages in the lenders’ own loan portfolios and self-insuring;

using programs, such as those offered by Fannie Mae and Freddie Mac in the United States, requiring
lower mortgage insurance coverage levels;

originating and securitizing loans in mortgage-backed securities whose underlying mortgages are not
insured with private mortgage insurance or which are structured so that the risk of default lies with the
investor, rather than a private mortgage insurer; and

using risk-sharing insurance programs, credit default swaps or similar instruments, instead of private
mortgage insurance, to transfer credit risk on mortgages.

The degree to which lenders or borrowers may select these alternatives now, or in the future, is difficult to
predict. As one or more of the alternatives described above, or new alternatives that enter the market, are chosen
over mortgage insurance, our revenues could be adversely impacted. The loss of business in general or the
specific loss of more profitable business could have a material adverse effect on our results of operations and
financial condition.

Potential liabilities in connection with our U.S. contract underwriting services could have a material
adverse effect on our financial condition and results of operations.

We offer contract underwriting services to certain of our mortgage lenders in the United States, pursuant to

which our employees and contractors work directly with the lender to determine whether the data relating to a
borrower and a proposed loan contained in a mortgage loan application file complies with the lender’s loan
underwriting guidelines or the investor’s loan purchase requirements. In connection with that service, we also
compile the application data and submit it to the automated underwriting systems of Fannie Mae and Freddie
Mac, which independently analyze the data to determine if the proposed loan complies with their investor
requirements.

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For example, a natural or man-made disaster or a pandemic, similar to COVID-19, could disrupt our computer

systems and our ability to conduct or process business, as well as lead to unexpected changes in policyholders

and contractholders behavior. The continued threat of terrorism and ongoing military actions may cause

significant volatility in global financial markets, and a natural or man-made disaster or a pandemic could trigger

an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could,

among other things, result in a decline in business and increased claims from those areas, as well as an adverse

effect on home prices in those areas, which could result in increased loss experience in our mortgage insurance

businesses. Disasters or a pandemic also could disrupt public and private infrastructure, including

communications and financial services, which could disrupt our normal business operations.

Item 1B. Unresolved Staff Comments

We have no unresolved comments from the staff of the SEC.

Item 2. Properties

We own our headquarters facility in Richmond, Virginia, which consists of approximately 450,000 square

feet in four buildings, as well as one facility in Lynchburg, Virginia with approximately 210,000 square feet. In

addition, we lease one office space with approximately 20,000 square feet in Lynchburg, Virginia and another

198,000 square feet of office space in 6 locations throughout the United States. We also lease approximately

74,000 square feet in 4 locations outside the United States.

Item 3. Legal Proceedings

See note 20 in our consolidated financial statements under “Part II—Item 8—Financial Statements and

Supplementary Data” for a description of material pending litigation and regulatory matters affecting us.

Item 4. Mine Safety Disclosures

Not applicable.

Under the terms of our contract underwriting agreements, we agree to indemnify the lender against losses

incurred in the event that we make material errors in determining whether loans processed by our contract
underwriters meet specified underwriting or purchase criteria, subject to contractual limitations on liability. As a
result, we assume credit and processing risk in connection with our contract underwriting services. If our reserves
for potential claims in connection with our contract underwriting services are inadequate as a result of differences
from our estimates and assumptions or other reasons, we may be required to increase our underlying reserves,
which could materially adversely affect our results of operations and financial condition.

Medical advances, such as genetic research and diagnostic imaging, and related legislation could
materially adversely affect the financial performance of our life insurance, long-term care insurance and
annuity businesses.

Genetic testing research and discovery is advancing at a rapid pace. Though some of this research is focused

on identifying the genes associated with rare diseases, much of the research is focused on identifying the genes
associated with an increased risk of various diseases such as diabetes, heart disease, cancer and Alzheimer’s
disease. Diagnostic testing utilizing various blood panels or imaging techniques, including the use of artificial
intelligence, may allow clinicians to detect similar diseases during an earlier treatment phase and prescribe more
acute medicine or treatments. We believe that if an individual learns through such testing that they are
predisposed to a condition that may reduce their life expectancy or increase their chances of requiring long-term
care, they potentially will be more likely to purchase life and long-term care insurance policies or not permit their
existing policy to lapse. In contrast, if an individual learns that they lack the genetic predisposition to develop the
conditions that reduce longevity or require long-term care, they potentially will be less likely to purchase life and
long-term care insurance products, but more likely to purchase certain annuity products and permit their life and
long-term care insurance policies to lapse.

Being able to access and use the medical information (including the results of genetic and diagnostic testing)

known to our prospective policyholders is important to ensure that an underwriting risk assessment matches the
anticipated risk priced into our life and long-term care insurance products, as well as our annuity products.
Currently, there are some state level restrictions related to an insurer’s access and use of genetic information, and
periodically new genetic testing legislation is being introduced. However, further restrictions on the access and
use of such medical information could create a mismatch between an assessed risk and the product pricing. Such
a mismatch has the potential to increase product pricing causing a decrease in sales to lower risk individuals
resulting in higher risk individuals becoming the more likely buyer. In addition, it is possible that regulators may
enforce anti-discrimination provisions even when medical information is available that indicates a purchaser is at
higher risk. The net result of this could cause a deterioration in the risk profile of our portfolio which could lead
to payments to our policyholders and contractholders that are materially higher than anticipated. Any of these
events could materially adversely affect our business, results of operations and financial condition.

In addition to earlier diagnosis or knowledge of disease risk, medical advances may also lead to newer
forms of preventive care which could improve an individual’s overall health and/or longevity. If this were to
occur, the duration of payments made by us under certain forms of long-term care and life insurance policies or
annuity contracts would likely increase thereby reducing our profitability on those products. Conversely, slower
progressing medical advances, particularly in the areas of cognitive decline, could adversely impact our long-
term care insurance business as policyholders may remain on claim for a long period of time resulting in higher
severity and duration of claims.

Other General Risk

The occurrence of natural or man-made disasters or a future pandemic could materially adversely affect
our financial condition and results of operations.

We are exposed to various risks arising out of natural disasters, including fires, earthquakes, hurricanes,

floods and tornadoes, and man-made disasters, including acts of terrorism and military actions and pandemics.

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For example, a natural or man-made disaster or a pandemic, similar to COVID-19, could disrupt our computer
systems and our ability to conduct or process business, as well as lead to unexpected changes in policyholders
and contractholders behavior. The continued threat of terrorism and ongoing military actions may cause
significant volatility in global financial markets, and a natural or man-made disaster or a pandemic could trigger
an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could,
among other things, result in a decline in business and increased claims from those areas, as well as an adverse
effect on home prices in those areas, which could result in increased loss experience in our mortgage insurance
businesses. Disasters or a pandemic also could disrupt public and private infrastructure, including
communications and financial services, which could disrupt our normal business operations.

Item 1B. Unresolved Staff Comments

We have no unresolved comments from the staff of the SEC.

Item 2. Properties

We own our headquarters facility in Richmond, Virginia, which consists of approximately 450,000 square
feet in four buildings, as well as one facility in Lynchburg, Virginia with approximately 210,000 square feet. In
addition, we lease one office space with approximately 20,000 square feet in Lynchburg, Virginia and another
198,000 square feet of office space in 6 locations throughout the United States. We also lease approximately
74,000 square feet in 4 locations outside the United States.

Item 3. Legal Proceedings

See note 20 in our consolidated financial statements under “Part II—Item 8—Financial Statements and

Supplementary Data” for a description of material pending litigation and regulatory matters affecting us.

Item 4. Mine Safety Disclosures

Not applicable.

Under the terms of our contract underwriting agreements, we agree to indemnify the lender against losses

incurred in the event that we make material errors in determining whether loans processed by our contract

underwriters meet specified underwriting or purchase criteria, subject to contractual limitations on liability. As a

result, we assume credit and processing risk in connection with our contract underwriting services. If our reserves

for potential claims in connection with our contract underwriting services are inadequate as a result of differences

from our estimates and assumptions or other reasons, we may be required to increase our underlying reserves,

which could materially adversely affect our results of operations and financial condition.

Medical advances, such as genetic research and diagnostic imaging, and related legislation could

materially adversely affect the financial performance of our life insurance, long-term care insurance and

annuity businesses.

Genetic testing research and discovery is advancing at a rapid pace. Though some of this research is focused

on identifying the genes associated with rare diseases, much of the research is focused on identifying the genes

associated with an increased risk of various diseases such as diabetes, heart disease, cancer and Alzheimer’s

disease. Diagnostic testing utilizing various blood panels or imaging techniques, including the use of artificial

intelligence, may allow clinicians to detect similar diseases during an earlier treatment phase and prescribe more

acute medicine or treatments. We believe that if an individual learns through such testing that they are

predisposed to a condition that may reduce their life expectancy or increase their chances of requiring long-term

care, they potentially will be more likely to purchase life and long-term care insurance policies or not permit their

existing policy to lapse. In contrast, if an individual learns that they lack the genetic predisposition to develop the

conditions that reduce longevity or require long-term care, they potentially will be less likely to purchase life and

long-term care insurance products, but more likely to purchase certain annuity products and permit their life and

long-term care insurance policies to lapse.

Being able to access and use the medical information (including the results of genetic and diagnostic testing)

known to our prospective policyholders is important to ensure that an underwriting risk assessment matches the

anticipated risk priced into our life and long-term care insurance products, as well as our annuity products.

Currently, there are some state level restrictions related to an insurer’s access and use of genetic information, and

periodically new genetic testing legislation is being introduced. However, further restrictions on the access and

use of such medical information could create a mismatch between an assessed risk and the product pricing. Such

a mismatch has the potential to increase product pricing causing a decrease in sales to lower risk individuals

resulting in higher risk individuals becoming the more likely buyer. In addition, it is possible that regulators may

enforce anti-discrimination provisions even when medical information is available that indicates a purchaser is at

higher risk. The net result of this could cause a deterioration in the risk profile of our portfolio which could lead

to payments to our policyholders and contractholders that are materially higher than anticipated. Any of these

events could materially adversely affect our business, results of operations and financial condition.

In addition to earlier diagnosis or knowledge of disease risk, medical advances may also lead to newer

forms of preventive care which could improve an individual’s overall health and/or longevity. If this were to

occur, the duration of payments made by us under certain forms of long-term care and life insurance policies or

annuity contracts would likely increase thereby reducing our profitability on those products. Conversely, slower

progressing medical advances, particularly in the areas of cognitive decline, could adversely impact our long-

term care insurance business as policyholders may remain on claim for a long period of time resulting in higher

severity and duration of claims.

Other General Risk

The occurrence of natural or man-made disasters or a future pandemic could materially adversely affect

our financial condition and results of operations.

We are exposed to various risks arising out of natural disasters, including fires, earthquakes, hurricanes,

floods and tornadoes, and man-made disasters, including acts of terrorism and military actions and pandemics.

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on our common stock.

additional information.

Item 6.

Selected Financial Data

We have elected to early apply new rules issued by the SEC on November 19, 2020 and made effective on

February 10, 2021 regarding Item 301 of Regulation S-K. As permitted under the new SEC rules, we removed

“Item 6—Selected Financial Data” from this annual report filed on Form 10-K. We continue to provide

disclosures under Item 302, “Supplemental Financial Information” found in note 19 of “Item 8—Financial

Statements and Supplementary Data” and have not early applied new rules regarding changes to Item 303,

“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See “Part II—

Item 7” for additional details and applicable disclosures.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

PART II

Dividends

Equity Securities

Market for Common Stock

Our Class A Common Stock is listed on the New York Stock Exchange under the symbol “GNW.” As of

February 17, 2021, we had 292 holders of record of our Class A Common Stock.

In November 2008, to enhance our liquidity and capital position in the challenging market environment, our

Board of Directors suspended the payment of dividends on our common stock indefinitely. The declaration and

payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors

and will depend on many factors including our receipt of dividends from our operating subsidiaries, our financial

condition and results of operations, the capital requirements of our subsidiaries, legal requirements, regulatory

constraints, our debt obligations, our credit and financial strength ratings and such other factors as the Board of

Directors deems relevant. We cannot assure you when, whether or at what level we will resume paying dividends

Common Stock Performance Graph

See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for

The following performance graph and related information shall not be deemed “soliciting material” nor to

be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we
specifically incorporate it by reference into such filing.

In November 2015, we were included in the S&P MidCap 400 Index, which is more representative of our
total market capitalization. The following graph compares the cumulative total stockholder return on our Class A
Common Stock with the cumulative total stockholder return on the S&P 500 Stock Index, S&P 500 Insurance
Index, S&P MidCap 400 Index and S&P MidCap 400 Insurance Index.

Comparison of Cumulative Five Year Total Return

$250

$200

$150

$100

$50

$0
12/31/15

12/31/16

12/31/17

12/31/18

12/31/19

12/31/20

Genworth Financial

S&P 500 Insurance Index

S&P MidCap 400 Insurance Index

S&P 500 Index

S&P MidCap 400 Index

2015

2016

2017

2018

2019

2020

Genworth Financial, Inc. . . . . . . . . . . . . . . . . . . . .
S&P 500® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Insurance Index . . . . . . . . . . . . . . . . . . .
S&P MidCap 400 Index . . . . . . . . . . . . . . . . . . . .
S&P MidCap 400 Insurance Index . . . . . . . . . . . .

$100.00
$100.00
$100.00
$100.00
$100.00

$102.14
$111.96
$117.58
$120.74
$126.14

$ 83.38
$136.40
$136.62
$140.35
$148.50

$124.93
$130.42
$121.31
$124.80
$145.87

$117.96
$171.49
$156.95
$157.49
$185.40

$101.34
$203.04
$156.26
$179.00
$171.65

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87

PART II

Dividends

In November 2008, to enhance our liquidity and capital position in the challenging market environment, our

Board of Directors suspended the payment of dividends on our common stock indefinitely. The declaration and
payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors
and will depend on many factors including our receipt of dividends from our operating subsidiaries, our financial
condition and results of operations, the capital requirements of our subsidiaries, legal requirements, regulatory
constraints, our debt obligations, our credit and financial strength ratings and such other factors as the Board of
Directors deems relevant. We cannot assure you when, whether or at what level we will resume paying dividends
on our common stock.

Common Stock Performance Graph

See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for

additional information.

Item 6.

Selected Financial Data

We have elected to early apply new rules issued by the SEC on November 19, 2020 and made effective on
February 10, 2021 regarding Item 301 of Regulation S-K. As permitted under the new SEC rules, we removed
“Item 6—Selected Financial Data” from this annual report filed on Form 10-K. We continue to provide
disclosures under Item 302, “Supplemental Financial Information” found in note 19 of “Item 8—Financial
Statements and Supplementary Data” and have not early applied new rules regarding changes to Item 303,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See “Part II—
Item 7” for additional details and applicable disclosures.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Market for Common Stock

Our Class A Common Stock is listed on the New York Stock Exchange under the symbol “GNW.” As of

February 17, 2021, we had 292 holders of record of our Class A Common Stock.

The following performance graph and related information shall not be deemed “soliciting material” nor to

be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the

Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we

specifically incorporate it by reference into such filing.

In November 2015, we were included in the S&P MidCap 400 Index, which is more representative of our

total market capitalization. The following graph compares the cumulative total stockholder return on our Class A

Common Stock with the cumulative total stockholder return on the S&P 500 Stock Index, S&P 500 Insurance

Index, S&P MidCap 400 Index and S&P MidCap 400 Insurance Index.

Comparison of Cumulative Five Year Total Return

$250

$200

$150

$100

$50

$0

12/31/15

12/31/16

12/31/17

12/31/18

12/31/19

12/31/20

Genworth Financial

S&P 500 Insurance Index

S&P MidCap 400 Insurance Index

S&P 500 Index

S&P MidCap 400 Index

2015

2016

2017

2018

2019

2020

Genworth Financial, Inc. . . . . . . . . . . . . . . . . . . . .

S&P 500® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

S&P 500 Insurance Index . . . . . . . . . . . . . . . . . . .

S&P MidCap 400 Index . . . . . . . . . . . . . . . . . . . .

S&P MidCap 400 Insurance Index . . . . . . . . . . . .

$100.00

$100.00

$100.00

$100.00

$100.00

$102.14

$111.96

$117.58

$120.74

$126.14

$ 83.38

$136.40

$136.62

$140.35

$148.50

$124.93

$130.42

$121.31

$124.80

$145.87

$117.96

$171.49

$156.95

$157.49

$185.40

$101.34

$203.04

$156.26

$179.00

$171.65

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

•

policy fees and other income, including surrender charges, mortality and expense risk charges, and

The following discussion and analysis of our consolidated financial condition and results of operations
should be read in conjunction with our audited consolidated financial statements and related notes included in
“Item 8—Financial Statements and Supplementary Data.”

Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years

ended December 31, 2020 and 2019. Discussions of information related to 2018 and year-to-year comparisons
between 2019 and 2018 are not included in this Form 10-K. Comparative discussions between 2019 and 2018
can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Overview

Our business

We are dedicated to helping meet the homeownership and long-term care needs of our customers. We are
headquartered in Richmond, Virginia. We facilitate homeownership in the United States and internationally by
providing mortgage insurance products that allow people to purchase homes with low down payments while
protecting lenders against the risk of default. Through our homeownership education and assistance programs,
we also help people keep their homes when they experience financial difficulties. We offer long-term care
insurance products as well as service traditional life insurance and fixed annuity products. We have the following
four operating business segments: U.S. Mortgage Insurance; Australia Mortgage Insurance; U.S. Life Insurance;
and Runoff. We also have Corporate and Other activities.

Our financial information

The financial information in this Annual Report on Form 10-K has been derived from our consolidated

financial statements.

Revenues and expenses

Our revenues consist primarily of the following:

• U.S. Mortgage Insurance. The revenues in our U.S. Mortgage Insurance segment consist primarily of:

•

•

•

net premiums earned on U.S. mortgage insurance policies;

net investment income and net investment gains (losses) on the segment’s separate investment
portfolio; and

fee revenues from contract underwriting services.

• Australia Mortgage Insurance. The revenues in our Australia Mortgage Insurance segment consist

primarily of:

other administrative charges.

• Runoff. The revenues in our Runoff segment consist primarily of:

net investment income and net investment gains (losses) on the segment’s separate investment

portfolios; and

policy fees and other income, including mortality and expense risk charges, primarily from

variable annuity contracts, and other administrative charges.

• Corporate and Other. The revenues in Corporate and Other activities consist primarily of:

net premiums earned primarily on mortgage insurance policies in certain smaller international

mortgage insurance businesses;

unallocated net investment income and net investment gains (losses); and

policy fees and other income from other businesses that are managed outside of our operating

segments and eliminations of inter-segment transactions.

Our expenses consist primarily of the following:

benefits provided to policyholders and contractholders and changes in reserves;

interest credited on general account balances;

acquisition and operating expenses, including commissions, marketing expenses, legal expenses,

policy and contract servicing costs, overhead and other general expenses that are not capitalized

(shown net of deferrals);

amortization of DAC and other intangible assets;

interest and other financing expenses; and

income taxes.

•

•

•

•

•

•

•

•

•

•

•

We allocate corporate expenses to each of our operating segments using various methodologies, including

based on the amount of capital allocated to each operating segment.

We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the

U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional

or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to

reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent

differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income

taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other

activities.

The effective tax rates disclosed herein are calculated using whole dollars. As a result, the percentages

shown may differ from an effective tax rate calculated using rounded numbers.

•

•

net premiums earned on Australia mortgage insurance policies; and

Executive Summary of Financial Results

net investment income and net investment gains (losses) on the segment’s separate investment
portfolio.

Below is an executive summary of our consolidated financial results for the periods indicated. Amounts

below are net of taxes, unless otherwise indicated.

• U.S. Life Insurance. The revenues in our U.S. Life Insurance segment consist primarily of:

•

•

net premiums earned on individual and group long-term care insurance, individual term life
insurance and single premium immediate annuities with life contingencies;

net investment income and net investment gains (losses) on the segment’s separate investment
portfolios; and

2020 compared to 2019

respectively.

• We had net income available to Genworth Financial, Inc.’s common stockholders of $178 million and

$343 million in 2020 and 2019, respectively. Adjusted operating income available to Genworth

Financial, Inc.’s common stockholders was $317 million and $420 million in 2020 and 2019,

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and results of operations

should be read in conjunction with our audited consolidated financial statements and related notes included in

“Item 8—Financial Statements and Supplementary Data.”

Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years

ended December 31, 2020 and 2019. Discussions of information related to 2018 and year-to-year comparisons

between 2019 and 2018 are not included in this Form 10-K. Comparative discussions between 2019 and 2018

can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of

Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Overview

Our business

We are dedicated to helping meet the homeownership and long-term care needs of our customers. We are

headquartered in Richmond, Virginia. We facilitate homeownership in the United States and internationally by

providing mortgage insurance products that allow people to purchase homes with low down payments while

protecting lenders against the risk of default. Through our homeownership education and assistance programs,

we also help people keep their homes when they experience financial difficulties. We offer long-term care

insurance products as well as service traditional life insurance and fixed annuity products. We have the following

four operating business segments: U.S. Mortgage Insurance; Australia Mortgage Insurance; U.S. Life Insurance;

and Runoff. We also have Corporate and Other activities.

Our financial information

financial statements.

The financial information in this Annual Report on Form 10-K has been derived from our consolidated

Revenues and expenses

Our revenues consist primarily of the following:

• U.S. Mortgage Insurance. The revenues in our U.S. Mortgage Insurance segment consist primarily of:

net premiums earned on U.S. mortgage insurance policies;

net investment income and net investment gains (losses) on the segment’s separate investment

portfolio; and

fee revenues from contract underwriting services.

• Australia Mortgage Insurance. The revenues in our Australia Mortgage Insurance segment consist

•

•

•

•

•

•

•

primarily of:

portfolio.

•

policy fees and other income, including surrender charges, mortality and expense risk charges, and
other administrative charges.

• Runoff. The revenues in our Runoff segment consist primarily of:

•

•

net investment income and net investment gains (losses) on the segment’s separate investment
portfolios; and

policy fees and other income, including mortality and expense risk charges, primarily from
variable annuity contracts, and other administrative charges.

• Corporate and Other. The revenues in Corporate and Other activities consist primarily of:

•

•

•

net premiums earned primarily on mortgage insurance policies in certain smaller international
mortgage insurance businesses;

unallocated net investment income and net investment gains (losses); and

policy fees and other income from other businesses that are managed outside of our operating
segments and eliminations of inter-segment transactions.

Our expenses consist primarily of the following:

•

•

•

•

•

•

benefits provided to policyholders and contractholders and changes in reserves;

interest credited on general account balances;

acquisition and operating expenses, including commissions, marketing expenses, legal expenses,
policy and contract servicing costs, overhead and other general expenses that are not capitalized
(shown net of deferrals);

amortization of DAC and other intangible assets;

interest and other financing expenses; and

income taxes.

We allocate corporate expenses to each of our operating segments using various methodologies, including

based on the amount of capital allocated to each operating segment.

We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the

U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional
or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to
reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent
differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income
taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other
activities.

The effective tax rates disclosed herein are calculated using whole dollars. As a result, the percentages

shown may differ from an effective tax rate calculated using rounded numbers.

net premiums earned on Australia mortgage insurance policies; and

Executive Summary of Financial Results

net investment income and net investment gains (losses) on the segment’s separate investment

Below is an executive summary of our consolidated financial results for the periods indicated. Amounts

• U.S. Life Insurance. The revenues in our U.S. Life Insurance segment consist primarily of:

net premiums earned on individual and group long-term care insurance, individual term life

insurance and single premium immediate annuities with life contingencies;

net investment income and net investment gains (losses) on the segment’s separate investment

portfolios; and

below are net of taxes, unless otherwise indicated.

2020 compared to 2019

• We had net income available to Genworth Financial, Inc.’s common stockholders of $178 million and

$343 million in 2020 and 2019, respectively. Adjusted operating income available to Genworth
Financial, Inc.’s common stockholders was $317 million and $420 million in 2020 and 2019,
respectively.

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• Our U.S. Mortgage Insurance segment had adjusted operating income available to Genworth Financial,
Inc.’s common stockholders of $381 million and $568 million in 2020 and 2019, respectively. The
decrease was primarily attributable to higher losses largely from new delinquencies driven in large part
by a significant increase in borrower forbearance as a result of COVID-19, reserve strengthening of
$51 million on existing delinquencies and from lower net benefits from cures and aging of existing
delinquencies in 2020. These decreases were partially offset by higher premiums largely driven by
higher insurance in-force and an increase in policy cancellations in our single premium mortgage
insurance product primarily due to higher mortgage refinancing in 2020. The year ended December 31,
2019 included favorable reserve adjustments of $18 million mostly associated with lower expected
claim rates and a favorable adjustment of $11 million related to our single premium earnings pattern
review.

• Our Australia Mortgage Insurance segment had adjusted operating income available to Genworth

Financial, Inc.’s common stockholders of $1 million and $51 million in 2020 and 2019, respectively.
The decrease was primarily from loss reserve strengthening of $91 million driven by a refinement in
methodology and anticipated claims outcomes due to the economic impacts caused by COVID-19,
including incurred but not reported (“IBNR”) reserves on loans in payment deferral programs. The
decrease was also attributable to lower earned premiums largely from portfolio seasoning and lower
policy cancellations and lower net investment income in 2020.

• Our U.S. Life Insurance segment had adjusted operating income available to Genworth Financial,
Inc.’s common stockholders of $68 million in 2020 compared to an adjusted operating loss of
$55 million in 2019.

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our
long-term care insurance business increased $180 million primarily from an increase in claim
terminations driven mostly by higher mortality as well as favorable development on IBNR claims
and higher investment income in 2020. We also increased reserves by $157 million in 2020 to
account for changes to incidence and mortality experience driven by COVID-19, which we
believe are temporary.

• The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders in our
life insurance business increased $66 million predominantly attributable to higher reserves in our
10-year term universal life insurance block as it entered its post-level premium period during the
premium grace period, higher mortality in 2020 compared to 2019, higher lapses primarily
associated with our large 20-year term life insurance block as it entered its post-level premium
period and a DAC impairment of $50 million in 2020. The higher loss was partially offset by a
favorable unlocking of $60 million in our term universal and universal life insurance products as
part of our annual review of assumptions in the fourth quarter of 2020 compared to unfavorable
unlocking of $107 million in 2019 (see “—Critical Accounting Estimates” for additional
information).

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our
fixed annuities business increased $9 million predominantly from $39 million of unfavorable
charges related to loss recognition testing in 2019 that did not recur (see “—Critical Accounting
Estimates—Future policy benefits” for additional information) and lower interest credited due to
block runoff, partially offset by lower net spreads in 2020.

• Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common

stockholders of $43 million and $56 million in 2020 and 2019, respectively. The decrease was
predominantly due to less favorable equity market performance, an unfavorable assumption update of
$5 million and a decline in interest rates, partially offset by higher net spreads in 2020.

• Corporate and Other Activities had an adjusted operating loss available to Genworth Financial, Inc.’s
common stockholders of $176 million and $200 million in 2020 and 2019, respectively. The decrease

in the loss was primarily related to lower interest expense and lower operating costs, partially offset by

a lower benefit for income taxes in 2020.

The periods under review include, among others, the following significant developments.

Significant Developments

U.S. Mortgage Insurance

• COVID-19 and CARES Act. The United States economy and consumer confidence improved in the

second half of 2020 compared to the first half of 2020 as state economies reopened in varying degrees;

however, certain geographies and industries have experienced slower recoveries because of

COVID-19, the mitigation steps taken to control its spread or changed consumer behavior. The

unemployment rate was elevated at 6.7% in December 2020, compared to the pre-pandemic level of

3.5% in February 2020 but has decreased from a peak of 14.8% in April 2020. Specific to housing

finance, the CARES Act requires mortgage servicers to provide up to 180 days of deferred or reduced

payments (which can be extended for up to an additional 180 days), commonly referred to as

“forbearance,” for borrowers with a federally backed mortgage loan who assert they have experienced

a financial hardship related to COVID-19. Since the introduction of the CARES Act, the GSEs as well

as most servicers of non-federally backed mortgage loans have extended similar relief to their

respective portfolios of loans. The FHFA extended the foreclosure moratorium until March 31, 2021

for mortgages that are purchased by the GSEs.

• Borrower forbearance. Forbearance periods can vary but generally may be extended up to 15 months

or shortened at the request of the borrower. In February 2021, the FHFA issued guidance for loans in

an active COVID-19 forbearance plan. For those loans in a forbearance plan as of February 28, 2021,

the servicer is authorized to grant an eligible borrower an extension of up to three additional months,

provided the plan term does not exceed 15 months of total delinquency or a cumulative term of 15

months, whichever is shorter. Approximately 82% of our primary new delinquencies between the

second and fourth quarters of 2020 were subject to a forbearance plan as compared to less than 5% in

recent pre-COVID-19 quarters. Servicer reported forbearance slowed meaningfully beginning in June

2020 and ended the fourth quarter of 2020 with approximately 5.4% or 50,018 of our active primary

policies reported in a forbearance plan, of which approximately 63% were reported as delinquent.

•

Incurred losses. Incurred losses were $381 million for the year ended December 31, 2020, of which

$308 million was attributable to new delinquencies driven mostly by borrower forbearance as a result

of COVID-19. Our U.S. mortgage insurance business strengthened its existing reserves by $65 million

in 2020 primarily driven by the deterioration of early cure emergence patterns impacting claim

frequency along with a modest increase in claim severity.

• Mortgage originations and new insurance written. Estimated mortgage origination volume increased

during 2020 compared to 2019 primarily from low interest rates which resulted in higher refinance

origination volumes and to a lesser degree higher purchase originations. In addition, the estimated

private mortgage insurance available market increased driven by higher refinance originations and

higher purchase market penetration. Given the volume to date, we expect mortgage originations to

remain strong into the first quarter of 2021 fueled by sustained low interest rates driving refinances and

by continued strength in the purchase originations market. Due to higher mortgage originations and a

larger private mortgage insurance market, our new insurance written increased to $99.9 billion in 2020,

a 60% increase compared to 2019. Higher new insurance written continues to drive growth in our

primary insurance in force.

• Persistency. The growth in our primary insurance in-force from higher new insurance written was

partially offset by lower persistency in 2020 from low interest rates. Our primary persistency declined to

59% for the year ended December 31, 2020 compared to 76% for the year ended December 31, 2019. In

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• Our U.S. Mortgage Insurance segment had adjusted operating income available to Genworth Financial,

Inc.’s common stockholders of $381 million and $568 million in 2020 and 2019, respectively. The

decrease was primarily attributable to higher losses largely from new delinquencies driven in large part

by a significant increase in borrower forbearance as a result of COVID-19, reserve strengthening of

$51 million on existing delinquencies and from lower net benefits from cures and aging of existing

delinquencies in 2020. These decreases were partially offset by higher premiums largely driven by

higher insurance in-force and an increase in policy cancellations in our single premium mortgage

insurance product primarily due to higher mortgage refinancing in 2020. The year ended December 31,

2019 included favorable reserve adjustments of $18 million mostly associated with lower expected

claim rates and a favorable adjustment of $11 million related to our single premium earnings pattern

review.

• Our Australia Mortgage Insurance segment had adjusted operating income available to Genworth

Financial, Inc.’s common stockholders of $1 million and $51 million in 2020 and 2019, respectively.

The decrease was primarily from loss reserve strengthening of $91 million driven by a refinement in

methodology and anticipated claims outcomes due to the economic impacts caused by COVID-19,

including incurred but not reported (“IBNR”) reserves on loans in payment deferral programs. The

decrease was also attributable to lower earned premiums largely from portfolio seasoning and lower

policy cancellations and lower net investment income in 2020.

• Our U.S. Life Insurance segment had adjusted operating income available to Genworth Financial,

Inc.’s common stockholders of $68 million in 2020 compared to an adjusted operating loss of

$55 million in 2019.

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our

long-term care insurance business increased $180 million primarily from an increase in claim

terminations driven mostly by higher mortality as well as favorable development on IBNR claims

and higher investment income in 2020. We also increased reserves by $157 million in 2020 to

account for changes to incidence and mortality experience driven by COVID-19, which we

believe are temporary.

• The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders in our

life insurance business increased $66 million predominantly attributable to higher reserves in our

10-year term universal life insurance block as it entered its post-level premium period during the

premium grace period, higher mortality in 2020 compared to 2019, higher lapses primarily

associated with our large 20-year term life insurance block as it entered its post-level premium

period and a DAC impairment of $50 million in 2020. The higher loss was partially offset by a

favorable unlocking of $60 million in our term universal and universal life insurance products as

part of our annual review of assumptions in the fourth quarter of 2020 compared to unfavorable

unlocking of $107 million in 2019 (see “—Critical Accounting Estimates” for additional

information).

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our

fixed annuities business increased $9 million predominantly from $39 million of unfavorable

charges related to loss recognition testing in 2019 that did not recur (see “—Critical Accounting

Estimates—Future policy benefits” for additional information) and lower interest credited due to

block runoff, partially offset by lower net spreads in 2020.

• Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common

stockholders of $43 million and $56 million in 2020 and 2019, respectively. The decrease was

predominantly due to less favorable equity market performance, an unfavorable assumption update of

$5 million and a decline in interest rates, partially offset by higher net spreads in 2020.

• Corporate and Other Activities had an adjusted operating loss available to Genworth Financial, Inc.’s

common stockholders of $176 million and $200 million in 2020 and 2019, respectively. The decrease

in the loss was primarily related to lower interest expense and lower operating costs, partially offset by
a lower benefit for income taxes in 2020.

Significant Developments

The periods under review include, among others, the following significant developments.

U.S. Mortgage Insurance

• COVID-19 and CARES Act. The United States economy and consumer confidence improved in the

second half of 2020 compared to the first half of 2020 as state economies reopened in varying degrees;
however, certain geographies and industries have experienced slower recoveries because of
COVID-19, the mitigation steps taken to control its spread or changed consumer behavior. The
unemployment rate was elevated at 6.7% in December 2020, compared to the pre-pandemic level of
3.5% in February 2020 but has decreased from a peak of 14.8% in April 2020. Specific to housing
finance, the CARES Act requires mortgage servicers to provide up to 180 days of deferred or reduced
payments (which can be extended for up to an additional 180 days), commonly referred to as
“forbearance,” for borrowers with a federally backed mortgage loan who assert they have experienced
a financial hardship related to COVID-19. Since the introduction of the CARES Act, the GSEs as well
as most servicers of non-federally backed mortgage loans have extended similar relief to their
respective portfolios of loans. The FHFA extended the foreclosure moratorium until March 31, 2021
for mortgages that are purchased by the GSEs.

• Borrower forbearance. Forbearance periods can vary but generally may be extended up to 15 months
or shortened at the request of the borrower. In February 2021, the FHFA issued guidance for loans in
an active COVID-19 forbearance plan. For those loans in a forbearance plan as of February 28, 2021,
the servicer is authorized to grant an eligible borrower an extension of up to three additional months,
provided the plan term does not exceed 15 months of total delinquency or a cumulative term of 15
months, whichever is shorter. Approximately 82% of our primary new delinquencies between the
second and fourth quarters of 2020 were subject to a forbearance plan as compared to less than 5% in
recent pre-COVID-19 quarters. Servicer reported forbearance slowed meaningfully beginning in June
2020 and ended the fourth quarter of 2020 with approximately 5.4% or 50,018 of our active primary
policies reported in a forbearance plan, of which approximately 63% were reported as delinquent.

•

Incurred losses. Incurred losses were $381 million for the year ended December 31, 2020, of which
$308 million was attributable to new delinquencies driven mostly by borrower forbearance as a result
of COVID-19. Our U.S. mortgage insurance business strengthened its existing reserves by $65 million
in 2020 primarily driven by the deterioration of early cure emergence patterns impacting claim
frequency along with a modest increase in claim severity.

• Mortgage originations and new insurance written. Estimated mortgage origination volume increased
during 2020 compared to 2019 primarily from low interest rates which resulted in higher refinance
origination volumes and to a lesser degree higher purchase originations. In addition, the estimated
private mortgage insurance available market increased driven by higher refinance originations and
higher purchase market penetration. Given the volume to date, we expect mortgage originations to
remain strong into the first quarter of 2021 fueled by sustained low interest rates driving refinances and
by continued strength in the purchase originations market. Due to higher mortgage originations and a
larger private mortgage insurance market, our new insurance written increased to $99.9 billion in 2020,
a 60% increase compared to 2019. Higher new insurance written continues to drive growth in our
primary insurance in force.

• Persistency. The growth in our primary insurance in-force from higher new insurance written was

partially offset by lower persistency in 2020 from low interest rates. Our primary persistency declined to
59% for the year ended December 31, 2020 compared to 76% for the year ended December 31, 2019. In

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addition, lower persistency in our U.S. mortgage insurance business has impacted business
performance in several other ways including, but not limited to, elevating single premium policy
cancellations resulting in higher earned premiums and accelerating the amortization of our existing
reinsurance transactions reducing their associated PMIERs capital credit.

• PMIERs compliance. On December 4, 2020, the GSEs issued both temporary and permanent

amendments to PMIERs, which became effective retroactively on June 30, 2020. For loans that became
non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each
non-performing loan. As of December 31, 2020, our U.S. mortgage insurance business had estimated
available assets of 137% above the published PMIERs requirements compared to 132% as of
September 30, 2020 and 138% as of December 31, 2019. The estimated sufficiency as of December 31,
2020 was $1,229 million of available assets above the published PMIERs requirements compared to
$1,074 million as of September 30, 2020 and $1,057 million as of December 31, 2019. PMIERs
sufficiency is based on the published requirements applicable to private mortgage insurers and does not
give effect to the GSE Restrictions recently imposed on our U.S. mortgage insurance business. The
increase in PMIERs sufficiency compared to September 30, 2020 was driven in part by the completion
of an insurance linked note transaction in October 2020 and elevated lapses driven by prevailing low
interest rates, partially offset by elevated new insurance written. In addition, elevated lapses drove an
acceleration of the amortization of our existing reinsurance transactions reducing their PMIERs capital
credit in the fourth quarter of 2020. Our PMIERs required assets as of December 31, 2020 and
September 30, 2020 benefited from the application of a 0.30 multiplier applied to the risk-based required
asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all
eligible delinquencies provided $1,046 million and $1,217 million, respectively, of benefit to our
December 31, 2020 and September 30, 2020 PMIERs required assets. For additional information related
to PMIERs, see “Item 1—Business—Regulation—Mortgage Insurance Regulation—Other U.S.
regulation and Agency Qualification Requirements.”

• PMIERs restrictions. In September 2020, the GSEs imposed certain restrictions with respect to capital
on our U.S. mortgage insurance business for the later of six quarters or until certain conditions are met.
For additional information related to these PMIERs restrictions, see “Item 1—Business—Regulation—
Mortgage Insurance Regulation—Other U.S. Regulation and Agency Qualification Requirements.”
These restrictions require GMICO to maintain a buffer above PMIERs Minimum Required Assets,
GMHI to retain $300 million in holding company cash to be available for limited purposes and prior
written approval from the GSEs before any additional debt issuance by GMHI or GMICO.

• GMHI debt offering. On August 21, 2020, GMHI, our wholly-owned U.S. mortgage insurance

subsidiary, issued $750 million of its 6.50% senior notes due in 2025. A dividend of $437 million was
paid to Genworth Holdings from the net cash proceeds of the offering with the remaining amount
retained by GMHI.

Australia Mortgage Insurance

• Regulatory capital. As of December 31, 2020, our Australia mortgage insurance business estimated its
PCA ratio was approximately 165%, representing a decrease from 191% as of December 31, 2019. The
decrease was principally from loss reserve strengthening predominantly driven by a refinement in
methodology and anticipated claims outcomes due to the economic impacts caused by COVID-19, a
DAC write-off of AUD$182 million recorded in the first quarter of 2020 in connection with the
completion of liability adequacy testing under local Australian Accounting Standards (“AAS”) and
from strong new business written in 2020.

• Premium earnings pattern review. Our mortgage insurance business in Australia completed a review of
its premium earnings pattern in the fourth quarter of 2020, which resulted in no changes to the earnings
pattern adopted in previous years.

• Key customers. In May 2020, following a request-for-proposal process, our second largest customer in

our Australia mortgage insurance business advised us that they would not renew their contract with us.

The contract with this customer expired in November 2020. This customer represented 11% of our

gross written premiums for the year ended December 31, 2020. While the termination of the contract

with this customer will reduce gross written premiums in 2021, it is expected to modestly impact future

financial results of our mortgage insurance business in Australia.

U.S. Life Insurance

•

In-force rate actions in our long-term care insurance business. As part of our strategy for our long-

term care insurance business, we have been implementing, and expect to continue to pursue, significant

premium rate increases and associated benefit reductions on older generation blocks of business in

order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and

capital. We are also requesting premium rate increases and associated benefit reductions on newer

blocks of business, as needed, some of which may be significant, to help bring their loss ratios back

towards their original pricing. For all of these in-force rate action filings, we received 144 filing

approvals from 37 states in 2020, representing a weighted-average increase of 34% on approximately

$1,008 million in annualized in-force premiums, or approximately $344 million of incremental annual

premiums. We also submitted 245 new filings in 50 states in 2020 on approximately $1,485 million in

annualized in-force premiums.

• Cumulative economic benefit from in-force rate actions. We estimate that the cumulative economic

benefit of our rate increases through 2020 equals approximately $14.5 billion, on a net present value

basis, of the total amount required under our multi-year in-force rate action plan in our long-term care

insurance business. For additional information on the impact in-force rate actions have on loss

recognition testing of our long-term care insurance business, see “—Critical Accounting Estimates—

Future policy benefits.”

• Completion of annual long-term care insurance reviews. We conducted a detailed review of our

assumptions and methodologies of our claim reserves and future policy benefits for our long-term care

insurance business and completed loss recognition testing in the fourth quarter of 2020. As a result of

changes to certain assumptions and methodologies, we recorded a modest net favorable impact in 2020.

In 2019, we did not make any significant changes to the assumptions or methodologies. See “—Critical

Accounting Estimates” for additional information.

•

Long-term care insurance margins. In the fourth quarter of 2020, we completed our annual assumption

review for our long-term care insurance business and in aggregate our U.S. GAAP margins remained in

the same range as our 2019 margins. For additional information on reserves, see “—Critical

Accounting Estimates—Future policy benefits.”

• Completion of life insurance assumption review. We conduct a review of our assumptions for our

universal and term universal life insurance products annually. In the fourth quarter of 2020, as a result

of the review, we recorded a $60 million net favorable adjustment to net income in our term universal

and universal life insurance products. The positive impact to earnings was primarily due to a model

refinement in our term universal life insurance product related to persistency and grace period timing

and lower projected cost of insurance assessments on our universal life insurance products. In the

fourth quarter of 2019, as a result of the review, we recorded a $107 million unfavorable adjustment to

net income in our universal and term universal life insurance products. For additional information see

“—Critical Accounting Estimates—Policyholder account balances.”

• Profits followed by losses reserve in our long-term care insurance business. With respect to our long-

term care insurance block, excluding the acquired block, our future projections indicate we have

projected profits in earlier periods followed by projected losses in later periods. As a result of this

pattern of projected profits followed by projected losses, we ratably accrue additional future policy

benefit reserves over the profitable periods, currently expected to be through 2031, by the amounts

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addition, lower persistency in our U.S. mortgage insurance business has impacted business

performance in several other ways including, but not limited to, elevating single premium policy

cancellations resulting in higher earned premiums and accelerating the amortization of our existing

reinsurance transactions reducing their associated PMIERs capital credit.

• PMIERs compliance. On December 4, 2020, the GSEs issued both temporary and permanent

amendments to PMIERs, which became effective retroactively on June 30, 2020. For loans that became

non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each

non-performing loan. As of December 31, 2020, our U.S. mortgage insurance business had estimated

available assets of 137% above the published PMIERs requirements compared to 132% as of

September 30, 2020 and 138% as of December 31, 2019. The estimated sufficiency as of December 31,

2020 was $1,229 million of available assets above the published PMIERs requirements compared to

$1,074 million as of September 30, 2020 and $1,057 million as of December 31, 2019. PMIERs

sufficiency is based on the published requirements applicable to private mortgage insurers and does not

give effect to the GSE Restrictions recently imposed on our U.S. mortgage insurance business. The

increase in PMIERs sufficiency compared to September 30, 2020 was driven in part by the completion

of an insurance linked note transaction in October 2020 and elevated lapses driven by prevailing low

interest rates, partially offset by elevated new insurance written. In addition, elevated lapses drove an

acceleration of the amortization of our existing reinsurance transactions reducing their PMIERs capital

credit in the fourth quarter of 2020. Our PMIERs required assets as of December 31, 2020 and

September 30, 2020 benefited from the application of a 0.30 multiplier applied to the risk-based required

asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all

eligible delinquencies provided $1,046 million and $1,217 million, respectively, of benefit to our

December 31, 2020 and September 30, 2020 PMIERs required assets. For additional information related

to PMIERs, see “Item 1—Business—Regulation—Mortgage Insurance Regulation—Other U.S.

regulation and Agency Qualification Requirements.”

• PMIERs restrictions. In September 2020, the GSEs imposed certain restrictions with respect to capital

on our U.S. mortgage insurance business for the later of six quarters or until certain conditions are met.

For additional information related to these PMIERs restrictions, see “Item 1—Business—Regulation—

Mortgage Insurance Regulation—Other U.S. Regulation and Agency Qualification Requirements.”

These restrictions require GMICO to maintain a buffer above PMIERs Minimum Required Assets,

GMHI to retain $300 million in holding company cash to be available for limited purposes and prior

written approval from the GSEs before any additional debt issuance by GMHI or GMICO.

• GMHI debt offering. On August 21, 2020, GMHI, our wholly-owned U.S. mortgage insurance

subsidiary, issued $750 million of its 6.50% senior notes due in 2025. A dividend of $437 million was

paid to Genworth Holdings from the net cash proceeds of the offering with the remaining amount

retained by GMHI.

Australia Mortgage Insurance

• Regulatory capital. As of December 31, 2020, our Australia mortgage insurance business estimated its

PCA ratio was approximately 165%, representing a decrease from 191% as of December 31, 2019. The

decrease was principally from loss reserve strengthening predominantly driven by a refinement in

methodology and anticipated claims outcomes due to the economic impacts caused by COVID-19, a

DAC write-off of AUD$182 million recorded in the first quarter of 2020 in connection with the

completion of liability adequacy testing under local Australian Accounting Standards (“AAS”) and

from strong new business written in 2020.

• Premium earnings pattern review. Our mortgage insurance business in Australia completed a review of

its premium earnings pattern in the fourth quarter of 2020, which resulted in no changes to the earnings

pattern adopted in previous years.

• Key customers. In May 2020, following a request-for-proposal process, our second largest customer in
our Australia mortgage insurance business advised us that they would not renew their contract with us.
The contract with this customer expired in November 2020. This customer represented 11% of our
gross written premiums for the year ended December 31, 2020. While the termination of the contract
with this customer will reduce gross written premiums in 2021, it is expected to modestly impact future
financial results of our mortgage insurance business in Australia.

U.S. Life Insurance

•

In-force rate actions in our long-term care insurance business. As part of our strategy for our long-
term care insurance business, we have been implementing, and expect to continue to pursue, significant
premium rate increases and associated benefit reductions on older generation blocks of business in
order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and
capital. We are also requesting premium rate increases and associated benefit reductions on newer
blocks of business, as needed, some of which may be significant, to help bring their loss ratios back
towards their original pricing. For all of these in-force rate action filings, we received 144 filing
approvals from 37 states in 2020, representing a weighted-average increase of 34% on approximately
$1,008 million in annualized in-force premiums, or approximately $344 million of incremental annual
premiums. We also submitted 245 new filings in 50 states in 2020 on approximately $1,485 million in
annualized in-force premiums.

• Cumulative economic benefit from in-force rate actions. We estimate that the cumulative economic
benefit of our rate increases through 2020 equals approximately $14.5 billion, on a net present value
basis, of the total amount required under our multi-year in-force rate action plan in our long-term care
insurance business. For additional information on the impact in-force rate actions have on loss
recognition testing of our long-term care insurance business, see “—Critical Accounting Estimates—
Future policy benefits.”

• Completion of annual long-term care insurance reviews. We conducted a detailed review of our

assumptions and methodologies of our claim reserves and future policy benefits for our long-term care
insurance business and completed loss recognition testing in the fourth quarter of 2020. As a result of
changes to certain assumptions and methodologies, we recorded a modest net favorable impact in 2020.
In 2019, we did not make any significant changes to the assumptions or methodologies. See “—Critical
Accounting Estimates” for additional information.

•

Long-term care insurance margins. In the fourth quarter of 2020, we completed our annual assumption
review for our long-term care insurance business and in aggregate our U.S. GAAP margins remained in
the same range as our 2019 margins. For additional information on reserves, see “—Critical
Accounting Estimates—Future policy benefits.”

• Completion of life insurance assumption review. We conduct a review of our assumptions for our

universal and term universal life insurance products annually. In the fourth quarter of 2020, as a result
of the review, we recorded a $60 million net favorable adjustment to net income in our term universal
and universal life insurance products. The positive impact to earnings was primarily due to a model
refinement in our term universal life insurance product related to persistency and grace period timing
and lower projected cost of insurance assessments on our universal life insurance products. In the
fourth quarter of 2019, as a result of the review, we recorded a $107 million unfavorable adjustment to
net income in our universal and term universal life insurance products. For additional information see
“—Critical Accounting Estimates—Policyholder account balances.”

• Profits followed by losses reserve in our long-term care insurance business. With respect to our long-
term care insurance block, excluding the acquired block, our future projections indicate we have
projected profits in earlier periods followed by projected losses in later periods. As a result of this
pattern of projected profits followed by projected losses, we ratably accrue additional future policy
benefit reserves over the profitable periods, currently expected to be through 2031, by the amounts

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necessary to offset estimated losses during the periods that follow. During the year ended
December 31, 2020, we increased our long-term care insurance future policy benefit reserves by
$302 million, including $55 million during the fourth quarter of 2020, to accrue for profits followed by
losses. As of December 31, 2020, the total amount accrued for profits followed by losses was
$625 million.

Liquidity and Capital Resources

• Payment of Genworth Holdings’ February 2021 senior notes. Genworth Holdings paid its 7.20% senior

notes with a principal balance of $338 million at maturity on February 16, 2021.

• Australia mortgage insurance debt issuance and redemption. On July 30, 2020, GFMIPL issued
AUD$190 million floating rate subordinated notes due in July 2030, part of which was issued in
exchange for AUD$147 million of its floating rate subordinated notes due in July 2025. On August 24,
2020 and October 6, 2020, GFMIPL redeemed AUD$5 million and the remaining AUD$48 million,
respectively, of its floating rate subordinated notes due in July 2025 and paid accrued interest thereon.

• Redemption of Genworth Holdings’ June 2020 senior notes. On January 21, 2020, Genworth Holdings
early redeemed $397 million of its 7.70% senior notes originally scheduled to mature in June 2020 for
a pre-tax loss of $9 million. The senior notes were fully redeemed with a cash payment of
$409 million, comprised of the outstanding principal balance of $397 million, accrued interest of
$3 million and a make-whole premium of $9 million.

• Repurchase of Genworth Holdings’ 2021 senior notes. During the year ended December 31, 2020,

Genworth Holdings repurchased $84 million principal amount of its senior notes with 2021 maturity
dates for a pre-tax gain of $4 million and paid accrued interest thereon.

• Redemption of non-recourse funding obligations. In January 2020, upon receipt of approval from the

Director of Insurance of the State of South Carolina, Rivermont Life Insurance Company I
(“Rivermont I”), our indirect wholly-owned special purpose consolidated captive insurance subsidiary,
redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050. The
early redemption resulted in a pre-tax loss of $4 million from the write-off of deferred borrowing costs.

• AXA promissory note. On December 1, 2015, we completed the sale of our lifestyle protection

insurance business to AXA. In 2017, AXA sued us for damages on an indemnity in the 2015 agreement
related to alleged remediation it paid to customers who purchased payment protection insurance. On
July 20, 2020, we reached a settlement agreement with AXA for losses incurred from mis-selling
complaints on policies sold from 1970 through 2004. Under the settlement agreement we agreed to
make two installment payments to AXA for approximately £317 million in 2022. We further agreed to
pay AXA for future claims that are still being processed currently estimated to be approximately
£108 million that will be due with the final installment payment in 2022. As of December 31, 2020, the
total amount owed to AXA under the settlement agreement is £425 million ($581 million) which is
included in liabilities related to discontinued operations in our consolidated balance sheet.

•

•

Liquidity and contractual obligations. For additional details related to Genworth Holdings’ liquidity in
relation to its contractual obligations, see note 1 in our consolidated financial statements under
“Item 8—Financial Statements and Supplementary Data.”

Secured term loan repayment. On December 12, 2019, Genworth Holdings repaid its senior secured
term loan facility (“Term Loan”), which was originally closed on March 7, 2018 and was scheduled to
mature in March 2023. Prior to the repayment, Genworth Financial International Holdings, LLC
(“GFIH”) provided a limited recourse guarantee to the lenders of Genworth Holdings’ outstanding
Term Loan, which was secured by GFIH’s ownership interest in Genworth Canada’s outstanding
common shares. Due to the sale of the underlying collateral, the Term Loan was required to be repaid
upon the sale of Genworth Canada. A cash payment of $445 million was used to fully repay the
outstanding principal and accrued interest of the Term Loan.

Regulation and Taxes

• The effective tax rate for the years ended December 31, 2020 and 2019 was 26.2% and 27.3%,

respectively. The decrease in the effective tax rate was primarily attributable to a lower effect from

foreign operations and gains on forward starting swaps settled prior to the enactment of the TCJA,

which will continue to be tax effected at 35% as they are amortized into net investment income, in

relation to higher pre-tax income in 2020. See note 13 in our consolidated financial statements under

“Item 8—Financial Statements and Supplementary Data” for additional information.

Dispositions

•

Sale of our lifestyle protection insurance business. As discussed above, on July 20, 2020, we reached a

settlement agreement with AXA. An after-tax loss of $549 million and $110 million is included in

income (loss) from discontinued operations for the years ended December 31, 2020 and 2019,

respectively, associated with the case and settlement agreement. We have established our current best

estimates for future claims that are still being processed under the settlement agreement, as well as for

the unrelated liability related to underwriting losses and other expenses; however, there may be future

adjustments to these estimates. If amounts are different from our estimates, it could result in an

adjustment to our liabilities and an additional amount reflected in income (loss) from discontinued

operations. See notes 20 and 23 in our consolidated financial statements under “Item 8—Financial

Statements and Supplementary Data” for additional information.

•

Sale of our Canada mortgage insurance business. On December 12, 2019, we completed the sale of

Genworth Canada, our former Canada mortgage insurance business, to Brookfield and received

approximately $1.7 billion in net cash proceeds. During 2019, we recorded an after-tax loss of

$121 million related to the sale. See note 23 in our consolidated financial statements under “Item 8—

Financial Statements and Supplementary Data” for additional information.

Critical Accounting Estimates

The accounting estimates (including sensitivities) discussed in this section are those that we consider to be

particularly critical to an understanding of our consolidated financial statements because their application places

the most significant demands on our ability to judge the effect of inherently uncertain matters on our financial

results. The sensitivities included in this section involve matters that are also inherently uncertain and involve the

exercise of significant judgment in selecting the factors and amounts used in the sensitivities. Small changes in

the amounts used in the sensitivities or the use of different factors could result in materially different outcomes

from those reflected in the sensitivities. For all of these accounting estimates, we caution that future events

seldom develop as estimated and management’s best estimates often require adjustment. See “Cautionary Note

Regarding Forward-looking Statements.”

Insurance liabilities and reserves. We calculate and maintain reserves for the estimated future payment of

claims to our policyholders and contractholders based on actuarial assumptions and in accordance with U.S.

GAAP and industry practice. We build these reserves as the estimated value of those obligations increases, and

we release these reserves as those future obligations are paid, experience changes or policies lapse. The reserves

we establish reflect estimates and actuarial assumptions and methodologies with regard to our future experience.

These estimates and actuarial assumptions and methodologies involve the exercise of significant judgment and

are inherently uncertain. These estimates and actuarial assumptions and methodologies are subjected to a variety

of internal reviews and, in some cases, external independent reviews. Our future financial results depend

significantly upon the extent to which our actual future experience is consistent with the assumptions we have

used in determining our reserves as well as the assumptions originally used in pricing our products.

Many factors, and changes in these factors, can affect future experience including, but not limited to:

interest rates; investment returns and volatility; economic and social conditions, such as inflation, unemployment,

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necessary to offset estimated losses during the periods that follow. During the year ended

December 31, 2020, we increased our long-term care insurance future policy benefit reserves by

$302 million, including $55 million during the fourth quarter of 2020, to accrue for profits followed by

losses. As of December 31, 2020, the total amount accrued for profits followed by losses was

$625 million.

Liquidity and Capital Resources

• Payment of Genworth Holdings’ February 2021 senior notes. Genworth Holdings paid its 7.20% senior

notes with a principal balance of $338 million at maturity on February 16, 2021.

• Australia mortgage insurance debt issuance and redemption. On July 30, 2020, GFMIPL issued

AUD$190 million floating rate subordinated notes due in July 2030, part of which was issued in

exchange for AUD$147 million of its floating rate subordinated notes due in July 2025. On August 24,

2020 and October 6, 2020, GFMIPL redeemed AUD$5 million and the remaining AUD$48 million,

respectively, of its floating rate subordinated notes due in July 2025 and paid accrued interest thereon.

• Redemption of Genworth Holdings’ June 2020 senior notes. On January 21, 2020, Genworth Holdings

early redeemed $397 million of its 7.70% senior notes originally scheduled to mature in June 2020 for

a pre-tax loss of $9 million. The senior notes were fully redeemed with a cash payment of

$409 million, comprised of the outstanding principal balance of $397 million, accrued interest of

$3 million and a make-whole premium of $9 million.

• Repurchase of Genworth Holdings’ 2021 senior notes. During the year ended December 31, 2020,

Genworth Holdings repurchased $84 million principal amount of its senior notes with 2021 maturity

dates for a pre-tax gain of $4 million and paid accrued interest thereon.

• Redemption of non-recourse funding obligations. In January 2020, upon receipt of approval from the

Director of Insurance of the State of South Carolina, Rivermont Life Insurance Company I

(“Rivermont I”), our indirect wholly-owned special purpose consolidated captive insurance subsidiary,

redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050. The

early redemption resulted in a pre-tax loss of $4 million from the write-off of deferred borrowing costs.

• AXA promissory note. On December 1, 2015, we completed the sale of our lifestyle protection

insurance business to AXA. In 2017, AXA sued us for damages on an indemnity in the 2015 agreement

related to alleged remediation it paid to customers who purchased payment protection insurance. On

July 20, 2020, we reached a settlement agreement with AXA for losses incurred from mis-selling

complaints on policies sold from 1970 through 2004. Under the settlement agreement we agreed to

make two installment payments to AXA for approximately £317 million in 2022. We further agreed to

pay AXA for future claims that are still being processed currently estimated to be approximately

£108 million that will be due with the final installment payment in 2022. As of December 31, 2020, the

total amount owed to AXA under the settlement agreement is £425 million ($581 million) which is

included in liabilities related to discontinued operations in our consolidated balance sheet.

•

•

Liquidity and contractual obligations. For additional details related to Genworth Holdings’ liquidity in

relation to its contractual obligations, see note 1 in our consolidated financial statements under

“Item 8—Financial Statements and Supplementary Data.”

Secured term loan repayment. On December 12, 2019, Genworth Holdings repaid its senior secured

term loan facility (“Term Loan”), which was originally closed on March 7, 2018 and was scheduled to

mature in March 2023. Prior to the repayment, Genworth Financial International Holdings, LLC

(“GFIH”) provided a limited recourse guarantee to the lenders of Genworth Holdings’ outstanding

Term Loan, which was secured by GFIH’s ownership interest in Genworth Canada’s outstanding

common shares. Due to the sale of the underlying collateral, the Term Loan was required to be repaid

upon the sale of Genworth Canada. A cash payment of $445 million was used to fully repay the

outstanding principal and accrued interest of the Term Loan.

Regulation and Taxes

• The effective tax rate for the years ended December 31, 2020 and 2019 was 26.2% and 27.3%,

respectively. The decrease in the effective tax rate was primarily attributable to a lower effect from
foreign operations and gains on forward starting swaps settled prior to the enactment of the TCJA,
which will continue to be tax effected at 35% as they are amortized into net investment income, in
relation to higher pre-tax income in 2020. See note 13 in our consolidated financial statements under
“Item 8—Financial Statements and Supplementary Data” for additional information.

Dispositions

•

•

Sale of our lifestyle protection insurance business. As discussed above, on July 20, 2020, we reached a
settlement agreement with AXA. An after-tax loss of $549 million and $110 million is included in
income (loss) from discontinued operations for the years ended December 31, 2020 and 2019,
respectively, associated with the case and settlement agreement. We have established our current best
estimates for future claims that are still being processed under the settlement agreement, as well as for
the unrelated liability related to underwriting losses and other expenses; however, there may be future
adjustments to these estimates. If amounts are different from our estimates, it could result in an
adjustment to our liabilities and an additional amount reflected in income (loss) from discontinued
operations. See notes 20 and 23 in our consolidated financial statements under “Item 8—Financial
Statements and Supplementary Data” for additional information.

Sale of our Canada mortgage insurance business. On December 12, 2019, we completed the sale of
Genworth Canada, our former Canada mortgage insurance business, to Brookfield and received
approximately $1.7 billion in net cash proceeds. During 2019, we recorded an after-tax loss of
$121 million related to the sale. See note 23 in our consolidated financial statements under “Item 8—
Financial Statements and Supplementary Data” for additional information.

Critical Accounting Estimates

The accounting estimates (including sensitivities) discussed in this section are those that we consider to be
particularly critical to an understanding of our consolidated financial statements because their application places
the most significant demands on our ability to judge the effect of inherently uncertain matters on our financial
results. The sensitivities included in this section involve matters that are also inherently uncertain and involve the
exercise of significant judgment in selecting the factors and amounts used in the sensitivities. Small changes in
the amounts used in the sensitivities or the use of different factors could result in materially different outcomes
from those reflected in the sensitivities. For all of these accounting estimates, we caution that future events
seldom develop as estimated and management’s best estimates often require adjustment. See “Cautionary Note
Regarding Forward-looking Statements.”

Insurance liabilities and reserves. We calculate and maintain reserves for the estimated future payment of

claims to our policyholders and contractholders based on actuarial assumptions and in accordance with U.S.
GAAP and industry practice. We build these reserves as the estimated value of those obligations increases, and
we release these reserves as those future obligations are paid, experience changes or policies lapse. The reserves
we establish reflect estimates and actuarial assumptions and methodologies with regard to our future experience.
These estimates and actuarial assumptions and methodologies involve the exercise of significant judgment and
are inherently uncertain. These estimates and actuarial assumptions and methodologies are subjected to a variety
of internal reviews and, in some cases, external independent reviews. Our future financial results depend
significantly upon the extent to which our actual future experience is consistent with the assumptions we have
used in determining our reserves as well as the assumptions originally used in pricing our products.

Many factors, and changes in these factors, can affect future experience including, but not limited to:

interest rates; investment returns and volatility; economic and social conditions, such as inflation, unemployment,

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home price appreciation or depreciation, and healthcare experience; policyholder persistency or lapses; insured
mortality; insured morbidity; future premium rate increases and associated benefit reductions; expenses; and
doctrines of legal liability and damage awards in litigation. Because these assumptions relate to factors that are
not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we
cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those
payments. Small changes in assumptions or small deviations of actual experience from assumptions can have,
and in the past had, material impacts on our reserve levels, results of operations and financial condition.
Moreover, we may not be able to mitigate the impact of unexpected adverse experience by increasing premiums
and/or other charges to policyholders (where we have the right to do so) or by offering benefit reductions as an
alternative to increasing premiums.

Insurance reserves differ for long- and short-duration insurance policies. Measurement of reserves for long-

duration insurance contracts (such as life insurance, annuity and long-term care insurance products) is based on
approved actuarial methods, and includes assumptions about mortality, morbidity, lapses, interest rates and other
factors. Short-duration contracts are accounted for based on actuarial estimates of the amount of loss inherent in
that period’s claims, including losses incurred for which claims have not been reported. Short-duration contract
loss estimates rely on actuarial observations of ultimate loss experience for similar historical events.

Future policy benefits

The liability for future policy benefits is equal to the present value of expected future benefits and expenses,

less the present value of expected future net premiums based on assumptions including projected interest rates
and investment returns, health care experience, policyholder persistency or lapses, insured mortality, insured
morbidity and expenses, all of which are locked-in at the time the policies are issued or acquired. In our long-
term care insurance business, our assumptions used in loss recognition testing also include significant premium
rate increases and associated benefit reductions that have been filed and approved or are anticipated to be
approved (including premium rate increases and associated benefit reductions not yet filed). The liability for
future policy benefits is reviewed at least annually as a part of our loss recognition testing using current
assumptions based on the manner of acquiring, servicing and measuring the profitability of the insurance
contracts. Loss recognition testing is generally performed at the line of business level, with acquired blocks and
certain reinsured blocks tested separately. Changes in how we manage certain polices could require separate loss
recognition testing and could result in future charges to net income. If loss recognition testing indicates a
premium deficiency, the liability for future policy benefits is measured using updated assumptions, which
become the new locked-in assumptions utilized going forward unless another premium deficiency charge is
recorded.

See notes 2 and 9 in our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data” for additional information related to insurance reserves.

Long-term care insurance block, excluding our acquired block

We annually perform loss recognition testing for the liability for future policy benefits for our long-term
care insurance products in the aggregate, excluding our acquired block of long-term care insurance, which is
tested separately. The results of loss recognition testing are driven by changes to assumptions and methodologies
primarily impacting claim termination rates, incidence and benefit utilization rates, as well as in-force rate
actions. Claim termination rates refer to the expected rates at which claims end. Incidence rates represent the
likelihood the policyholder will go on claim. Benefit utilization rates estimate how much of the available policy
benefits are expected to be used.

Our assumption for future in-force rate actions is based on our best estimate of the rate increases we expect
given our claim cost expectations and uses our historical experience from rate increase approvals. In addition, we
review other assumptions, particularly related to lapse rates, morbidity, mortality improvement and expenses, and
update these assumptions as appropriate.

In 2020 and 2019, the results of our loss recognition testing on our long-term care insurance block,

excluding the acquired block, indicated that our DAC was recoverable and reserves were sufficient, with a

margin of approximately $400 million to $800 million as of December 31, 2020 compared to approximately

$400 million to $700 million as of December 31, 2019. The margin in 2020 included updates for claim

terminations and incidence and benefit utilization, among others. These updates drove changes to our in-force

rate action plan. The margin reflected an assumption for future in-force rate actions (anticipated to be approved,

including premium rate increases and associated benefit reductions not yet filed) of approximately $8.0 billion in

2020 and approximately $7.6 billion in 2019. The increase in our future rate actions in 2020 was a result of new

future unapproved in-force rate actions added, partially offset by in-force rate action approvals received during

2020. A change in the expected amount of in-force rate actions would impact the results of our long-term care

insurance margin testing, whereby any unexpected reduction in the amount of in-force rate actions would

negatively impact our margins and could result in a premium deficiency.

We assume a static discount rate that is in line with our current portfolio yield. Our discount rate assumption

for our long-term care insurance block, excluding the acquired block, was 5.34% and 5.39% in 2020 and 2019,

respectively. This rate represents our expected investment returns based on the portfolio of assets supporting the

net U.S. GAAP liability as of the calculation date and, therefore, excluded the impacts of qualifying hedge gains

that are not currently amortizing. In the select sensitivities below, for both our long-term care insurance block

excluding our acquired block and our acquired block, the 25 basis point decrease in the discount rate refers to a

reduction in our portfolio yields. As of December 31, 2020 and 2019, the liability for future policy benefits

associated with our long-term care insurance block, excluding the acquired block, was $26.9 billion and

$24.1 billion, respectively.

were as follows:

The impact on our 2020 long-term care insurance loss recognition testing margin for select sensitivities

(Amounts in millions)

Sensitivities on 2020 loss recognition testing:

5% relative increase in future claim costs . . . . . . . . . . . . . . . . . .

Discount rate decrease of 25 basis points . . . . . . . . . . . . . . . . . .

10% reduction in benefit of future in-force rate actions . . . . . . .

$(2,500)

$(1,100)

$ (800)

Other Block

(Excluding

the Acquired

Block)

The margin impacts in the table above are each discrete and do not reflect the impact one factor may have

on another. For example, the increases in claim costs do not include any offsetting impacts from potential future

in-force rate actions. Any such offset from in-force rate actions would primarily impact our long-term care

insurance block, excluding the acquired block.

Any future adverse changes in our assumptions could result in both the impairment of DAC associated with

our long-term care insurance products as well as the establishment of additional future policy benefit reserves.

Any favorable variation would result in additional margin and higher income recognized over the remaining

duration of the in-force block. Our positive margin for our long-term care insurance block, excluding the

acquired block, is dependent on our assumptions regarding our ability to successfully implement our in-force rate

action strategy involving premium rate increases and associated benefit reductions. For our long-term care

insurance block, excluding the acquired block, any adverse changes in assumptions would only be reflected in

net income as a loss to the extent the margin was reduced below zero.

Profits followed by losses

With respect to our long-term care insurance block, excluding the acquired block, while loss recognition

testing supports that in the aggregate our reserves are sufficient, our future projections indicate we have projected

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home price appreciation or depreciation, and healthcare experience; policyholder persistency or lapses; insured

mortality; insured morbidity; future premium rate increases and associated benefit reductions; expenses; and

doctrines of legal liability and damage awards in litigation. Because these assumptions relate to factors that are

not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we

cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those

payments. Small changes in assumptions or small deviations of actual experience from assumptions can have,

and in the past had, material impacts on our reserve levels, results of operations and financial condition.

Moreover, we may not be able to mitigate the impact of unexpected adverse experience by increasing premiums

and/or other charges to policyholders (where we have the right to do so) or by offering benefit reductions as an

alternative to increasing premiums.

Insurance reserves differ for long- and short-duration insurance policies. Measurement of reserves for long-

duration insurance contracts (such as life insurance, annuity and long-term care insurance products) is based on

approved actuarial methods, and includes assumptions about mortality, morbidity, lapses, interest rates and other

factors. Short-duration contracts are accounted for based on actuarial estimates of the amount of loss inherent in

that period’s claims, including losses incurred for which claims have not been reported. Short-duration contract

loss estimates rely on actuarial observations of ultimate loss experience for similar historical events.

Future policy benefits

The liability for future policy benefits is equal to the present value of expected future benefits and expenses,

less the present value of expected future net premiums based on assumptions including projected interest rates

and investment returns, health care experience, policyholder persistency or lapses, insured mortality, insured

morbidity and expenses, all of which are locked-in at the time the policies are issued or acquired. In our long-

term care insurance business, our assumptions used in loss recognition testing also include significant premium

rate increases and associated benefit reductions that have been filed and approved or are anticipated to be

approved (including premium rate increases and associated benefit reductions not yet filed). The liability for

future policy benefits is reviewed at least annually as a part of our loss recognition testing using current

assumptions based on the manner of acquiring, servicing and measuring the profitability of the insurance

contracts. Loss recognition testing is generally performed at the line of business level, with acquired blocks and

certain reinsured blocks tested separately. Changes in how we manage certain polices could require separate loss

recognition testing and could result in future charges to net income. If loss recognition testing indicates a

premium deficiency, the liability for future policy benefits is measured using updated assumptions, which

become the new locked-in assumptions utilized going forward unless another premium deficiency charge is

recorded.

See notes 2 and 9 in our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data” for additional information related to insurance reserves.

Long-term care insurance block, excluding our acquired block

We annually perform loss recognition testing for the liability for future policy benefits for our long-term

care insurance products in the aggregate, excluding our acquired block of long-term care insurance, which is

tested separately. The results of loss recognition testing are driven by changes to assumptions and methodologies

primarily impacting claim termination rates, incidence and benefit utilization rates, as well as in-force rate

actions. Claim termination rates refer to the expected rates at which claims end. Incidence rates represent the

likelihood the policyholder will go on claim. Benefit utilization rates estimate how much of the available policy

benefits are expected to be used.

Our assumption for future in-force rate actions is based on our best estimate of the rate increases we expect

given our claim cost expectations and uses our historical experience from rate increase approvals. In addition, we

review other assumptions, particularly related to lapse rates, morbidity, mortality improvement and expenses, and

update these assumptions as appropriate.

In 2020 and 2019, the results of our loss recognition testing on our long-term care insurance block,
excluding the acquired block, indicated that our DAC was recoverable and reserves were sufficient, with a
margin of approximately $400 million to $800 million as of December 31, 2020 compared to approximately
$400 million to $700 million as of December 31, 2019. The margin in 2020 included updates for claim
terminations and incidence and benefit utilization, among others. These updates drove changes to our in-force
rate action plan. The margin reflected an assumption for future in-force rate actions (anticipated to be approved,
including premium rate increases and associated benefit reductions not yet filed) of approximately $8.0 billion in
2020 and approximately $7.6 billion in 2019. The increase in our future rate actions in 2020 was a result of new
future unapproved in-force rate actions added, partially offset by in-force rate action approvals received during
2020. A change in the expected amount of in-force rate actions would impact the results of our long-term care
insurance margin testing, whereby any unexpected reduction in the amount of in-force rate actions would
negatively impact our margins and could result in a premium deficiency.

We assume a static discount rate that is in line with our current portfolio yield. Our discount rate assumption

for our long-term care insurance block, excluding the acquired block, was 5.34% and 5.39% in 2020 and 2019,
respectively. This rate represents our expected investment returns based on the portfolio of assets supporting the
net U.S. GAAP liability as of the calculation date and, therefore, excluded the impacts of qualifying hedge gains
that are not currently amortizing. In the select sensitivities below, for both our long-term care insurance block
excluding our acquired block and our acquired block, the 25 basis point decrease in the discount rate refers to a
reduction in our portfolio yields. As of December 31, 2020 and 2019, the liability for future policy benefits
associated with our long-term care insurance block, excluding the acquired block, was $26.9 billion and
$24.1 billion, respectively.

The impact on our 2020 long-term care insurance loss recognition testing margin for select sensitivities

were as follows:

(Amounts in millions)

Sensitivities on 2020 loss recognition testing:

Other Block
(Excluding
the Acquired
Block)

5% relative increase in future claim costs . . . . . . . . . . . . . . . . . .
Discount rate decrease of 25 basis points . . . . . . . . . . . . . . . . . .
10% reduction in benefit of future in-force rate actions . . . . . . .

$(2,500)
$(1,100)
$ (800)

The margin impacts in the table above are each discrete and do not reflect the impact one factor may have

on another. For example, the increases in claim costs do not include any offsetting impacts from potential future
in-force rate actions. Any such offset from in-force rate actions would primarily impact our long-term care
insurance block, excluding the acquired block.

Any future adverse changes in our assumptions could result in both the impairment of DAC associated with

our long-term care insurance products as well as the establishment of additional future policy benefit reserves.
Any favorable variation would result in additional margin and higher income recognized over the remaining
duration of the in-force block. Our positive margin for our long-term care insurance block, excluding the
acquired block, is dependent on our assumptions regarding our ability to successfully implement our in-force rate
action strategy involving premium rate increases and associated benefit reductions. For our long-term care
insurance block, excluding the acquired block, any adverse changes in assumptions would only be reflected in
net income as a loss to the extent the margin was reduced below zero.

Profits followed by losses

With respect to our long-term care insurance block, excluding the acquired block, while loss recognition
testing supports that in the aggregate our reserves are sufficient, our future projections indicate we have projected

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profits in earlier periods followed by projected losses in later periods. As a result of this pattern of projected
profits followed by projected losses, we will ratably accrue additional future policy benefit reserves over the
profitable periods, currently expected to be through 2031, by the amounts necessary to offset estimated losses
during the periods that follow. Such additional reserves are updated each period and calculated based on our
estimate of the amount necessary to offset the losses in future periods utilizing expected income and current best
estimate assumptions based on actual and anticipated experience, consistent with our loss recognition testing. We
adjust the accrual rate prospectively, over the remaining profit periods, without any catch-up adjustment. During
the years ended December 31, 2020 and 2019, we increased our long-term care insurance future policy benefit
reserves by $302 million and $213 million, respectively, to accrue for profits followed by losses. As of
December 31, 2020, the total amount accrued for profits followed by losses was $625 million. The accrual is
recorded quarterly and is impacted by the pattern and present value of expected future losses which are updated
annually at the time in which we perform loss recognition testing. During the fourth quarter of 2020, we updated
our loss recognition testing assumptions, which included changes from our annual assumption review completed
in the fourth quarter of 2020 as well as updates to our future in-force rate actions. The present value of expected
future losses was approximately $2.1 billion and $2.0 billion as of December 31, 2020 and 2019, respectively. As
of December 31, 2020, we estimate a factor of approximately 76% of those profits on our long-term care
insurance block, excluding the acquired block, will be accrued in the future to offset estimated future losses
during later periods. As of December 31, 2019, we estimated a factor of approximately 80% to ratably accrue
additional future policy benefits. The decrease in the factor was mostly driven by higher actual profits in 2020
resulting in a larger increase in accrued future policy benefits during 2020, partially offset by the updated profit
pattern from our annual review of assumptions completed in the fourth quarter of 2020, as well as updates to our
future in-force rate actions. There may be future adjustments to this estimate reflecting any variety of new and
adverse trends that could result in increases to future policy benefit reserves for our profits followed by losses
accrual, and such future increases could possibly be material to our results of operations and financial condition
and liquidity.

Acquired block of long-term care insurance

In 2014, we had a premium deficiency in our acquired block of long-term care insurance; therefore, our

assumptions that were updated in connection with the premium deficiency have remained locked-in. These
updated assumptions will remain locked-in unless, and until such time as, another premium deficiency occurs.
Due to the premium deficiency that existed in 2014, we monitor our acquired block more frequently than
annually.

As of December 31, 2020, our acquired block of long-term care insurance had positive margin of
approximately $100 million to $200 million compared to approximately $100 million to $300 million as of
December 31, 2019. Our discount rate assumption was 6.44% and 7.00% in 2020 and 2019, respectively. As of
December 31, 2020 and 2019, the liability for future policy benefits associated with our acquired block of long-
term care insurance was $1.9 billion and $2.1 billion, respectively.

The impact on our 2020 long-term care insurance loss recognition testing margin for select sensitivities

were as follows:

(Amounts in millions)

Acquired
Block

Sensitivities on 2020 loss recognition testing margin:

5% relative increase in future claim costs . . . . . . . . . . . .
Discount rate decrease of 25 basis points . . . . . . . . . . . . .

$(100)
$ (30)

from future in-force rate actions, and therefore, there is a higher likelihood that adverse changes in our

assumptions would result in an additional premium deficiency. The impacts of future adverse changes in our

assumptions resulting in another premium deficiency would result in the establishment of additional future policy

benefit reserves and would be immediately reflected in net income as a loss if our margin for this block is again

reduced below zero. Any favorable variation would result in additional margin and higher income recognized

over the remaining duration of the in-force block but would not have an immediate benefit to net income.

Term and whole life insurance

Similar to our long-term care insurance products, we annually perform loss recognition testing for the

liability for future policy benefits for our term and whole life insurance products, excluding our acquired block,

which is tested separately. The margin of our term and whole life insurance products has fluctuated over the

years. As of December 31, 2020 and 2019, we had margin of approximately $300 million to $800 million and

$200 million to $600 million, respectively, and a DAC balance of $1.1 billion and $1.2 billion, respectively, on

our term and whole life insurance products, excluding the acquired block. If our margin is reduced below zero for

our term and whole life insurance products, excluding our acquired block, we would amortize DAC up to the

amount of DAC recorded on our balance sheet and if DAC was fully written off, establish additional future

policy benefit reserves, either of which would result in a charge to net income.

As of December 31, 2020 and 2019, we had margin of approximately $100 million to $300 million and

$100 million to $400 million, respectively, and a PVFP balance of $73 million and $74 million, respectively, on

our acquired block of term and whole life insurance products. If our margin is reduced below zero for our

acquired block of term and whole life insurance products, we would amortize PVFP up to the amount of PVFP

recorded on our balance sheet and if PVFP was fully written off, establish additional future policy benefit

reserves, either of which would result in a charge to net income.

The risks we face mostly include adverse variations in mortality and lapse assumptions. Adverse experience

in one or all of these risks could result in the DAC associated with our term and whole life insurance products,

excluding our acquired block and PVFP associated with our acquired block of term and whole life insurance

products to no longer be fully recoverable as well as the required establishment of additional future policy benefit

reserves. Any favorable variation would result in additional margin and higher income recognized over the

remaining duration of the in-force block. The sensitivities in the table below are changes that we consider to be

reasonably possible given historical changes in market conditions and our experience with these products.

The impact on our 2020 term and whole life insurance loss recognition testing margin for select sensitivities

were as follows:

(Amounts in millions)

Sensitivities on 2020 loss recognition testing:

2% higher mortality . . . . . . . . . . . . . . . . . . . . . . . . .

10% increase in lapses . . . . . . . . . . . . . . . . . . . . . . .

$ (70)

$(480)

$(10)

$(40)

$ (80)

$(520)

Other Block

(Excluding

the Acquired

Block)

Acquired

Block

Total

The margin impacts in the table above are each discrete and do not reflect the impact one factor may have

on another.

Fixed immediate annuities

The margin impacts in the table above are each discrete and do not reflect the impact one factor may have

on another. For example, the increases in claim costs do not include any incremental adverse impacts from a
potential decrease in the discount rate. Due to the age of our acquired block, it would not benefit significantly

U.S. GAAP prohibits a change (or unlocking) of assumptions on traditional long-duration insurance

products unless recoverability testing, also known as loss recognition testing, deems them to be inadequate. Due

to the premium deficiency that existed in 2016, we perform loss recognition testing on our fixed immediate

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profits in earlier periods followed by projected losses in later periods. As a result of this pattern of projected

profits followed by projected losses, we will ratably accrue additional future policy benefit reserves over the

profitable periods, currently expected to be through 2031, by the amounts necessary to offset estimated losses

during the periods that follow. Such additional reserves are updated each period and calculated based on our

estimate of the amount necessary to offset the losses in future periods utilizing expected income and current best

estimate assumptions based on actual and anticipated experience, consistent with our loss recognition testing. We

adjust the accrual rate prospectively, over the remaining profit periods, without any catch-up adjustment. During

the years ended December 31, 2020 and 2019, we increased our long-term care insurance future policy benefit

reserves by $302 million and $213 million, respectively, to accrue for profits followed by losses. As of

December 31, 2020, the total amount accrued for profits followed by losses was $625 million. The accrual is

recorded quarterly and is impacted by the pattern and present value of expected future losses which are updated

annually at the time in which we perform loss recognition testing. During the fourth quarter of 2020, we updated

our loss recognition testing assumptions, which included changes from our annual assumption review completed

in the fourth quarter of 2020 as well as updates to our future in-force rate actions. The present value of expected

future losses was approximately $2.1 billion and $2.0 billion as of December 31, 2020 and 2019, respectively. As

of December 31, 2020, we estimate a factor of approximately 76% of those profits on our long-term care

insurance block, excluding the acquired block, will be accrued in the future to offset estimated future losses

during later periods. As of December 31, 2019, we estimated a factor of approximately 80% to ratably accrue

additional future policy benefits. The decrease in the factor was mostly driven by higher actual profits in 2020

resulting in a larger increase in accrued future policy benefits during 2020, partially offset by the updated profit

pattern from our annual review of assumptions completed in the fourth quarter of 2020, as well as updates to our

future in-force rate actions. There may be future adjustments to this estimate reflecting any variety of new and

adverse trends that could result in increases to future policy benefit reserves for our profits followed by losses

accrual, and such future increases could possibly be material to our results of operations and financial condition

and liquidity.

annually.

Acquired block of long-term care insurance

In 2014, we had a premium deficiency in our acquired block of long-term care insurance; therefore, our

assumptions that were updated in connection with the premium deficiency have remained locked-in. These

updated assumptions will remain locked-in unless, and until such time as, another premium deficiency occurs.

Due to the premium deficiency that existed in 2014, we monitor our acquired block more frequently than

As of December 31, 2020, our acquired block of long-term care insurance had positive margin of

approximately $100 million to $200 million compared to approximately $100 million to $300 million as of

December 31, 2019. Our discount rate assumption was 6.44% and 7.00% in 2020 and 2019, respectively. As of

December 31, 2020 and 2019, the liability for future policy benefits associated with our acquired block of long-

term care insurance was $1.9 billion and $2.1 billion, respectively.

The impact on our 2020 long-term care insurance loss recognition testing margin for select sensitivities

were as follows:

(Amounts in millions)

Acquired

Block

Sensitivities on 2020 loss recognition testing margin:

5% relative increase in future claim costs . . . . . . . . . . . .

Discount rate decrease of 25 basis points . . . . . . . . . . . . .

$(100)

$ (30)

from future in-force rate actions, and therefore, there is a higher likelihood that adverse changes in our
assumptions would result in an additional premium deficiency. The impacts of future adverse changes in our
assumptions resulting in another premium deficiency would result in the establishment of additional future policy
benefit reserves and would be immediately reflected in net income as a loss if our margin for this block is again
reduced below zero. Any favorable variation would result in additional margin and higher income recognized
over the remaining duration of the in-force block but would not have an immediate benefit to net income.

Term and whole life insurance

Similar to our long-term care insurance products, we annually perform loss recognition testing for the
liability for future policy benefits for our term and whole life insurance products, excluding our acquired block,
which is tested separately. The margin of our term and whole life insurance products has fluctuated over the
years. As of December 31, 2020 and 2019, we had margin of approximately $300 million to $800 million and
$200 million to $600 million, respectively, and a DAC balance of $1.1 billion and $1.2 billion, respectively, on
our term and whole life insurance products, excluding the acquired block. If our margin is reduced below zero for
our term and whole life insurance products, excluding our acquired block, we would amortize DAC up to the
amount of DAC recorded on our balance sheet and if DAC was fully written off, establish additional future
policy benefit reserves, either of which would result in a charge to net income.

As of December 31, 2020 and 2019, we had margin of approximately $100 million to $300 million and
$100 million to $400 million, respectively, and a PVFP balance of $73 million and $74 million, respectively, on
our acquired block of term and whole life insurance products. If our margin is reduced below zero for our
acquired block of term and whole life insurance products, we would amortize PVFP up to the amount of PVFP
recorded on our balance sheet and if PVFP was fully written off, establish additional future policy benefit
reserves, either of which would result in a charge to net income.

The risks we face mostly include adverse variations in mortality and lapse assumptions. Adverse experience

in one or all of these risks could result in the DAC associated with our term and whole life insurance products,
excluding our acquired block and PVFP associated with our acquired block of term and whole life insurance
products to no longer be fully recoverable as well as the required establishment of additional future policy benefit
reserves. Any favorable variation would result in additional margin and higher income recognized over the
remaining duration of the in-force block. The sensitivities in the table below are changes that we consider to be
reasonably possible given historical changes in market conditions and our experience with these products.

The impact on our 2020 term and whole life insurance loss recognition testing margin for select sensitivities

were as follows:

(Amounts in millions)

Sensitivities on 2020 loss recognition testing:

Other Block
(Excluding
the Acquired
Block)

Acquired
Block

Total

2% higher mortality . . . . . . . . . . . . . . . . . . . . . . . . .
10% increase in lapses . . . . . . . . . . . . . . . . . . . . . . .

$ (70)
$(480)

$(10)
$(40)

$ (80)
$(520)

The margin impacts in the table above are each discrete and do not reflect the impact one factor may have

on another.

Fixed immediate annuities

The margin impacts in the table above are each discrete and do not reflect the impact one factor may have

on another. For example, the increases in claim costs do not include any incremental adverse impacts from a

potential decrease in the discount rate. Due to the age of our acquired block, it would not benefit significantly

U.S. GAAP prohibits a change (or unlocking) of assumptions on traditional long-duration insurance
products unless recoverability testing, also known as loss recognition testing, deems them to be inadequate. Due
to the premium deficiency that existed in 2016, we perform loss recognition testing on our fixed immediate

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annuity products more frequently than annually. In 2016, a premium deficiency in our fixed immediate annuity
products resulted in the write-off of the entire DAC balance associated with these products. Accordingly, the
premium deficiencies that occurred subsequent to 2016 resulted in the establishment of additional future policy
benefit reserves and were also reflected as a loss in net income.

Persistent low interest rates have impacted, and may continue to impact, the margins of our fixed immediate

annuity products. In 2020, the results of our loss recognition testing did not result in a premium deficiency;
therefore, our liability for future policy benefits was sufficient. However, in 2019 and 2018, we determined we
had premium deficiencies in our fixed immediate annuity products as a result of loss recognition testing and we
increased our future policy benefit reserves and recognized expenses of $39 million and $22 million,
respectively. The premium deficiency test results were primarily driven by the low interest rate environment and
updated assumptions. The updated assumptions will remain locked-in until such time as we determine another
premium deficiency exists.

The impacts of future adverse changes in our assumptions would result in the establishment of additional
future policy benefit reserves and would be immediately reflected as a loss in net income if our margin for this
block is again reduced below zero. Any favorable variation would result in additional margin and higher income
recognized over the remaining duration of the in-force block but would not have an immediate benefit to net
income. The risks we face include adverse variations in interest rates, credit spreads and mortality. Adverse
experience in one or all of these risks would negatively impact our margin for this block. As of December 31,
2020, we estimate that a 10 basis point reduction in asset yields from the December 31, 2020 level or 2% lower
mortality, scenarios that we consider to be reasonably possible given historical changes in market conditions and
experience on our fixed immediate annuity products, would result in a reduction to margin of approximately
$28 million or $21 million, respectively. Currently, these reductions are not sufficient to reduce our margin for
this block below zero. However, future adverse variations could reduce our margin below zero which would
result in the establishment of additional future policy benefit reserves and reflected as a loss in net income.

Policyholder account balances

The liability for policyholder account balances represents the contract value that has accrued to the benefit

of the policyholder as of the balance sheet date for investment-type and universal and term universal life
insurance contracts. We are also required to establish additional benefit reserves for guarantees or product
features in addition to the contract value where the additional benefit reserves are calculated by applying a
benefit ratio to accumulated contractholder assessments, and then deducting accumulated paid claims. The
benefit ratio is equal to the ratio of benefits to assessments, accumulated with interest and considering both past
and anticipated future claims experience, which includes assumptions for insured mortality, interest rates and
policyholder persistency or lapses, among other assumptions.

We perform an annual review of assumptions for our universal and term universal life insurance products,

typically in the fourth quarter. Our 2020 test resulted in a decrease in the liability for policyholder account
balances of $118 million, with a corresponding pre-tax benefit recorded to net income, primarily due to a model
refinement in our term universal life insurance product related to persistency and grace period timing and lower
projected cost of insurance assessments on our universal life insurance products. Other assumption updates
mostly focused on long-term trends in mortality, persistency and interest rates. Our 2019 and 2018 tests resulted
in an increase in the liability for policyholder account balances of $72 million and $119 million, respectively,
with a corresponding pre-tax loss recorded to net income. The 2019 and 2018 test results were predominantly
impacted by emerging mortality experience, lower expected growth in interest rates and a prolonged low interest
rate environment.

As of December 31, 2020 and 2019, we had DAC of $245 million and $333 million, respectively, and total
policyholder account balances including reserves in excess of the contract value of $9.7 billion and $9.0 billion,
respectively, related to our universal and term universal life insurance products. As of December 31, 2020, for

our universal and term universal life insurance products, we estimate that a 100 basis point reduction in interest

rates from the December 31, 2020 level, or 2% higher mortality, scenarios that we consider to be reasonably

possible given historical changes in market conditions and experience on these products, would result in a loss

recorded to net income of approximately $1 million and $38 million, respectively. Adverse experience in

persistency could also result in the DAC amortization associated with these products to be accelerated as well as

the establishment of higher additional benefit reserves. Any favorable changes in these assumptions would result

in lower DAC amortization as well as a reduction in the liability for policyholder account balances.

Liability for policy and contract claims

The liability for policy and contract claims represents the amount needed to provide for the estimated

ultimate cost of settling claims relating to insured events that have occurred on or before the end of the respective

reporting period. The estimated liability includes requirements for future payments of: (a) claims that have been

reported to the insurer; (b) claims related to insured events that have occurred but that have not been reported to

the insurer as of the date the liability is estimated; and (c) claim adjustment expenses. Claim adjustment expenses

include costs incurred in the claim settlement process such as legal fees and costs to record, process and adjust

claims.

December 31:

Our liability for policy and contract claims is reviewed regularly, with changes in our estimates of future

claims recorded through net income.

The following table sets forth our recorded liability for policy and contract claims by business as of

(Amounts in millions)

2020

2019

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,518

$10,239

U.S. mortgage insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Australia mortgage insurance . . . . . . . . . . . . . . . . . . . . . . . .

Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Runoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other mortgage insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .

555

378

331

12

12

11

233

248

208

13

9

8

Total liability for policy and contract claims . . . . . . . .

$11,817

$10,958

Long-term care insurance

The liability for policy and contract claims, also known as claim reserves, for our long-term care insurance

products represents the present value of the amount needed to provide for the estimated ultimate cost of settling

claims relating to insured events that have occurred on or before the end of the respective reporting period. Key

assumptions include investment returns, health care experience, insured mortality, insured morbidity and

expenses. Our discount rate assumption assumes a static discount rate in line with our current portfolio yield.

During the fourth quarter of 2020, we reviewed our assumptions and methodologies relating to our claim

reserves of our long-term care insurance business and made certain changes to our assumptions or

methodologies, particularly those assumptions used to calculate our IBNR reserves. In total, these updates

reduced our liability for policy and contract claims by $38 million. During the third quarter of 2019, we reviewed

our assumptions and methodologies relating to our claim reserves of our long-term care insurance business but

did not make any significant changes to the assumptions or methodologies, other than routine updates to

investment returns and benefit utilization rates as we typically do each quarter. These updates did not have a

significant impact on claim reserve levels. As experience has emerged in the past, we have made resulting

changes to our assumptions that have had a material impact on our results of operations and financial position.

Our experience will continue to emerge and as a result there is a potential for future assumption reviews to result

in further updates.

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annuity products more frequently than annually. In 2016, a premium deficiency in our fixed immediate annuity

products resulted in the write-off of the entire DAC balance associated with these products. Accordingly, the

premium deficiencies that occurred subsequent to 2016 resulted in the establishment of additional future policy

benefit reserves and were also reflected as a loss in net income.

Persistent low interest rates have impacted, and may continue to impact, the margins of our fixed immediate

annuity products. In 2020, the results of our loss recognition testing did not result in a premium deficiency;

therefore, our liability for future policy benefits was sufficient. However, in 2019 and 2018, we determined we

had premium deficiencies in our fixed immediate annuity products as a result of loss recognition testing and we

increased our future policy benefit reserves and recognized expenses of $39 million and $22 million,

respectively. The premium deficiency test results were primarily driven by the low interest rate environment and

updated assumptions. The updated assumptions will remain locked-in until such time as we determine another

premium deficiency exists.

The impacts of future adverse changes in our assumptions would result in the establishment of additional

future policy benefit reserves and would be immediately reflected as a loss in net income if our margin for this

block is again reduced below zero. Any favorable variation would result in additional margin and higher income

recognized over the remaining duration of the in-force block but would not have an immediate benefit to net

income. The risks we face include adverse variations in interest rates, credit spreads and mortality. Adverse

experience in one or all of these risks would negatively impact our margin for this block. As of December 31,

2020, we estimate that a 10 basis point reduction in asset yields from the December 31, 2020 level or 2% lower

mortality, scenarios that we consider to be reasonably possible given historical changes in market conditions and

experience on our fixed immediate annuity products, would result in a reduction to margin of approximately

$28 million or $21 million, respectively. Currently, these reductions are not sufficient to reduce our margin for

this block below zero. However, future adverse variations could reduce our margin below zero which would

result in the establishment of additional future policy benefit reserves and reflected as a loss in net income.

Policyholder account balances

The liability for policyholder account balances represents the contract value that has accrued to the benefit

of the policyholder as of the balance sheet date for investment-type and universal and term universal life

insurance contracts. We are also required to establish additional benefit reserves for guarantees or product

features in addition to the contract value where the additional benefit reserves are calculated by applying a

benefit ratio to accumulated contractholder assessments, and then deducting accumulated paid claims. The

benefit ratio is equal to the ratio of benefits to assessments, accumulated with interest and considering both past

and anticipated future claims experience, which includes assumptions for insured mortality, interest rates and

policyholder persistency or lapses, among other assumptions.

We perform an annual review of assumptions for our universal and term universal life insurance products,

typically in the fourth quarter. Our 2020 test resulted in a decrease in the liability for policyholder account

balances of $118 million, with a corresponding pre-tax benefit recorded to net income, primarily due to a model

refinement in our term universal life insurance product related to persistency and grace period timing and lower

projected cost of insurance assessments on our universal life insurance products. Other assumption updates

mostly focused on long-term trends in mortality, persistency and interest rates. Our 2019 and 2018 tests resulted

in an increase in the liability for policyholder account balances of $72 million and $119 million, respectively,

with a corresponding pre-tax loss recorded to net income. The 2019 and 2018 test results were predominantly

impacted by emerging mortality experience, lower expected growth in interest rates and a prolonged low interest

rate environment.

As of December 31, 2020 and 2019, we had DAC of $245 million and $333 million, respectively, and total

policyholder account balances including reserves in excess of the contract value of $9.7 billion and $9.0 billion,

respectively, related to our universal and term universal life insurance products. As of December 31, 2020, for

our universal and term universal life insurance products, we estimate that a 100 basis point reduction in interest
rates from the December 31, 2020 level, or 2% higher mortality, scenarios that we consider to be reasonably
possible given historical changes in market conditions and experience on these products, would result in a loss
recorded to net income of approximately $1 million and $38 million, respectively. Adverse experience in
persistency could also result in the DAC amortization associated with these products to be accelerated as well as
the establishment of higher additional benefit reserves. Any favorable changes in these assumptions would result
in lower DAC amortization as well as a reduction in the liability for policyholder account balances.

Liability for policy and contract claims

The liability for policy and contract claims represents the amount needed to provide for the estimated
ultimate cost of settling claims relating to insured events that have occurred on or before the end of the respective
reporting period. The estimated liability includes requirements for future payments of: (a) claims that have been
reported to the insurer; (b) claims related to insured events that have occurred but that have not been reported to
the insurer as of the date the liability is estimated; and (c) claim adjustment expenses. Claim adjustment expenses
include costs incurred in the claim settlement process such as legal fees and costs to record, process and adjust
claims.

Our liability for policy and contract claims is reviewed regularly, with changes in our estimates of future

claims recorded through net income.

The following table sets forth our recorded liability for policy and contract claims by business as of

December 31:

(Amounts in millions)

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. mortgage insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australia mortgage insurance . . . . . . . . . . . . . . . . . . . . . . . .
Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Runoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other mortgage insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

$10,518
555
378
331
12
12
11

$10,239
233
248
208
13
9
8

Total liability for policy and contract claims . . . . . . . .

$11,817

$10,958

Long-term care insurance

The liability for policy and contract claims, also known as claim reserves, for our long-term care insurance
products represents the present value of the amount needed to provide for the estimated ultimate cost of settling
claims relating to insured events that have occurred on or before the end of the respective reporting period. Key
assumptions include investment returns, health care experience, insured mortality, insured morbidity and
expenses. Our discount rate assumption assumes a static discount rate in line with our current portfolio yield.

During the fourth quarter of 2020, we reviewed our assumptions and methodologies relating to our claim

reserves of our long-term care insurance business and made certain changes to our assumptions or
methodologies, particularly those assumptions used to calculate our IBNR reserves. In total, these updates
reduced our liability for policy and contract claims by $38 million. During the third quarter of 2019, we reviewed
our assumptions and methodologies relating to our claim reserves of our long-term care insurance business but
did not make any significant changes to the assumptions or methodologies, other than routine updates to
investment returns and benefit utilization rates as we typically do each quarter. These updates did not have a
significant impact on claim reserve levels. As experience has emerged in the past, we have made resulting
changes to our assumptions that have had a material impact on our results of operations and financial position.
Our experience will continue to emerge and as a result there is a potential for future assumption reviews to result
in further updates.

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Mortgage insurance

Estimates of mortgage insurance reserves for losses and loss adjustment expenses are based on notices of

mortgage loan defaults and estimates of defaults that have been incurred but have not been reported by loan
servicers, using assumptions developed based on past experience and our expectation of future development. The
estimates are determined using either a factor-based approach, in which assumptions of claim rates for loans in
default and the average amount paid for loans that result in a claim are calculated using traditional actuarial
techniques, or a case-based approach, in which each individual delinquent loan is reviewed and a best-estimate
loss is determined based on the status of the insured loan and an estimation of net sale proceeds from the
disposition of the mortgaged property. Assumptions also include provisions for loans within our delinquency
inventory that will be rescinded or modified (collectively referred to as “loss mitigation actions”) based on the
effects that such loss mitigation actions have had on our historical claim frequency rates, including an estimate
for reinstatement of previously rescinded coverage. Each of these inherently judgmental assumptions is
established in a respective geography based on historical and expected experience. We have established
processes, as well as contractual rights, to ensure we receive timely information from loan servicers to aid us in
the establishment of our estimates. In addition, when we have obtained sufficient facts and circumstances
through our investigative process, we have the unilateral right under our master policies and at law to rescind
coverage on the underlying loan certificate as if coverage never existed. As is common accounting practice in the
mortgage insurance industry and in accordance with U.S. GAAP, loss reserves are not established for future
claims on insured loans that are not currently in default.

Management reviews the loss reserves quarterly for adequacy, and if indicated, updates the assumptions
used for estimating and calculating such reserves based on actual experience and our historical frequency of
claim and severity of loss rates that are applied to the current population of delinquencies. Factors considered in
establishing loss reserves include claim frequency patterns (reflecting the loss mitigation actions on such claim
patterns), the aged category of the delinquency (i.e., age and progression of delinquency to claim), the severity of
loss and loan coverage percentage. The establishment of our mortgage insurance loss reserves is subject to
inherent uncertainty and requires judgment. The actual amount of the claim payments may vary significantly
from the loss reserve estimates. Our estimates could be adversely affected by several factors, including, but not
limited to, a deterioration of regional or national economic conditions leading to a reduction in borrowers’
income and thus their ability to make mortgage payments, a drop in housing values that could expose us to
greater loss on resale of properties obtained through foreclosure proceedings and an adverse change in the
effectiveness of loss mitigation actions that could result in an increase in the frequency of expected claim rates.
Our estimates are also affected by the extent of fraud and misrepresentation that we uncover in the loans that we
have insured and the coverage upon which we have consequently rescinded or may rescind going forward. Our
loss reserving methodology includes estimates of the number of loans in our delinquency inventory that will be
rescinded or modified, as well as estimates of the number of loans for which coverage may be reinstated under
certain conditions following a rescission action.

In considering the potential sensitivity of the factors underlying management’s best estimate of our

mortgage insurance reserves for losses, it is possible that even a relatively small change in estimated
delinquency-to-claim rate (“frequency”) or a relatively small percentage change in estimated claim amount
(“severity”) could have a significant impact on reserves and, correspondingly, on results of operations. For
example, based on our actual experience during the three-year period ended December 31, 2020 in our U.S.
mortgage insurance business, a quarterly change of 3% in the average frequency reserve factor would change the
gross reserve amount for such quarter by approximately $72 million for our U.S. mortgage insurance business.
Based on our actual experience during 2020, a quarterly increase of $1,000 in the severity of our average reserves
combined with a 1% change in the average frequency reserve factor would change the gross reserve amount by
approximately $10 million for our mortgage insurance business in Australia based on current exchange rates.

business, although these products make up a smaller portion of our product mix in the United States. The

majority of our insurance contracts in our U.S. mortgage insurance business have recurring premiums, as

discussed below. For single premium insurance contracts, we recognize premiums over the policy life in

accordance with the expected pattern of risk emergence. We recognize a portion of the revenue in premiums

earned in the current period, while the remaining portion is deferred as unearned premiums, and earned over time

in accordance with the expected pattern of risk emergence. If single premium policies are cancelled and the

premium is non-refundable, then the remaining unearned premium related to each cancelled policy is recognized

as earned premiums upon notification of the cancellation, if not included in our expected earnings pattern. The

expected pattern of risk emergence on which we base premium recognition is inherently judgmental and is based

on actuarial analysis of historical and expected experience. In our mortgage insurance business in Australia, we

recognize unearned premiums over a period of up to 12 years, most of which are recognized between two and six

years from issue date. The recognition of earned premiums for our mortgage insurance businesses involves

significant estimates and assumptions as to future loss development and policy cancellations. These assumptions

are based on our historical experience and our expectations of future performance, which are highly dependent on

assumptions as to long-term macroeconomic conditions including interest rates, home price appreciation and the

rate of unemployment. We periodically review our expected pattern of risk emergence and make adjustments

based on actual experience and changes in our expectation of future performance with any adjustments reflected

in current period net income. Changes in market conditions could cause a decline in mortgage originations,

mortgage insurance penetration rates or our market share, all of which could impact new insurance written. For

example, a decline in flow new insurance written of $1.0 billion in Australia would result in a reduction in earned

premiums of approximately $2 million in the first full year following the decline in flow new insurance written

based on current pricing and expected pattern of risk emergence. However, this decline would be partially offset

by the recognition of earned premiums from established unearned premium reserves primarily from the last three

years of business.

As of December 31, 2020 and 2019, we had $2.0 billion and $1.9 billion, respectively, of unearned

premiums, of which $1.2 billion and $1.0 billion, respectively, related to our mortgage insurance business in

Australia and $0.3 billion and $0.4 billion, respectively, related to our U.S. mortgage insurance business. For the

year ended December 31, 2019, we increased earned premiums and decreased unearned premiums by $14 million

related to our single premium earnings pattern review in our U.S. mortgage insurance business. There were no

adjustments to earned premiums in our mortgage insurance businesses for the years ended December 31, 2020

and 2018.

Our expected pattern of risk emergence for our mortgage insurance businesses is subject to change given the

inherent uncertainty as to the underlying loss development and policy cancellation assumptions and the long

duration of our international mortgage insurance policy contracts. Actual experience that is different than

expected loss development or policy cancellations could result in further material increases or decreases in the

recognition of earned premiums depending on the magnitude of the difference between actual and expected

experience. Additional loss development emergence and policy cancellation variations could result in further

increases or decreases in unearned premiums and could impact operating results depending on the magnitude of

variation experienced (assuming other assumptions held constant).

In our U.S. mortgage insurance business, the majority of our insurance contracts have recurring premiums.

We recognize recurring premiums over the terms of the related insurance policy on a pro-rata basis (i.e.,

monthly). Changes in market conditions could cause a decline in mortgage originations, mortgage insurance

penetration rates and our market share, all of which could impact new insurance written. For example, a decline

in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately

$4 million in the first full year. Likewise, if primary persistency declined on our existing insurance in-force by

10%, earned premiums would decline by approximately $100 million during the first full year, potentially offset

by lower reserves due to policies no longer being in-force.

Unearned premiums. In our mortgage insurance business in Australia, the majority of our insurance
contracts are single premium. We also have single premium insurance contracts in our U.S. mortgage insurance

The remaining portion of our unearned premiums primarily relates to our long-term care insurance business

where the underlying assumptions related to premium recognition are not subject to significant uncertainty.

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Mortgage insurance

Estimates of mortgage insurance reserves for losses and loss adjustment expenses are based on notices of

mortgage loan defaults and estimates of defaults that have been incurred but have not been reported by loan

servicers, using assumptions developed based on past experience and our expectation of future development. The

estimates are determined using either a factor-based approach, in which assumptions of claim rates for loans in

default and the average amount paid for loans that result in a claim are calculated using traditional actuarial

techniques, or a case-based approach, in which each individual delinquent loan is reviewed and a best-estimate

loss is determined based on the status of the insured loan and an estimation of net sale proceeds from the

disposition of the mortgaged property. Assumptions also include provisions for loans within our delinquency

inventory that will be rescinded or modified (collectively referred to as “loss mitigation actions”) based on the

effects that such loss mitigation actions have had on our historical claim frequency rates, including an estimate

for reinstatement of previously rescinded coverage. Each of these inherently judgmental assumptions is

established in a respective geography based on historical and expected experience. We have established

processes, as well as contractual rights, to ensure we receive timely information from loan servicers to aid us in

the establishment of our estimates. In addition, when we have obtained sufficient facts and circumstances

through our investigative process, we have the unilateral right under our master policies and at law to rescind

coverage on the underlying loan certificate as if coverage never existed. As is common accounting practice in the

mortgage insurance industry and in accordance with U.S. GAAP, loss reserves are not established for future

claims on insured loans that are not currently in default.

Management reviews the loss reserves quarterly for adequacy, and if indicated, updates the assumptions

used for estimating and calculating such reserves based on actual experience and our historical frequency of

claim and severity of loss rates that are applied to the current population of delinquencies. Factors considered in

establishing loss reserves include claim frequency patterns (reflecting the loss mitigation actions on such claim

patterns), the aged category of the delinquency (i.e., age and progression of delinquency to claim), the severity of

loss and loan coverage percentage. The establishment of our mortgage insurance loss reserves is subject to

inherent uncertainty and requires judgment. The actual amount of the claim payments may vary significantly

from the loss reserve estimates. Our estimates could be adversely affected by several factors, including, but not

limited to, a deterioration of regional or national economic conditions leading to a reduction in borrowers’

income and thus their ability to make mortgage payments, a drop in housing values that could expose us to

greater loss on resale of properties obtained through foreclosure proceedings and an adverse change in the

effectiveness of loss mitigation actions that could result in an increase in the frequency of expected claim rates.

Our estimates are also affected by the extent of fraud and misrepresentation that we uncover in the loans that we

have insured and the coverage upon which we have consequently rescinded or may rescind going forward. Our

loss reserving methodology includes estimates of the number of loans in our delinquency inventory that will be

rescinded or modified, as well as estimates of the number of loans for which coverage may be reinstated under

certain conditions following a rescission action.

In considering the potential sensitivity of the factors underlying management’s best estimate of our

mortgage insurance reserves for losses, it is possible that even a relatively small change in estimated

delinquency-to-claim rate (“frequency”) or a relatively small percentage change in estimated claim amount

(“severity”) could have a significant impact on reserves and, correspondingly, on results of operations. For

example, based on our actual experience during the three-year period ended December 31, 2020 in our U.S.

mortgage insurance business, a quarterly change of 3% in the average frequency reserve factor would change the

gross reserve amount for such quarter by approximately $72 million for our U.S. mortgage insurance business.

Based on our actual experience during 2020, a quarterly increase of $1,000 in the severity of our average reserves

combined with a 1% change in the average frequency reserve factor would change the gross reserve amount by

approximately $10 million for our mortgage insurance business in Australia based on current exchange rates.

business, although these products make up a smaller portion of our product mix in the United States. The
majority of our insurance contracts in our U.S. mortgage insurance business have recurring premiums, as
discussed below. For single premium insurance contracts, we recognize premiums over the policy life in
accordance with the expected pattern of risk emergence. We recognize a portion of the revenue in premiums
earned in the current period, while the remaining portion is deferred as unearned premiums, and earned over time
in accordance with the expected pattern of risk emergence. If single premium policies are cancelled and the
premium is non-refundable, then the remaining unearned premium related to each cancelled policy is recognized
as earned premiums upon notification of the cancellation, if not included in our expected earnings pattern. The
expected pattern of risk emergence on which we base premium recognition is inherently judgmental and is based
on actuarial analysis of historical and expected experience. In our mortgage insurance business in Australia, we
recognize unearned premiums over a period of up to 12 years, most of which are recognized between two and six
years from issue date. The recognition of earned premiums for our mortgage insurance businesses involves
significant estimates and assumptions as to future loss development and policy cancellations. These assumptions
are based on our historical experience and our expectations of future performance, which are highly dependent on
assumptions as to long-term macroeconomic conditions including interest rates, home price appreciation and the
rate of unemployment. We periodically review our expected pattern of risk emergence and make adjustments
based on actual experience and changes in our expectation of future performance with any adjustments reflected
in current period net income. Changes in market conditions could cause a decline in mortgage originations,
mortgage insurance penetration rates or our market share, all of which could impact new insurance written. For
example, a decline in flow new insurance written of $1.0 billion in Australia would result in a reduction in earned
premiums of approximately $2 million in the first full year following the decline in flow new insurance written
based on current pricing and expected pattern of risk emergence. However, this decline would be partially offset
by the recognition of earned premiums from established unearned premium reserves primarily from the last three
years of business.

As of December 31, 2020 and 2019, we had $2.0 billion and $1.9 billion, respectively, of unearned
premiums, of which $1.2 billion and $1.0 billion, respectively, related to our mortgage insurance business in
Australia and $0.3 billion and $0.4 billion, respectively, related to our U.S. mortgage insurance business. For the
year ended December 31, 2019, we increased earned premiums and decreased unearned premiums by $14 million
related to our single premium earnings pattern review in our U.S. mortgage insurance business. There were no
adjustments to earned premiums in our mortgage insurance businesses for the years ended December 31, 2020
and 2018.

Our expected pattern of risk emergence for our mortgage insurance businesses is subject to change given the

inherent uncertainty as to the underlying loss development and policy cancellation assumptions and the long
duration of our international mortgage insurance policy contracts. Actual experience that is different than
expected loss development or policy cancellations could result in further material increases or decreases in the
recognition of earned premiums depending on the magnitude of the difference between actual and expected
experience. Additional loss development emergence and policy cancellation variations could result in further
increases or decreases in unearned premiums and could impact operating results depending on the magnitude of
variation experienced (assuming other assumptions held constant).

In our U.S. mortgage insurance business, the majority of our insurance contracts have recurring premiums.

We recognize recurring premiums over the terms of the related insurance policy on a pro-rata basis (i.e.,
monthly). Changes in market conditions could cause a decline in mortgage originations, mortgage insurance
penetration rates and our market share, all of which could impact new insurance written. For example, a decline
in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately
$4 million in the first full year. Likewise, if primary persistency declined on our existing insurance in-force by
10%, earned premiums would decline by approximately $100 million during the first full year, potentially offset
by lower reserves due to policies no longer being in-force.

Unearned premiums. In our mortgage insurance business in Australia, the majority of our insurance

contracts are single premium. We also have single premium insurance contracts in our U.S. mortgage insurance

The remaining portion of our unearned premiums primarily relates to our long-term care insurance business

where the underlying assumptions related to premium recognition are not subject to significant uncertainty.

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Accordingly, changes in underlying assumptions we consider reasonably possible for this business would not
result in a material impact to premium recognition or our results of operations.

Deferred acquisition costs. DAC represents costs that are directly related to the successful acquisition of

new and renewal insurance policies and investment contracts which are deferred and amortized over the
estimated life of the related insurance policies. These costs primarily include commissions in excess of ultimate
renewal commissions and underwriting and contract and policy issuance expenses for policies successfully
acquired. DAC is subsequently amortized to expense in relation to the anticipated recognition of premiums or
gross profits.

The amortization of DAC for traditional long-duration insurance products (including term life insurance,

life-contingent structured settlements and immediate annuities and long-term care insurance) is determined as a
level proportion of premiums based on accepted actuarial methods and reasonable assumptions, including related
to projected interest rates and investment returns, health care experience (including type of care and cost of care),
policyholder persistency or lapses (i.e., the probability that a policy or contract will remain in-force from one
period to the next), insured mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and
severity of claim, including claim termination rates and benefit utilization rates) and expenses, established when
the contract or policy is issued. U.S. GAAP requires that assumptions for these types of products not be modified
(or unlocked) unless recoverability testing, also known as loss recognition testing, deems them to be inadequate.
Amortization is adjusted each period to reflect actual lapses or terminations. Accordingly, we could experience
accelerated amortization of DAC and a charge to net income if policies lapse or terminate earlier than originally
assumed, or if we fail recoverability testing.

Amortization of DAC for deferred annuity and universal life insurance contracts is based on expected gross

profits. Expected gross profits are adjusted quarterly to reflect actual experience to date or for the unlocking of
underlying key assumptions including interest rates, policyholder persistency or lapses, insured mortality and
expenses. The estimation of expected gross profits is subject to change given the inherent uncertainty as to the
underlying key assumptions employed and the long duration of our policy or contract liabilities. Changes in
expected gross profits reflecting the unlocking of underlying key assumptions could result in a material increase
or decrease in the amortization of DAC depending on the magnitude of the change in underlying assumptions.
Significant factors that could result in a material increase or decrease in DAC amortization for these products
include material changes in withdrawal or lapse rates, investment spreads or mortality assumptions. For the years
ended December 31, 2020, 2019 and 2018, key assumptions were unlocked in our U.S. Life Insurance and
Runoff segments to reflect our current expectation of future investment spreads, lapse rates and mortality.

We review DAC for recoverability at least annually. For deferred annuity and universal life insurance
contracts, if the present value of expected future gross profits is less than the unamortized DAC for a line of
business, a charge to net income is recorded for additional DAC amortization. For traditional long-duration and
short-duration contracts, if the benefit reserves plus the current estimate of expected future gross premiums and
interest income for a line of business are less than the current estimate of expected future benefits and expenses
(including any unamortized DAC), a charge to net income is recorded for additional DAC amortization or for
increased benefit reserves. The evaluation of DAC recoverability is subject to inherent uncertainty and requires
significant judgment and estimates to determine the present values of future premiums, estimated gross profits
and expected benefits and expenses of our businesses. In 2020, in connection with our review of DAC for
recoverability, we wrote off $63 million of DAC in our universal life insurance products due principally to lower
future estimated gross profits.

The amortization of DAC for mortgage insurance is based on expected gross margins. Expected gross

margins, defined as premiums less losses, are set based on assumptions for future persistency and loss
development of the business. These assumptions are updated for actual experience to date or as our expectations
of future experience are revised based on experience studies. Due to the inherent uncertainties in making
assumptions about future events, materially different experience from expected results in persistency or loss
development could result in a material increase or decrease to DAC amortization.

The DAC amortization methodology for our variable products (variable annuities and variable universal life

insurance) includes a long-term average appreciation assumption of 7.5% to 8.0%. When actual returns vary

from the expected 7.5% to 8.0%, we assume a reversion to the expected return over a three-year period.

The following table sets forth the increase (decrease) in amortization of DAC related to unlocking of

underlying key assumptions by segment for the years ended December 31:

(Amounts in millions)

U.S. Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 58

$ (3)

Australia Mortgage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Mortgage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Runoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

2018

$ 48

—

6

(2)

—

—

—

—

(2)

(2)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52

$ 56

$ (5)

Impacts on DAC from assumption reviews

In the fourth quarter of 2020, as part of our annual review of assumptions, we increased DAC amortization

by $48 million in our universal and term universal life insurance products predominantly due to changes in

expected gross profits driven mostly by lower projected cost of insurance assessments on our universal life

insurance products and a model refinement in our term universal life insurance product related to persistency and

grace period timing.

In the fourth quarter of 2020, as part of a periodic review of assumptions, our U.S. mortgage insurance

business increased DAC amortization by $6 million primarily driven by elevated lapses in 2020. For the years

ended December 31, 2019 and 2018, no assumptions were unlocked in our mortgage insurance businesses.

In the fourth quarter of 2019, as part of our annual review of assumptions, we increased DAC amortization

by $58 million in our universal and term universal life insurance products, reflecting updated assumptions

primarily related to the lower interest rate environment.

See notes 2 and 6 in our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data” for additional information related to DAC.

Valuation of fixed maturity securities. Our portfolio of fixed maturity securities comprises primarily

investment grade securities, which are carried at fair value.

The methodologies, estimates and assumptions used in valuing our fixed maturity securities evolve over

time and are subject to different interpretations, all of which can lead to materially different estimates of fair

value. Additionally, because the valuation is based on market conditions at a specific point in time, the

period-to-period changes in fair value may vary significantly due to changing interest rates, external

macroeconomic, and credit market conditions. For example, widening credit spreads will generally result in a

decrease, while tightening of credit spreads will generally result in an increase, in the fair value of our fixed

maturity securities. As well, during periods of increasing interest rates, the market values of lower-yielding assets

will decline. See “Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Sensitivity

Analysis—Interest Rate Risk” for the impact of hypothetical changes in interest rates on our investments

portfolio.

Estimates of fair value for fixed maturity securities are obtained primarily from industry-standard pricing

methodologies utilizing market observable inputs. For our less liquid securities, such as our privately placed

securities, we utilize independent market data to employ alternative valuation methods commonly used in the

financial services industry to estimate fair value. These securities are categorized into a three-level hierarchy

based on the market observability of the inputs used in estimating the fair value.

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Accordingly, changes in underlying assumptions we consider reasonably possible for this business would not

result in a material impact to premium recognition or our results of operations.

Deferred acquisition costs. DAC represents costs that are directly related to the successful acquisition of

new and renewal insurance policies and investment contracts which are deferred and amortized over the

estimated life of the related insurance policies. These costs primarily include commissions in excess of ultimate

renewal commissions and underwriting and contract and policy issuance expenses for policies successfully

acquired. DAC is subsequently amortized to expense in relation to the anticipated recognition of premiums or

gross profits.

The amortization of DAC for traditional long-duration insurance products (including term life insurance,

life-contingent structured settlements and immediate annuities and long-term care insurance) is determined as a

level proportion of premiums based on accepted actuarial methods and reasonable assumptions, including related

to projected interest rates and investment returns, health care experience (including type of care and cost of care),

policyholder persistency or lapses (i.e., the probability that a policy or contract will remain in-force from one

period to the next), insured mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and

severity of claim, including claim termination rates and benefit utilization rates) and expenses, established when

the contract or policy is issued. U.S. GAAP requires that assumptions for these types of products not be modified

(or unlocked) unless recoverability testing, also known as loss recognition testing, deems them to be inadequate.

Amortization is adjusted each period to reflect actual lapses or terminations. Accordingly, we could experience

accelerated amortization of DAC and a charge to net income if policies lapse or terminate earlier than originally

assumed, or if we fail recoverability testing.

Amortization of DAC for deferred annuity and universal life insurance contracts is based on expected gross

profits. Expected gross profits are adjusted quarterly to reflect actual experience to date or for the unlocking of

underlying key assumptions including interest rates, policyholder persistency or lapses, insured mortality and

expenses. The estimation of expected gross profits is subject to change given the inherent uncertainty as to the

underlying key assumptions employed and the long duration of our policy or contract liabilities. Changes in

expected gross profits reflecting the unlocking of underlying key assumptions could result in a material increase

or decrease in the amortization of DAC depending on the magnitude of the change in underlying assumptions.

Significant factors that could result in a material increase or decrease in DAC amortization for these products

include material changes in withdrawal or lapse rates, investment spreads or mortality assumptions. For the years

ended December 31, 2020, 2019 and 2018, key assumptions were unlocked in our U.S. Life Insurance and

Runoff segments to reflect our current expectation of future investment spreads, lapse rates and mortality.

We review DAC for recoverability at least annually. For deferred annuity and universal life insurance

contracts, if the present value of expected future gross profits is less than the unamortized DAC for a line of

business, a charge to net income is recorded for additional DAC amortization. For traditional long-duration and

short-duration contracts, if the benefit reserves plus the current estimate of expected future gross premiums and

interest income for a line of business are less than the current estimate of expected future benefits and expenses

(including any unamortized DAC), a charge to net income is recorded for additional DAC amortization or for

increased benefit reserves. The evaluation of DAC recoverability is subject to inherent uncertainty and requires

significant judgment and estimates to determine the present values of future premiums, estimated gross profits

and expected benefits and expenses of our businesses. In 2020, in connection with our review of DAC for

recoverability, we wrote off $63 million of DAC in our universal life insurance products due principally to lower

future estimated gross profits.

The amortization of DAC for mortgage insurance is based on expected gross margins. Expected gross

margins, defined as premiums less losses, are set based on assumptions for future persistency and loss

development of the business. These assumptions are updated for actual experience to date or as our expectations

of future experience are revised based on experience studies. Due to the inherent uncertainties in making

assumptions about future events, materially different experience from expected results in persistency or loss

development could result in a material increase or decrease to DAC amortization.

The DAC amortization methodology for our variable products (variable annuities and variable universal life

insurance) includes a long-term average appreciation assumption of 7.5% to 8.0%. When actual returns vary
from the expected 7.5% to 8.0%, we assume a reversion to the expected return over a three-year period.

The following table sets forth the increase (decrease) in amortization of DAC related to unlocking of

underlying key assumptions by segment for the years ended December 31:

(Amounts in millions)

U.S. Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australia Mortgage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Mortgage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Runoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

2018

$ 48
—

6
(2)

$ 58
—
—

(2)

$ (3)
—
—

(2)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52

$ 56

$ (5)

Impacts on DAC from assumption reviews

In the fourth quarter of 2020, as part of our annual review of assumptions, we increased DAC amortization

by $48 million in our universal and term universal life insurance products predominantly due to changes in
expected gross profits driven mostly by lower projected cost of insurance assessments on our universal life
insurance products and a model refinement in our term universal life insurance product related to persistency and
grace period timing.

In the fourth quarter of 2020, as part of a periodic review of assumptions, our U.S. mortgage insurance

business increased DAC amortization by $6 million primarily driven by elevated lapses in 2020. For the years
ended December 31, 2019 and 2018, no assumptions were unlocked in our mortgage insurance businesses.

In the fourth quarter of 2019, as part of our annual review of assumptions, we increased DAC amortization

by $58 million in our universal and term universal life insurance products, reflecting updated assumptions
primarily related to the lower interest rate environment.

See notes 2 and 6 in our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data” for additional information related to DAC.

Valuation of fixed maturity securities. Our portfolio of fixed maturity securities comprises primarily

investment grade securities, which are carried at fair value.

The methodologies, estimates and assumptions used in valuing our fixed maturity securities evolve over
time and are subject to different interpretations, all of which can lead to materially different estimates of fair
value. Additionally, because the valuation is based on market conditions at a specific point in time, the
period-to-period changes in fair value may vary significantly due to changing interest rates, external
macroeconomic, and credit market conditions. For example, widening credit spreads will generally result in a
decrease, while tightening of credit spreads will generally result in an increase, in the fair value of our fixed
maturity securities. As well, during periods of increasing interest rates, the market values of lower-yielding assets
will decline. See “Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Sensitivity
Analysis—Interest Rate Risk” for the impact of hypothetical changes in interest rates on our investments
portfolio.

Estimates of fair value for fixed maturity securities are obtained primarily from industry-standard pricing

methodologies utilizing market observable inputs. For our less liquid securities, such as our privately placed
securities, we utilize independent market data to employ alternative valuation methods commonly used in the
financial services industry to estimate fair value. These securities are categorized into a three-level hierarchy
based on the market observability of the inputs used in estimating the fair value.

104

105

Our valuation techniques maximize the use of observable inputs. However, for certain less liquid securities,
categorized as Level 3, the valuation inputs and assumptions cannot be corroborated with market observable data
and require greater estimation, resulting in values that are less certain. Additionally, the market observability of
inputs may change as certain inputs may be more direct drivers of valuation at the time of pricing, or if certain
assets previously in active markets become less liquid due to changes in the financial environment. As a result,
more securities may be categorized as Level 3 and require more subjectivity and management judgment. See
notes 2, 4 and 16 in our consolidated financial statements under “Item 8—Financial Statements and
Supplementary Data” for additional information related to the valuation of fixed maturity securities and a
description of the fair value measurement estimates and level assignments.

The following tables summarize the primary sources of data considered when determining fair value of each

class of fixed maturity securities as of December 31:

(Amounts in millions)

Fixed maturity securities:

2020

Total

Level 1

Level 2

Level 3

Pricing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broker quotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internal models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$59,524
730
5,536

Total fixed maturity securities . . . . . . . . . . . . . . .

$65,790

$—
—
—

$—

$59,524
—
2,177

$ —
730
3,359

$61,701

$4,089

(Amounts in millions)

Fixed maturity securities:

2019

Total

Level 1

Level 2

Level 3

Pricing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broker quotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internal models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$54,400
288
5,651

Total fixed maturity securities . . . . . . . . . . . . . . .

$60,339

$—
—
—

$—

$54,400
—
1,748

$ —
288
3,903

$56,148

$4,191

Derivatives. We enter into freestanding derivative transactions primarily to manage the risk associated with
variability in cash flows. We also use derivative instruments to hedge certain currency exposures. Additionally,
we purchase investment securities, issue certain insurance policies and engage in certain reinsurance contracts
that have embedded derivatives. The associated financial statement risk is the volatility in net income which can
result from among other things: (i) changes in the fair value of derivatives not qualifying as accounting hedges;
(ii) changes in the fair value of embedded derivatives required to be bifurcated from the related host contract; and
(iii) counterparty default. Accounting for derivatives is complex, as evidenced by significant authoritative
interpretations of the primary accounting standards which continue to evolve. See notes 2, 5 and 16 in our
consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for an
additional description of derivative instruments and fair value measurements of derivative instruments.

The assessment of hedge effectiveness is subject to interpretation, and different interpretations or estimates
may have a material effect on the amount reported in net income. In assessing whether certain derivatives qualify
for hedge accounting treatment, we rely on actuarial assumptions to project the occurrence of future events. For
example, we currently have qualifying forward starting interest rate swaps for which the hedged transactions
include bond purchases and interest payments on the bonds. Our assessment of the effectiveness of these forward
starting interest rate swaps depends upon, the availability of sufficient cash flows to satisfy future bond
purchases, which is estimated using actuarial assumptions for policyholder behavior, policy lapses, and in-force
rate actions, among other projections. We assess the hedging relationship for effectiveness at inception and on an
ongoing basis, and our assessment is subject to change as our best estimate of the forecasted transactions change.

Our derivative instruments are carried at fair value, which is determined using an income approach.

Although we leverage inputs from independent pricing services, estimating the carrying value of derivative

instruments often involves a variety of assumptions and estimates. The fair values fluctuate from period to period

due to the volatility of the valuation inputs, which include forward interest rate swap curves, foreign currency

exchange rates, and equity index volatility, among other variables. The majority of our freestanding derivatives

portfolio is comprised of interest rate swaps used to convert floating rate investments and liabilities to fixed rate

investments and liabilities. Projected increase (decrease) in market interest rates will result in a (decrease)

increase in the valuation of these interest rate swaps. A decrease in the fair value of our derivatives portfolio

would require us to post additional collateral to certain derivative counterparties which could add additional

strain on liquidity. See “Item 1A.—Risk Factors—Defaults by counterparties to our reinsurance arrangements or

to derivative instruments we use to hedge our business risks, or defaults by us on agreements we have with these

counterparties, may expose us to risks we sought to mitigate, which could have a material adverse effect on our

results of operations and financial condition” and “Item 7A—Quantitative and Qualitative Disclosures About

Market Risk—Sensitivity Analysis—Interest Rate Risk” for the impact of hypothetical changes in interest rates

on our derivatives portfolio.

During the fourth quarter of 2020 we updated the discount rates used to value certain interest rate swaps.

The discount rate used to value bilateral OTC derivative transactions was updated from a risk-free rate to the

Secured Overnight Financing Rate (“SOFR”) swap rate plus a credit spread in order to better align our valuation

with the bilateral dealers. Additionally, in preparation for the transition away from LIBOR, we were required by

the Chicago Mercantile Exchange (“CME”) to replace the Overnight Index rate with SOFR to discount our swap

agreements cleared through the CME. The updates to the discount rates did not have a significant impact on net

income. See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Investments and Derivative Instruments—Trends and Conditions” for additional information on our

transition from LIBOR.

Consolidated

General Trends and Conditions

The stability of both the financial markets and global economies in which we operate impacts the sales,

revenue growth and profitability trends of our businesses as well as the value of assets and liabilities.

Varied levels of economic performance, coupled with uncertain economic outlooks, changes in government

policy, global trade, regulatory and tax reforms, and other changes in market conditions, will continue to

influence investment and spending decisions by consumers and businesses as they adjust their consumption, debt,

capital and risk profiles in response to these conditions, including as a result of COVID-19. These trends change

as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our

sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets

and liabilities could be impacted going forward. In particular, factors such as the length of COVID-19 and the

speed of the economic recovery, government responses to COVID-19 (such as government stimulus),

government spending, monetary policies (such as further quantitative easing), the volatility and strength of the

capital markets, changes in tax policy and/or in U.S. tax legislation, international trade and the impact of global

financial regulation reform will continue to affect economic and business outlooks, level of interest rates,

consumer confidence and consumer behavior moving forward.

The U.S. and international governments, the U.S. Federal Reserve, other central banks and other legislative

and regulatory bodies have taken certain actions in response to COVID-19 to support the global economy and

capital markets. These policies and actions have been supportive to the worldwide economy, however, in spite of

these supportive policies the U.S. economy contracted in 2020 and the world economy fell into a recession. It is

too early to determine if gross domestic product (“GDP”) will continue to rebound in the first quarter of 2021

given the risk of virus re-emergence, the slow rollout of the vaccine and the potential for further actions to be

106

107

Our valuation techniques maximize the use of observable inputs. However, for certain less liquid securities,

categorized as Level 3, the valuation inputs and assumptions cannot be corroborated with market observable data

and require greater estimation, resulting in values that are less certain. Additionally, the market observability of

inputs may change as certain inputs may be more direct drivers of valuation at the time of pricing, or if certain

assets previously in active markets become less liquid due to changes in the financial environment. As a result,

more securities may be categorized as Level 3 and require more subjectivity and management judgment. See

notes 2, 4 and 16 in our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data” for additional information related to the valuation of fixed maturity securities and a

description of the fair value measurement estimates and level assignments.

The following tables summarize the primary sources of data considered when determining fair value of each

class of fixed maturity securities as of December 31:

(Amounts in millions)

Fixed maturity securities:

Total

Level 1

Level 2

Level 3

Pricing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$59,524

Broker quotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

730

5,536

Total fixed maturity securities . . . . . . . . . . . . . . .

$65,790

$59,524

$ —

—

2,177

730

3,359

$61,701

$4,089

(Amounts in millions)

Fixed maturity securities:

Total

Level 1

Level 2

Level 3

Pricing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$54,400

Broker quotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

288

5,651

Total fixed maturity securities . . . . . . . . . . . . . . .

$60,339

$54,400

$ —

—

1,748

288

3,903

$56,148

$4,191

Derivatives. We enter into freestanding derivative transactions primarily to manage the risk associated with

variability in cash flows. We also use derivative instruments to hedge certain currency exposures. Additionally,

we purchase investment securities, issue certain insurance policies and engage in certain reinsurance contracts

that have embedded derivatives. The associated financial statement risk is the volatility in net income which can

result from among other things: (i) changes in the fair value of derivatives not qualifying as accounting hedges;

(ii) changes in the fair value of embedded derivatives required to be bifurcated from the related host contract; and

(iii) counterparty default. Accounting for derivatives is complex, as evidenced by significant authoritative

interpretations of the primary accounting standards which continue to evolve. See notes 2, 5 and 16 in our

consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for an

additional description of derivative instruments and fair value measurements of derivative instruments.

The assessment of hedge effectiveness is subject to interpretation, and different interpretations or estimates

may have a material effect on the amount reported in net income. In assessing whether certain derivatives qualify

for hedge accounting treatment, we rely on actuarial assumptions to project the occurrence of future events. For

example, we currently have qualifying forward starting interest rate swaps for which the hedged transactions

include bond purchases and interest payments on the bonds. Our assessment of the effectiveness of these forward

starting interest rate swaps depends upon, the availability of sufficient cash flows to satisfy future bond

purchases, which is estimated using actuarial assumptions for policyholder behavior, policy lapses, and in-force

rate actions, among other projections. We assess the hedging relationship for effectiveness at inception and on an

ongoing basis, and our assessment is subject to change as our best estimate of the forecasted transactions change.

2020

2019

$—

—

—

$—

$—

—

—

$—

Our derivative instruments are carried at fair value, which is determined using an income approach.
Although we leverage inputs from independent pricing services, estimating the carrying value of derivative
instruments often involves a variety of assumptions and estimates. The fair values fluctuate from period to period
due to the volatility of the valuation inputs, which include forward interest rate swap curves, foreign currency
exchange rates, and equity index volatility, among other variables. The majority of our freestanding derivatives
portfolio is comprised of interest rate swaps used to convert floating rate investments and liabilities to fixed rate
investments and liabilities. Projected increase (decrease) in market interest rates will result in a (decrease)
increase in the valuation of these interest rate swaps. A decrease in the fair value of our derivatives portfolio
would require us to post additional collateral to certain derivative counterparties which could add additional
strain on liquidity. See “Item 1A.—Risk Factors—Defaults by counterparties to our reinsurance arrangements or
to derivative instruments we use to hedge our business risks, or defaults by us on agreements we have with these
counterparties, may expose us to risks we sought to mitigate, which could have a material adverse effect on our
results of operations and financial condition” and “Item 7A—Quantitative and Qualitative Disclosures About
Market Risk—Sensitivity Analysis—Interest Rate Risk” for the impact of hypothetical changes in interest rates
on our derivatives portfolio.

During the fourth quarter of 2020 we updated the discount rates used to value certain interest rate swaps.
The discount rate used to value bilateral OTC derivative transactions was updated from a risk-free rate to the
Secured Overnight Financing Rate (“SOFR”) swap rate plus a credit spread in order to better align our valuation
with the bilateral dealers. Additionally, in preparation for the transition away from LIBOR, we were required by
the Chicago Mercantile Exchange (“CME”) to replace the Overnight Index rate with SOFR to discount our swap
agreements cleared through the CME. The updates to the discount rates did not have a significant impact on net
income. See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Investments and Derivative Instruments—Trends and Conditions” for additional information on our
transition from LIBOR.

Consolidated

General Trends and Conditions

The stability of both the financial markets and global economies in which we operate impacts the sales,

revenue growth and profitability trends of our businesses as well as the value of assets and liabilities.

Varied levels of economic performance, coupled with uncertain economic outlooks, changes in government

policy, global trade, regulatory and tax reforms, and other changes in market conditions, will continue to
influence investment and spending decisions by consumers and businesses as they adjust their consumption, debt,
capital and risk profiles in response to these conditions, including as a result of COVID-19. These trends change
as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our
sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets
and liabilities could be impacted going forward. In particular, factors such as the length of COVID-19 and the
speed of the economic recovery, government responses to COVID-19 (such as government stimulus),
government spending, monetary policies (such as further quantitative easing), the volatility and strength of the
capital markets, changes in tax policy and/or in U.S. tax legislation, international trade and the impact of global
financial regulation reform will continue to affect economic and business outlooks, level of interest rates,
consumer confidence and consumer behavior moving forward.

The U.S. and international governments, the U.S. Federal Reserve, other central banks and other legislative

and regulatory bodies have taken certain actions in response to COVID-19 to support the global economy and
capital markets. These policies and actions have been supportive to the worldwide economy, however, in spite of
these supportive policies the U.S. economy contracted in 2020 and the world economy fell into a recession. It is
too early to determine if gross domestic product (“GDP”) will continue to rebound in the first quarter of 2021
given the risk of virus re-emergence, the slow rollout of the vaccine and the potential for further actions to be

106

107

taken to mitigate the spread of the virus. We have experienced the effects of the recession, which has adversely
impacted our businesses, particularly our mortgage insurance businesses during the second quarter of 2020. We
could be further adversely affected if the U.S. or global recession is prolonged or the economic recovery is slow
or delayed.

2020 compared to 2019

care and term life insurance.

Consolidated Results of Operations

The following is a discussion of our consolidated results of operations. For a discussion of our segment
results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”

The following table sets forth the consolidated results of operations for the periods indicated:

Years ended December 31,

Increase
(decrease) and
percentage
change

(Amounts in millions)

2020

2019

2018

2020 vs. 2019

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,110
3,260
558
730

$4,037
3,220
50
789

$3,994
3,121
(9)
795

$ 73
40

2%
1%
508 NM(1)
(7)%
(59)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,658

8,096

7,901

562

7%

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of taxes . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations attributable to

5,391
549
988
492
5
202

7,627

1,031
270

761
(549)

212

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

Less: net income from discontinued operations attributable to

5,163
577
962
441
—
239

7,382

714
195

519
11

530

64

5,606
611
943
348
—
256

7,764

137
70

67
230

297

4%
228
(5)%
(28)
3%
26
51
12%
5 NM(1)
(15)%

(37)

245

317
75

3%

44%
38%

47%
242
(560) NM(1)

(318)

(60)%

70

(30)

(47)%

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

123

108

(123)

(100)%

Net income available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178

$ 343

$ 119

$(165)

(48)%

Net income available to Genworth Financial, Inc.’s common

stockholders:

Income (loss) from continuing operations available to Genworth
Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued operations available to

$ 727

$ 455

$

(3) $ 272

60%

Genworth Financial, Inc.’s common stockholders . . . . . . . . . .

(549)

(112)

122

(437) NM(1)

Net income available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178

$ 343

$ 119

$(165)

(48)%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

Premiums. Premiums consist primarily of premiums earned on insurance products for mortgage, long-term

• Our U.S. Mortgage Insurance segment increased $115 million mainly attributable to higher insurance

in-force and an increase in policy cancellations in our single premium mortgage insurance product

driven largely by higher mortgage refinancing, partially offset by lower average premium rates in 2020.

The year ended December 31, 2019 included a favorable adjustment of $14 million related to our single

premium earnings pattern review.

• Our Australia Mortgage Insurance segment decreased $38 million predominantly from portfolio

seasoning and lower policy cancellations in 2020. The year ended December 31, 2020 included a

decrease of $5 million attributable to changes in foreign exchange rates.

• Our U.S. Life Insurance segment decreased $3 million. Our long-term care insurance business

increased $37 million largely from $114 million of increased premiums in 2020 from in-force rate

actions approved and implemented, partially offset by policy terminations and policies entering paid-up

status in 2020. Our life insurance business decreased $40 million mainly attributable to the continued

runoff of our term and whole life insurance products in 2020.

Net investment income. Net investment income represents the income earned on our investments. For

discussion of the change in net investment income, see the comparison for this line item under “—Investments

and Derivative Instruments.”

Net investment gains (losses). Net investment gains (losses) consist primarily of realized gains and losses

from the sale or impairment of our investments, unrealized and realized gains and losses from our equity and

trading securities and derivative instruments. For discussion of the change in net investment gains (losses), see

the comparison for this line item under “—Investments and Derivative Instruments.”

Policy fees and other income. Policy fees and other income consists primarily of fees assessed against

policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal and

term universal life insurance policies, advisory and administration service fees assessed on investment

contractholder account values, broker/dealer commission revenues and other fees.

• Our U.S. Life Insurance segment decreased $48 million primarily driven by a $21 million favorable

correction related to ceded premiums on universal life insurance policies in 2019 that did not recur and

an unfavorable unlocking of $6 million in our universal and term universal life insurance products as

part of our annual review of assumptions in the fourth quarter of 2020 compared to a favorable

unlocking of $10 million in 2019. The decrease was also attributable to a decline in our universal and

term universal life insurance in-force and higher ceded reinsurance costs in 2020.

• Our Runoff segment decreased $10 million principally from lower fee income driven mostly by a

decline in the average account values in our variable annuity products in 2020.

• Corporate and Other activities decreased $4 million primarily related to losses from non-functional

currency remeasurement transactions in 2020 compared to gains in 2019.

Benefits and other changes in policy reserves. Benefits and other changes in policy reserves consist

primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance

and investment products for long-term care insurance, life insurance, accident and health insurance, structured

settlements and single premium immediate annuities with life contingencies, and claim costs incurred related to

mortgage insurance products.

• Our U.S. Mortgage Insurance segment increased $331 million largely from new delinquencies driven

primarily by a significant increase in borrower forbearance as a result of COVID-19 and strengthening

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taken to mitigate the spread of the virus. We have experienced the effects of the recession, which has adversely

impacted our businesses, particularly our mortgage insurance businesses during the second quarter of 2020. We

could be further adversely affected if the U.S. or global recession is prolonged or the economic recovery is slow

or delayed.

Consolidated Results of Operations

The following is a discussion of our consolidated results of operations. For a discussion of our segment

results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”

The following table sets forth the consolidated results of operations for the periods indicated:

Increase

(decrease) and

percentage

change

Years ended December 31,

2020

2019

2018

2020 vs. 2019

(Amounts in millions)

Revenues:

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,110

3,260

$4,037

3,220

$3,994

3,121

$ 73

40

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

558

730

50

789

(9)

795

508 NM(1)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,658

8,096

7,901

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . .

5,391

5,163

5,606

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . .

7,382

7,764

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . . . . .

Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued operations, net of taxes . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations attributable to

549

988

492

5

202

7,627

1,031

270

761

(549)

212

577

962

441

—

239

714

195

519

11

530

64

611

943

348

—

256

137

70

67

230

297

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

70

(30)

(47)%

Less: net income from discontinued operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

123

108

(123)

(100)%

Net income available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178

$ 343

$ 119

$(165)

(48)%

2%

1%

(7)%

7%

4%

(5)%

3%

12%

3%

44%

38%

47%

(59)

562

228

(28)

26

51

245

317

75

242

5 NM(1)

(37)

(15)%

(560) NM(1)

(318)

(60)%

Net income available to Genworth Financial, Inc.’s common

stockholders:

Income (loss) from continuing operations available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . .

$ 727

$ 455

$

(3) $ 272

60%

Income (loss) from discontinued operations available to

Genworth Financial, Inc.’s common stockholders . . . . . . . . . .

(549)

(112)

122

(437) NM(1)

Net income available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178

$ 343

$ 119

$(165)

(48)%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

2020 compared to 2019

Premiums. Premiums consist primarily of premiums earned on insurance products for mortgage, long-term

care and term life insurance.

• Our U.S. Mortgage Insurance segment increased $115 million mainly attributable to higher insurance
in-force and an increase in policy cancellations in our single premium mortgage insurance product
driven largely by higher mortgage refinancing, partially offset by lower average premium rates in 2020.
The year ended December 31, 2019 included a favorable adjustment of $14 million related to our single
premium earnings pattern review.

• Our Australia Mortgage Insurance segment decreased $38 million predominantly from portfolio
seasoning and lower policy cancellations in 2020. The year ended December 31, 2020 included a
decrease of $5 million attributable to changes in foreign exchange rates.

• Our U.S. Life Insurance segment decreased $3 million. Our long-term care insurance business

increased $37 million largely from $114 million of increased premiums in 2020 from in-force rate
actions approved and implemented, partially offset by policy terminations and policies entering paid-up
status in 2020. Our life insurance business decreased $40 million mainly attributable to the continued
runoff of our term and whole life insurance products in 2020.

Net investment income. Net investment income represents the income earned on our investments. For
discussion of the change in net investment income, see the comparison for this line item under “—Investments
and Derivative Instruments.”

Net investment gains (losses). Net investment gains (losses) consist primarily of realized gains and losses

from the sale or impairment of our investments, unrealized and realized gains and losses from our equity and
trading securities and derivative instruments. For discussion of the change in net investment gains (losses), see
the comparison for this line item under “—Investments and Derivative Instruments.”

Policy fees and other income. Policy fees and other income consists primarily of fees assessed against
policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal and
term universal life insurance policies, advisory and administration service fees assessed on investment
contractholder account values, broker/dealer commission revenues and other fees.

• Our U.S. Life Insurance segment decreased $48 million primarily driven by a $21 million favorable

correction related to ceded premiums on universal life insurance policies in 2019 that did not recur and
an unfavorable unlocking of $6 million in our universal and term universal life insurance products as
part of our annual review of assumptions in the fourth quarter of 2020 compared to a favorable
unlocking of $10 million in 2019. The decrease was also attributable to a decline in our universal and
term universal life insurance in-force and higher ceded reinsurance costs in 2020.

• Our Runoff segment decreased $10 million principally from lower fee income driven mostly by a

decline in the average account values in our variable annuity products in 2020.

• Corporate and Other activities decreased $4 million primarily related to losses from non-functional

currency remeasurement transactions in 2020 compared to gains in 2019.

Benefits and other changes in policy reserves. Benefits and other changes in policy reserves consist
primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance
and investment products for long-term care insurance, life insurance, accident and health insurance, structured
settlements and single premium immediate annuities with life contingencies, and claim costs incurred related to
mortgage insurance products.

• Our U.S. Mortgage Insurance segment increased $331 million largely from new delinquencies driven
primarily by a significant increase in borrower forbearance as a result of COVID-19 and strengthening

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109

of existing reserves of $65 million in 2020 primarily driven by the deterioration of early cure
emergence patterns impacting claim frequency along with a modest increase in claim severity. We also
experienced lower net benefits from cures and aging of existing delinquencies in 2020. Included in
2019 were favorable reserve adjustments of $23 million mostly associated with lower expected claim
rates.

• Our Australia Mortgage Insurance segment increased $73 million primarily from loss reserve

strengthening of $130 million driven by a refinement in methodology and anticipated claims outcomes
due to the economic impacts caused by COVID-19, including IBNR reserves on loans in payment
deferral programs. These increases were partially offset by favorable aging of existing delinquencies
and lower new reported delinquencies, net of cures, in 2020.

• Our Runoff segment increased $21 million primarily attributable to higher GMDB reserves in our

variable annuity products due to less favorable equity market performance, an unfavorable assumption
update of $7 million and higher surrenders in 2020.

• Our U.S. Life Insurance segment decreased $198 million. Our long-term care insurance business
decreased $96 million primarily due to an increase in claim terminations driven mostly by higher
mortality and favorable development on IBNR claims. Given our assumption that COVID-19 has
temporarily decreased the number of new claims submitted, IBNR reserves were strengthened by
$108 million, partially offsetting the favorable development on IBNR claims. In addition, we increased
claim reserves by $91 million reflecting our assumption that COVID-19 accelerated our mortality
experience on the most vulnerable claimants, leaving the remaining claim population less likely to
terminate compared to the pre-pandemic average population. These decreases were also partially offset
by aging of the in-force block, a less favorable impact of $107 million from reduced benefits in 2020
related to in-force rate actions approved and implemented and higher incremental reserves of
$89 million recorded in connection with an accrual for profits followed by losses. The year ended
December 31, 2020 also included a $17 million net favorable impact from the completion of our annual
review of assumptions and methodologies. Our life insurance business decreased $58 million primarily
attributable to a favorable unlocking of $124 million in our term universal and universal life insurance
products as part of our annual review of assumptions in the fourth quarter of 2020 compared to an
unfavorable unlocking of $82 million in 2019 (see “—Critical Accounting Estimates—Policyholder
account balances” for additional information). This decrease was partially offset by higher reserves in
our 10-year term universal life insurance block as it entered its post-level premium period during the
premium grace period and from higher mortality in 2020 compared to 2019 attributable in part to
COVID-19. Our fixed annuities business decreased $44 million principally from $39 million of
unfavorable charges in 2019 that did not recur related to loss recognition testing and from lower
interest credited due to block runoff, partially offset by unfavorable market impacts, including low
interest rates.

Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder

general account balances.

• Our U.S. Life Insurance segment decreased $36 million primarily related to our fixed annuities

business largely driven by a decline in the average account value in 2020.

• Our Runoff segment increased $8 million largely related to higher account values in our corporate-

owned life insurance products in 2020.

Acquisition and operating expenses, net of deferrals. Acquisition and operating expenses, net of deferrals,

represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment
contracts, including commissions, policy issuance expenses and other underwriting and general operating costs.
These costs and expenses are net of amounts that are capitalized and deferred, which are costs and expenses that

are related directly to the successful acquisition of new or renewal insurance policies and investment contracts,

such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.

• Our U.S. Life Insurance segment increased $16 million predominantly related to our long-term care

insurance business principally from higher commissions and premium taxes in 2020 associated with

our in-force rate action plan.

• Our U.S. Mortgage Insurance segment increased $15 million primarily attributable to higher operating

costs driven mostly by increased sales in 2020.

• Corporate and Other activities decreased $6 million mainly driven by lower operating expenses and a

$4 million gain related to the repurchase of Genworth Holdings’ senior notes with 2021 maturity dates,

partially offset by a make-whole premium of $9 million related to the early redemption of Genworth

Holdings’ senior notes originally scheduled to mature in June 2020 and higher employee-related

expenses in 2020.

Amortization of deferred acquisition costs and intangibles. Amortization of DAC and intangibles consists

primarily of the amortization of acquisition costs that are capitalized, PVFP and capitalized software.

• Our U.S. Life Insurance segment increased $46 million. Our long-term care insurance business

decreased $10 million primarily related to higher persistency on policies that are not on active claim.

Our life insurance business increased $68 million principally from a DAC impairment of $63 million,

higher lapses primarily associated with our large 20-year term life insurance block as it entered its post-

level premium period and higher reinsurance rates in 2020. These increases were partially offset by a

less unfavorable unlocking of $21 million in our universal and term universal life insurance products as

part of our annual review of assumptions in the fourth quarter of 2020 compared to 2019. Our fixed

annuities business decreased $12 million principally from lower account values due to block runoff in

2020.

• Our U.S. mortgage insurance segment increased $6 million primarily due to accelerated DAC

amortization driven by elevated lapses in 2020.

• Our Runoff segment increased $5 million mainly related to higher DAC amortization in our variable

annuity products principally from less favorable equity market performance in 2020.

Goodwill impairment. Charges for impairment of goodwill are the result of declines in the fair value of the

reporting units. Our Australia Mortgage Insurance segment recorded a goodwill impairment charge of $5 million

in 2020, which represented the full amount of goodwill related to our mortgage insurance business in Australia.

Interest expense. Interest expense represents interest related to our borrowings that are incurred at Genworth

Holdings or subsidiaries and our non-recourse funding obligations and interest expense related to the Tax Matters

Agreement and certain reinsurance arrangements being accounted for as deposits.

• Corporate and Other activities decreased $42 million largely driven by the early redemption of

Genworth Holdings’ senior notes originally scheduled to mature in June 2020, a lower floating rate of

interest on our junior subordinated notes and the repurchase of Genworth Holdings’ senior notes with

2021 maturity dates in 2020.

• Our U.S. Life Insurance segment decreased $12 million due to our life insurance business principally

related to the early redemption of non-recourse funding obligations, partially offset by the write-off of

$4 million in deferred borrowing costs in 2020.

• Our U.S. Mortgage Insurance segment increased $18 million related to GMHI’s 6.50% senior notes

with an aggregate principal balance of $750 million due in 2025 (“2025 Senior Notes”) issued in

August 2020.

Provision for income taxes. The effective tax rate decreased to 26.2% for the year ended December 31, 2020

from 27.3% for the year ended December 31, 2019. The decrease in the effective tax rate was primarily

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of existing reserves of $65 million in 2020 primarily driven by the deterioration of early cure

emergence patterns impacting claim frequency along with a modest increase in claim severity. We also

experienced lower net benefits from cures and aging of existing delinquencies in 2020. Included in

2019 were favorable reserve adjustments of $23 million mostly associated with lower expected claim

rates.

• Our Australia Mortgage Insurance segment increased $73 million primarily from loss reserve

strengthening of $130 million driven by a refinement in methodology and anticipated claims outcomes

due to the economic impacts caused by COVID-19, including IBNR reserves on loans in payment

deferral programs. These increases were partially offset by favorable aging of existing delinquencies

and lower new reported delinquencies, net of cures, in 2020.

• Our Runoff segment increased $21 million primarily attributable to higher GMDB reserves in our

variable annuity products due to less favorable equity market performance, an unfavorable assumption

update of $7 million and higher surrenders in 2020.

• Our U.S. Life Insurance segment decreased $198 million. Our long-term care insurance business

decreased $96 million primarily due to an increase in claim terminations driven mostly by higher

mortality and favorable development on IBNR claims. Given our assumption that COVID-19 has

temporarily decreased the number of new claims submitted, IBNR reserves were strengthened by

$108 million, partially offsetting the favorable development on IBNR claims. In addition, we increased

claim reserves by $91 million reflecting our assumption that COVID-19 accelerated our mortality

experience on the most vulnerable claimants, leaving the remaining claim population less likely to

terminate compared to the pre-pandemic average population. These decreases were also partially offset

by aging of the in-force block, a less favorable impact of $107 million from reduced benefits in 2020

related to in-force rate actions approved and implemented and higher incremental reserves of

$89 million recorded in connection with an accrual for profits followed by losses. The year ended

December 31, 2020 also included a $17 million net favorable impact from the completion of our annual

review of assumptions and methodologies. Our life insurance business decreased $58 million primarily

attributable to a favorable unlocking of $124 million in our term universal and universal life insurance

products as part of our annual review of assumptions in the fourth quarter of 2020 compared to an

unfavorable unlocking of $82 million in 2019 (see “—Critical Accounting Estimates—Policyholder

account balances” for additional information). This decrease was partially offset by higher reserves in

our 10-year term universal life insurance block as it entered its post-level premium period during the

premium grace period and from higher mortality in 2020 compared to 2019 attributable in part to

COVID-19. Our fixed annuities business decreased $44 million principally from $39 million of

unfavorable charges in 2019 that did not recur related to loss recognition testing and from lower

interest credited due to block runoff, partially offset by unfavorable market impacts, including low

interest rates.

general account balances.

Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder

• Our U.S. Life Insurance segment decreased $36 million primarily related to our fixed annuities

business largely driven by a decline in the average account value in 2020.

• Our Runoff segment increased $8 million largely related to higher account values in our corporate-

owned life insurance products in 2020.

Acquisition and operating expenses, net of deferrals. Acquisition and operating expenses, net of deferrals,

represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment

contracts, including commissions, policy issuance expenses and other underwriting and general operating costs.

These costs and expenses are net of amounts that are capitalized and deferred, which are costs and expenses that

are related directly to the successful acquisition of new or renewal insurance policies and investment contracts,
such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.

• Our U.S. Life Insurance segment increased $16 million predominantly related to our long-term care
insurance business principally from higher commissions and premium taxes in 2020 associated with
our in-force rate action plan.

• Our U.S. Mortgage Insurance segment increased $15 million primarily attributable to higher operating

costs driven mostly by increased sales in 2020.

• Corporate and Other activities decreased $6 million mainly driven by lower operating expenses and a

$4 million gain related to the repurchase of Genworth Holdings’ senior notes with 2021 maturity dates,
partially offset by a make-whole premium of $9 million related to the early redemption of Genworth
Holdings’ senior notes originally scheduled to mature in June 2020 and higher employee-related
expenses in 2020.

Amortization of deferred acquisition costs and intangibles. Amortization of DAC and intangibles consists

primarily of the amortization of acquisition costs that are capitalized, PVFP and capitalized software.

• Our U.S. Life Insurance segment increased $46 million. Our long-term care insurance business

decreased $10 million primarily related to higher persistency on policies that are not on active claim.
Our life insurance business increased $68 million principally from a DAC impairment of $63 million,
higher lapses primarily associated with our large 20-year term life insurance block as it entered its post-
level premium period and higher reinsurance rates in 2020. These increases were partially offset by a
less unfavorable unlocking of $21 million in our universal and term universal life insurance products as
part of our annual review of assumptions in the fourth quarter of 2020 compared to 2019. Our fixed
annuities business decreased $12 million principally from lower account values due to block runoff in
2020.

• Our U.S. mortgage insurance segment increased $6 million primarily due to accelerated DAC

amortization driven by elevated lapses in 2020.

• Our Runoff segment increased $5 million mainly related to higher DAC amortization in our variable

annuity products principally from less favorable equity market performance in 2020.

Goodwill impairment. Charges for impairment of goodwill are the result of declines in the fair value of the

reporting units. Our Australia Mortgage Insurance segment recorded a goodwill impairment charge of $5 million
in 2020, which represented the full amount of goodwill related to our mortgage insurance business in Australia.

Interest expense. Interest expense represents interest related to our borrowings that are incurred at Genworth
Holdings or subsidiaries and our non-recourse funding obligations and interest expense related to the Tax Matters
Agreement and certain reinsurance arrangements being accounted for as deposits.

• Corporate and Other activities decreased $42 million largely driven by the early redemption of

Genworth Holdings’ senior notes originally scheduled to mature in June 2020, a lower floating rate of
interest on our junior subordinated notes and the repurchase of Genworth Holdings’ senior notes with
2021 maturity dates in 2020.

• Our U.S. Life Insurance segment decreased $12 million due to our life insurance business principally
related to the early redemption of non-recourse funding obligations, partially offset by the write-off of
$4 million in deferred borrowing costs in 2020.

• Our U.S. Mortgage Insurance segment increased $18 million related to GMHI’s 6.50% senior notes
with an aggregate principal balance of $750 million due in 2025 (“2025 Senior Notes”) issued in
August 2020.

Provision for income taxes. The effective tax rate decreased to 26.2% for the year ended December 31, 2020

from 27.3% for the year ended December 31, 2019. The decrease in the effective tax rate was primarily

110

111

attributable to a lower effect from foreign operations and gains on forward starting swaps settled prior to the
enactment of the TCJA, which will continue to be tax effected at 35% as they are amortized into net investment
income, in relation to higher pre-tax income in 2020.

Net income attributable to noncontrolling interests. Net income attributable to noncontrolling interests
represents the portion of equity in a subsidiary attributable to third parties. The decrease was predominantly
related to lower premiums and lower net investment income, partially offset by higher net investment gains in
2020.

Use of non-GAAP measures

Reconciliation of net income (loss) to adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders

We use non-GAAP financial measures entitled “adjusted operating income (loss) available to Genworth
Financial, Inc.’s common stockholders” and “adjusted operating income (loss) available to Genworth Financial,
Inc.’s common stockholders per share.” Adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders per share is derived from adjusted operating income (loss) available to Genworth
Financial, Inc.’s common stockholders. Our chief operating decision maker evaluates segment performance and
allocates resources on the basis of adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders. We define adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders as 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 infrequent or unusual non-operating items. Gains
(losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse
funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on
reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent
or unusual non-operating items because we do not consider them to be related to the operating performance of
our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result
of estimated future credit losses, the size and timing of which can vary significantly depending on market credit
cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are
influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments,
gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on
insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss)
available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of
overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not
indicative of overall operating trends.

While some of these items may be significant components of net income (loss) available to Genworth
Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from
or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders,
including adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per
share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the
income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders as a basis for determining awards
and compensation for senior management and to evaluate performance on a basis comparable to that used by
analysts. However, the items excluded from adjusted operating income (loss) available to Genworth Financial,
Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future.
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted

operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and

diluted basis are not substitutes for net income (loss) available to Genworth Financial, Inc.’s common

stockholders or net income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a

basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted

operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the

definitions used by other companies.

Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to

adjusted operating income (loss) assume a 21% tax rate for our domestic segments and a 30% tax rate for our

Australia Mortgage Insurance segment and are net of the portion attributable to noncontrolling interests. In 2018,

we assumed a flat 21% tax rate on adjustments for all of our segments. Net investment gains (losses) are also

adjusted for DAC and other intangible amortization and certain benefit reserves.

The following table includes a reconciliation of net income available to Genworth Financial, Inc.’s common

stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

for the years ended December 31:

(Amounts in millions)

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . . . . . .

$ 178

$343

$119

Add: net income from continuing operations attributable to noncontrolling interests . . . . .

34

Add: net income from discontinued operations attributable to noncontrolling interests . . . . —

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations attributable to noncontrolling interests . . . . .

2020

2019

2018

64

123

530

11

519

64

70

108

297

230

67

70

212

(549)

761

34

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

727

455

(3)

Adjustments to income (loss) from continuing operations available to Genworth

Financial, Inc.’s common stockholders:

Net investment (gains) losses, net (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(538)

(50)

(10)

Goodwill impairment, net (2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Gains) losses on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Fees associated with bond consent solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

3 —

9 —

4

—

—

—

2

6

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113

11 —

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 317

$420

$ (5)

(1)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for

DAC and other intangible amortization and certain benefit reserves of $(11) million, $(11) million and $(12)

million, respectively, and adjusted for the portion of net investment gains (losses) attributable to

noncontrolling interests of $31 million, $11 million and $(7) million, respectively.

(2)

For the year ended December 31, 2020, goodwill impairment was adjusted for the portion attributable to

noncontrolling interests of $2 million.

In 2020, we recorded a goodwill impairment of $3 million, net of the portion attributable to noncontrolling

interests, in our Australia mortgage insurance business.

During 2020, we repurchased $84 million principal amount of Genworth Holdings’ senior notes with 2021

maturity dates for a pre-tax gain of $4 million. In January 2020, we paid a pre-tax make-whole expense of

112

113

attributable to a lower effect from foreign operations and gains on forward starting swaps settled prior to the

enactment of the TCJA, which will continue to be tax effected at 35% as they are amortized into net investment

income, in relation to higher pre-tax income in 2020.

Net income attributable to noncontrolling interests. Net income attributable to noncontrolling interests

represents the portion of equity in a subsidiary attributable to third parties. The decrease was predominantly

related to lower premiums and lower net investment income, partially offset by higher net investment gains in

2020.

Use of non-GAAP measures

common stockholders

Reconciliation of net income (loss) to adjusted operating income (loss) available to Genworth Financial, Inc.’s

We use non-GAAP financial measures entitled “adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders” and “adjusted operating income (loss) available to Genworth Financial,

Inc.’s common stockholders per share.” Adjusted operating income (loss) available to Genworth Financial, Inc.’s

common stockholders per share is derived from adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders. Our chief operating decision maker evaluates segment performance and

allocates resources on the basis of adjusted operating income (loss) available to Genworth Financial, Inc.’s

common stockholders. We define adjusted operating income (loss) available to Genworth Financial, Inc.’s

common stockholders as 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 infrequent or unusual non-operating items. Gains

(losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse

funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on

reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent

or unusual non-operating items because we do not consider them to be related to the operating performance of

our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result

of estimated future credit losses, the size and timing of which can vary significantly depending on market credit

cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are

influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments,

gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on

insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss)

available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of

overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not

indicative of overall operating trends.

While some of these items may be significant components of net income (loss) available to Genworth

Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from

or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders,

including adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per

share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the

income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders as a basis for determining awards

and compensation for senior management and to evaluate performance on a basis comparable to that used by

analysts. However, the items excluded from adjusted operating income (loss) available to Genworth Financial,

Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future.

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted

operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and
diluted basis are not substitutes for net income (loss) available to Genworth Financial, Inc.’s common
stockholders or net income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a
basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted
operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the
definitions used by other companies.

Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to

adjusted operating income (loss) assume a 21% tax rate for our domestic segments and a 30% tax rate for our
Australia Mortgage Insurance segment and are net of the portion attributable to noncontrolling interests. In 2018,
we assumed a flat 21% tax rate on adjustments for all of our segments. Net investment gains (losses) are also
adjusted for DAC and other intangible amortization and certain benefit reserves.

The following table includes a reconciliation of net income available to Genworth Financial, Inc.’s common

stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
for the years ended December 31:

(Amounts in millions)

2020

2019

2018

$ 178
Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . . . . . .
Add: net income from continuing operations attributable to noncontrolling interests . . . . .
34
Add: net income from discontinued operations attributable to noncontrolling interests . . . . —

$343
64
123

$119
70
108

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations attributable to noncontrolling interests . . . . .

212
(549)

761
34

530
11

519
64

297
230

67
70

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

727

455

(3)

Adjustments to income (loss) from continuing operations available to Genworth
Financial, Inc.’s common stockholders:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses, net (1)
Goodwill impairment, net (2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees associated with bond consent solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
113
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(538)

(50)

3 —
9 —
3

4

—
11 —

(10)
—
—

2
6

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 317

$420

$ (5)

(1)

(2)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for
DAC and other intangible amortization and certain benefit reserves of $(11) million, $(11) million and $(12)
million, respectively, and adjusted for the portion of net investment gains (losses) attributable to
noncontrolling interests of $31 million, $11 million and $(7) million, respectively.
For the year ended December 31, 2020, goodwill impairment was adjusted for the portion attributable to
noncontrolling interests of $2 million.

In 2020, we recorded a goodwill impairment of $3 million, net of the portion attributable to noncontrolling

interests, in our Australia mortgage insurance business.

During 2020, we repurchased $84 million principal amount of Genworth Holdings’ senior notes with 2021

maturity dates for a pre-tax gain of $4 million. In January 2020, we paid a pre-tax make-whole expense of

112

113

$9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in
June 2020 and Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance
subsidiary, early redeemed all of its $315 million outstanding non-recourse funding obligations originally due in
2050 resulting in a pre-tax loss of $4 million from the write-off of deferred borrowing costs. These transactions
were excluded from adjusted operating income (loss) as they relate to gains (losses) on the early extinguishment
of debt.

In 2020, 2019 and 2018, we recorded a pre-tax expense of $3 million, $4 million and $2 million,

respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational
needs and expenses.

There were no infrequent or unusual items excluded from adjusted operating income (loss) during the
periods presented other than fees incurred in 2018 related to Genworth Holdings’ bond consent solicitation of
$6 million for broker, advisor and investment banking fees.

Earnings (loss) per share

The following table provides basic and diluted earnings (loss) per common share for the years ended

December 31:

(Amounts in millions, except per share amounts)

2020

2019

2018

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.44

$ 0.90

$ (0.01)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.42

$ 0.89

$ (0.01)

Net income available to Genworth Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.68

$ 0.24

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.67

$ 0.24

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.63

$ 0.84

$ (0.01)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.62

$ 0.82

$ (0.01)

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505.2

502.9

500.4

Diluted (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

511.6

509.7

500.4

(1) Under applicable accounting guidance, companies in a loss position are required to use basic weighted-

average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our
loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the year
ended December 31, 2018, we were required to use basic weighted-average common shares outstanding in
the calculation of diluted loss per share as the inclusion of shares for stock options, restricted stock units
(“RSUs”) and stock appreciation rights (“SARs”) of 3.8 million would have been antidilutive to the
calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s
common stockholders for the year ended December 31, 2018, dilutive potential weighted-average common
shares outstanding would have been 504.2 million.

Diluted weighted-average shares outstanding reflect the effects of potentially dilutive securities including

stock options, RSUs and other equity-based compensation.

Results of Operations and Selected Financial and Operating Performance Measures by Segment

Our chief operating decision maker evaluates segment performance and allocates resources on the basis of

adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. See note 18 in

our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for a

reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders and a summary of adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and

Other activities.

We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the

U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional

or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to

reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent

differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income

taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other

activities.

Management’s discussion and analysis by segment contains selected operating performance measures

including “sales” and “insurance in-force” or “risk in-force” which are commonly used in the insurance industry

as measures of operating performance.

Management regularly monitors and reports sales metrics as a measure of volume of new business generated

in a period. Sales refer to new insurance written for mortgage insurance products. We consider new insurance

written to be a measure of our operating performance because it represents a measure of new sales of insurance

policies during a specified period, rather than a measure of our revenues or profitability during that period.

Management regularly monitors and reports insurance in-force and risk in-force. Insurance in-force for our

U.S. mortgage insurance business is a measure of the aggregate unpaid principal balance as of the respective

reporting date for loans we insure. Insurance in-force for our Australia mortgage insurance business is a measure

of the aggregate original loan balance for outstanding insurance policies as of the respective reporting date. Risk

in-force for our U.S. mortgage insurance business is based on the coverage percentage applied to the estimated

current outstanding loan balance. Risk in-force in our Australia mortgage insurance business is computed using

an “effective” risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the

net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to

insurance in-force a factor of 35% that represents the highest expected average per-claim payment for any one

underwriting year over the life of our mortgage insurance business in Australia. We also have certain risk share

arrangements in Australia where we provide pro-rata coverage of certain loans rather than 100% coverage. As a

result, for loans with these risk share arrangements, the applicable pro-rata coverage amount provided is used

when applying the factor. We consider insurance in-force and risk in-force to be measures of our operating

performance because they represent measures of the size of our business at a specific date which will generate

revenues and profits in a future period, rather than measures of our revenues or profitability during that period.

Management also regularly monitors and reports a loss ratio for our businesses. For our mortgage insurance

businesses, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For

our long-term care insurance business, the loss ratio is the ratio of benefits and other changes in reserves less

tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to

be a measure of underwriting performance in these businesses and helps to enhance the understanding of the

operating performance of our businesses.

These operating performance measures enable us to compare our operating performance across periods

without regard to revenues or profitability related to policies or contracts sold in prior periods or from

investments or other sources.

114

115

$9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in

June 2020 and Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance

subsidiary, early redeemed all of its $315 million outstanding non-recourse funding obligations originally due in

2050 resulting in a pre-tax loss of $4 million from the write-off of deferred borrowing costs. These transactions

were excluded from adjusted operating income (loss) as they relate to gains (losses) on the early extinguishment

of debt.

needs and expenses.

In 2020, 2019 and 2018, we recorded a pre-tax expense of $3 million, $4 million and $2 million,

respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational

There were no infrequent or unusual items excluded from adjusted operating income (loss) during the

periods presented other than fees incurred in 2018 related to Genworth Holdings’ bond consent solicitation of

$6 million for broker, advisor and investment banking fees.

Earnings (loss) per share

December 31:

The following table provides basic and diluted earnings (loss) per common share for the years ended

(Amounts in millions, except per share amounts)

2020

2019

2018

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.44

$ 0.90

$ (0.01)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.42

$ 0.89

$ (0.01)

Net income available to Genworth Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.68

$ 0.24

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.67

$ 0.24

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.63

$ 0.84

$ (0.01)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.62

$ 0.82

$ (0.01)

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505.2

502.9

500.4

Diluted (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

511.6

509.7

500.4

(1) Under applicable accounting guidance, companies in a loss position are required to use basic weighted-

average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our

loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the year

ended December 31, 2018, we were required to use basic weighted-average common shares outstanding in

the calculation of diluted loss per share as the inclusion of shares for stock options, restricted stock units

(“RSUs”) and stock appreciation rights (“SARs”) of 3.8 million would have been antidilutive to the

calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s

common stockholders for the year ended December 31, 2018, dilutive potential weighted-average common

shares outstanding would have been 504.2 million.

Diluted weighted-average shares outstanding reflect the effects of potentially dilutive securities including

stock options, RSUs and other equity-based compensation.

Results of Operations and Selected Financial and Operating Performance Measures by Segment

Our chief operating decision maker evaluates segment performance and allocates resources on the basis of
adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. See note 18 in
our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for a
reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders and a summary of adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and
Other activities.

We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the

U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional
or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to
reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent
differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income
taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other
activities.

Management’s discussion and analysis by segment contains selected operating performance measures
including “sales” and “insurance in-force” or “risk in-force” which are commonly used in the insurance industry
as measures of operating performance.

Management regularly monitors and reports sales metrics as a measure of volume of new business generated

in a period. Sales refer to new insurance written for mortgage insurance products. We consider new insurance
written to be a measure of our operating performance because it represents a measure of new sales of insurance
policies during a specified period, rather than a measure of our revenues or profitability during that period.

Management regularly monitors and reports insurance in-force and risk in-force. Insurance in-force for our

U.S. mortgage insurance business is a measure of the aggregate unpaid principal balance as of the respective
reporting date for loans we insure. Insurance in-force for our Australia mortgage insurance business is a measure
of the aggregate original loan balance for outstanding insurance policies as of the respective reporting date. Risk
in-force for our U.S. mortgage insurance business is based on the coverage percentage applied to the estimated
current outstanding loan balance. Risk in-force in our Australia mortgage insurance business is computed using
an “effective” risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the
net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to
insurance in-force a factor of 35% that represents the highest expected average per-claim payment for any one
underwriting year over the life of our mortgage insurance business in Australia. We also have certain risk share
arrangements in Australia where we provide pro-rata coverage of certain loans rather than 100% coverage. As a
result, for loans with these risk share arrangements, the applicable pro-rata coverage amount provided is used
when applying the factor. We consider insurance in-force and risk in-force to be measures of our operating
performance because they represent measures of the size of our business at a specific date which will generate
revenues and profits in a future period, rather than measures of our revenues or profitability during that period.

Management also regularly monitors and reports a loss ratio for our businesses. For our mortgage insurance
businesses, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For
our long-term care insurance business, the loss ratio is the ratio of benefits and other changes in reserves less
tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to
be a measure of underwriting performance in these businesses and helps to enhance the understanding of the
operating performance of our businesses.

These operating performance measures enable us to compare our operating performance across periods

without regard to revenues or profitability related to policies or contracts sold in prior periods or from
investments or other sources.

114

115

U.S. Mortgage Insurance segment

Trends and conditions

Results of our U.S. mortgage insurance business are affected primarily by the following factors: competitor

actions; unemployment or underemployment levels; other economic and housing market trends, including
interest rates, home prices, the number of first-time homebuyers, and mortgage origination volume mix and
practices; the levels and aging of mortgage delinquencies; the effect of seasonal variations; the inventory of
unsold homes; loan modification and other servicing efforts; and litigation, among other items.

The United States economy and consumer confidence improved in the second half of 2020 compared to the

first half of 2020 as state economies reopened in varying degrees; however, certain geographies and industries
have experienced slower recoveries because of the virus, the mitigation steps taken to control its spread or
changed consumer behavior. The unemployment rate was elevated at 6.7% in December 2020, compared to the
pre-pandemic level of 3.5% in February 2020 but has decreased from a peak of 14.8% in April 2020. Even after
the recovery in the second half of 2020, the number of unemployed Americans stands at approximately
11 million, which is 5 million higher than in February 2020. Among the unemployed, those on temporary layoff
continued to decrease to 3 million from a peak of 18 million in April 2020, but the number of permanent job
losses increased to 3 million. In addition, the number of long term unemployed over 26 weeks increased to
4 million. Specific to housing finance, mortgage origination activity remained robust in the fourth quarter of
2020 fueled by refinance activity and a strong surge in home sales. Refinance activity remained robust but
relatively flat as compared to the third quarter of 2020. After experiencing a slowdown in sales during the second
quarter of 2020, the purchase market improved in the second half of 2020 with sales of previously owned homes
increasing 10% in the fourth quarter of 2020 compared to the third quarter of 2020 and inventories declining
from 2.8 months to 2.1 months. The pandemic continued to affect our financial results in the fourth quarter of
2020 but to a lesser extent than in the second and third quarters of 2020 as primarily evidenced by the elevated,
but declining, servicer reported forbearance and new delinquencies during the fourth quarter of 2020.

The impact of COVID-19 on our future business results is difficult to predict. We have performed and have
periodically revised our scenario planning to help us better understand and tailor our actions to help mitigate the
potential adverse effects of the pandemic on our financial results. While our current financial results to date fall
within the range of our current scenarios, the ultimate outcomes and impact on our U.S. mortgage insurance
business will depend on the spread and length of the pandemic. Of similar importance will be the amount, type
and duration of government stimulus and its impact on borrowers, regulatory and government actions to support
housing and the economy, spread mitigating actions to curb the current increase in cases, the possible resurgence
of the virus in the future and the shape of economic recovery, all of which are unknown at present. It is difficult
to predict how long borrowers will need to use forbearance to assist them during the pandemic. Given the length
of time current forbearance plans may be extended, the resolution of a delinquency in a plan, whether it
ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not
longer. We continue to monitor COVID-19 developments and regulatory and government actions. However,
given the specific risks to our U.S. mortgage insurance business, it is possible the pandemic could have a
significant adverse impact on our results of operations and financial condition.

Specific to housing finance, the CARES Act requires mortgage servicers to provide up to 180 days of
deferred or reduced payments (forbearance) for borrowers with a federally backed mortgage loan who assert they
have experienced a financial hardship related to COVID-19. Forbearance may be extended for an additional 180
days up to a year in total or shortened at the request of the borrower. Federally backed mortgages include FHA
and VA backed loans and those purchased by Fannie Mae and Freddie Mac. The CARES Act also prohibited
foreclosures on all federally backed mortgage loans, except for vacant and abandoned properties, for a 60-day
period that began on March 18, 2020. Since the introduction of the CARES Act, the GSEs as well as most
servicers of non-federally backed mortgage loans have extended similar relief to their respective portfolios of
loans. The FHFA extended the foreclosure moratorium until at least March 31, 2021 for mortgages that are
purchased by the GSEs, and on February 9, 2021, the FHFA announced that borrowers whose loans are backed

by the GSEs and are in an active COVID-19 forbearance plan as of February 28, 2021 may be granted an

extension of up to an additional three months, provided the plan term does not exceed 15 months of total

delinquency or a cumulative term of 15 months, whichever is shorter. At the conclusion of the forbearance term,

a borrower may either bring their loan current, defer any missed payments until the end of their loan, or the loan

can be modified through a repayment plan or extension of the mortgage term. In addition, the CARES Act

provides that furnishers of credit reporting information, including servicers, should continue to report a loan as

current to credit reporting agencies if the loan is subject to a payment accommodation, such as forbearance, so

long as the borrower abides by the terms of the accommodation. Many servicers have updated and improved their

reporting to private mortgage insurers when a loan is covered by forbearance. Servicer reported forbearance

slowed meaningfully beginning in June 2020 and ended the fourth quarter of 2020 with approximately 5.4% or

50,018 of our active primary policies reported in a forbearance plan, of which approximately 63% were reported

as delinquent. Forbearance to date has been a leading indicator of future new delinquencies; however, it is

difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan

that remain current on their monthly mortgage payment will go delinquent.

Market penetration and eventual market size are affected in part by actions that impact housing or housing

finance policy taken by the GSEs and the U.S. government, including but not limited to, the FHA and the FHFA.

In the past, these actions have included announced changes, or potential changes, to underwriting standards,

including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits

and alternative products such as those offered through Freddie Mac’s IMAGIN and Fannie Mae’s EPMI pilot

programs, as well as low down payment programs available through the FHA or GSEs. On December 17, 2020,

the FHFA published the Enterprise Regulatory Capital Framework Final Rule for Fannie Mae and Freddie Mac,

which includes significantly increased regulatory capital requirements for the GSEs over current requirements.

Higher GSE capital requirements could ultimately lead to increased costs to borrowers for GSE loans, which in

turn could shift the market away from the GSEs to the FHA or lender portfolios. Such a shift could result in a

smaller market for private mortgage insurance. On January 20, 2021, the White House Chief of Staff issued a

memorandum announcing a regulatory freeze that halted enactment of new regulations pending review by

regulatory appointees. The memorandum includes regulations published in the Federal Register but not yet

effective, which includes a number of regulations that could impact the market for private mortgage insurance,

including QM rules and the Enterprise Regulatory Capital Framework. We do not expect a delay in the effective

dates will have an impact on our U.S. mortgage insurance business. On January 14, 2021, the U.S. Secretary of

the Treasury and the FHFA Director agreed to amend the Preferred Stock Purchase Agreements (“PSPAs”)

between the U.S. Treasury and each of the GSEs to increase the amount of capital each GSE may retain. In

addition, among other things, the PSPAs limit the amount of certain mortgages the GSEs may acquire, including

certain mortgages with combined loan-to-value ratios above 90%. Because these limits are based on the current

market size, we do not expect any impact to the private mortgage market in the near term. For more information

about the potential future impact, see “Item 1A—Risk Factors—Changes to the role of the GSEs or to the

charters or business practices of the GSEs, including actions or decisions to decrease or discontinue the use of

mortgage insurance, could adversely affect our financial condition and results of operations or significantly

impact our business,” and “—Risk Factors—The amount of mortgage insurance we write could decline

significantly if alternatives to private mortgage insurance are used or lower coverage levels of mortgage

insurance are selected.”

Estimated mortgage origination volume increased during 2020 compared to 2019 primarily as lower interest

rates resulted in higher refinance origination volumes and to a lesser degree higher purchase originations. The

estimated private mortgage insurance available market increased driven by higher refinance originations and

higher purchase market penetration. Given the volume experienced in 2020, we expect mortgage originations to

remain strong into the first quarter of 2021 fueled by sustained low interest rates driving refinances and by

continued strength in the purchase originations market.

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117

U.S. Mortgage Insurance segment

Trends and conditions

Results of our U.S. mortgage insurance business are affected primarily by the following factors: competitor

actions; unemployment or underemployment levels; other economic and housing market trends, including

interest rates, home prices, the number of first-time homebuyers, and mortgage origination volume mix and

practices; the levels and aging of mortgage delinquencies; the effect of seasonal variations; the inventory of

unsold homes; loan modification and other servicing efforts; and litigation, among other items.

The United States economy and consumer confidence improved in the second half of 2020 compared to the

first half of 2020 as state economies reopened in varying degrees; however, certain geographies and industries

have experienced slower recoveries because of the virus, the mitigation steps taken to control its spread or

changed consumer behavior. The unemployment rate was elevated at 6.7% in December 2020, compared to the

pre-pandemic level of 3.5% in February 2020 but has decreased from a peak of 14.8% in April 2020. Even after

the recovery in the second half of 2020, the number of unemployed Americans stands at approximately

11 million, which is 5 million higher than in February 2020. Among the unemployed, those on temporary layoff

continued to decrease to 3 million from a peak of 18 million in April 2020, but the number of permanent job

losses increased to 3 million. In addition, the number of long term unemployed over 26 weeks increased to

4 million. Specific to housing finance, mortgage origination activity remained robust in the fourth quarter of

2020 fueled by refinance activity and a strong surge in home sales. Refinance activity remained robust but

relatively flat as compared to the third quarter of 2020. After experiencing a slowdown in sales during the second

quarter of 2020, the purchase market improved in the second half of 2020 with sales of previously owned homes

increasing 10% in the fourth quarter of 2020 compared to the third quarter of 2020 and inventories declining

from 2.8 months to 2.1 months. The pandemic continued to affect our financial results in the fourth quarter of

2020 but to a lesser extent than in the second and third quarters of 2020 as primarily evidenced by the elevated,

but declining, servicer reported forbearance and new delinquencies during the fourth quarter of 2020.

The impact of COVID-19 on our future business results is difficult to predict. We have performed and have

periodically revised our scenario planning to help us better understand and tailor our actions to help mitigate the

potential adverse effects of the pandemic on our financial results. While our current financial results to date fall

within the range of our current scenarios, the ultimate outcomes and impact on our U.S. mortgage insurance

business will depend on the spread and length of the pandemic. Of similar importance will be the amount, type

and duration of government stimulus and its impact on borrowers, regulatory and government actions to support

housing and the economy, spread mitigating actions to curb the current increase in cases, the possible resurgence

of the virus in the future and the shape of economic recovery, all of which are unknown at present. It is difficult

to predict how long borrowers will need to use forbearance to assist them during the pandemic. Given the length

of time current forbearance plans may be extended, the resolution of a delinquency in a plan, whether it

ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not

longer. We continue to monitor COVID-19 developments and regulatory and government actions. However,

given the specific risks to our U.S. mortgage insurance business, it is possible the pandemic could have a

significant adverse impact on our results of operations and financial condition.

Specific to housing finance, the CARES Act requires mortgage servicers to provide up to 180 days of

deferred or reduced payments (forbearance) for borrowers with a federally backed mortgage loan who assert they

have experienced a financial hardship related to COVID-19. Forbearance may be extended for an additional 180

days up to a year in total or shortened at the request of the borrower. Federally backed mortgages include FHA

and VA backed loans and those purchased by Fannie Mae and Freddie Mac. The CARES Act also prohibited

foreclosures on all federally backed mortgage loans, except for vacant and abandoned properties, for a 60-day

period that began on March 18, 2020. Since the introduction of the CARES Act, the GSEs as well as most

servicers of non-federally backed mortgage loans have extended similar relief to their respective portfolios of

loans. The FHFA extended the foreclosure moratorium until at least March 31, 2021 for mortgages that are

purchased by the GSEs, and on February 9, 2021, the FHFA announced that borrowers whose loans are backed

by the GSEs and are in an active COVID-19 forbearance plan as of February 28, 2021 may be granted an
extension of up to an additional three months, provided the plan term does not exceed 15 months of total
delinquency or a cumulative term of 15 months, whichever is shorter. At the conclusion of the forbearance term,
a borrower may either bring their loan current, defer any missed payments until the end of their loan, or the loan
can be modified through a repayment plan or extension of the mortgage term. In addition, the CARES Act
provides that furnishers of credit reporting information, including servicers, should continue to report a loan as
current to credit reporting agencies if the loan is subject to a payment accommodation, such as forbearance, so
long as the borrower abides by the terms of the accommodation. Many servicers have updated and improved their
reporting to private mortgage insurers when a loan is covered by forbearance. Servicer reported forbearance
slowed meaningfully beginning in June 2020 and ended the fourth quarter of 2020 with approximately 5.4% or
50,018 of our active primary policies reported in a forbearance plan, of which approximately 63% were reported
as delinquent. Forbearance to date has been a leading indicator of future new delinquencies; however, it is
difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan
that remain current on their monthly mortgage payment will go delinquent.

Market penetration and eventual market size are affected in part by actions that impact housing or housing

finance policy taken by the GSEs and the U.S. government, including but not limited to, the FHA and the FHFA.
In the past, these actions have included announced changes, or potential changes, to underwriting standards,
including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits
and alternative products such as those offered through Freddie Mac’s IMAGIN and Fannie Mae’s EPMI pilot
programs, as well as low down payment programs available through the FHA or GSEs. On December 17, 2020,
the FHFA published the Enterprise Regulatory Capital Framework Final Rule for Fannie Mae and Freddie Mac,
which includes significantly increased regulatory capital requirements for the GSEs over current requirements.
Higher GSE capital requirements could ultimately lead to increased costs to borrowers for GSE loans, which in
turn could shift the market away from the GSEs to the FHA or lender portfolios. Such a shift could result in a
smaller market for private mortgage insurance. On January 20, 2021, the White House Chief of Staff issued a
memorandum announcing a regulatory freeze that halted enactment of new regulations pending review by
regulatory appointees. The memorandum includes regulations published in the Federal Register but not yet
effective, which includes a number of regulations that could impact the market for private mortgage insurance,
including QM rules and the Enterprise Regulatory Capital Framework. We do not expect a delay in the effective
dates will have an impact on our U.S. mortgage insurance business. On January 14, 2021, the U.S. Secretary of
the Treasury and the FHFA Director agreed to amend the Preferred Stock Purchase Agreements (“PSPAs”)
between the U.S. Treasury and each of the GSEs to increase the amount of capital each GSE may retain. In
addition, among other things, the PSPAs limit the amount of certain mortgages the GSEs may acquire, including
certain mortgages with combined loan-to-value ratios above 90%. Because these limits are based on the current
market size, we do not expect any impact to the private mortgage market in the near term. For more information
about the potential future impact, see “Item 1A—Risk Factors—Changes to the role of the GSEs or to the
charters or business practices of the GSEs, including actions or decisions to decrease or discontinue the use of
mortgage insurance, could adversely affect our financial condition and results of operations or significantly
impact our business,” and “—Risk Factors—The amount of mortgage insurance we write could decline
significantly if alternatives to private mortgage insurance are used or lower coverage levels of mortgage
insurance are selected.”

Estimated mortgage origination volume increased during 2020 compared to 2019 primarily as lower interest

rates resulted in higher refinance origination volumes and to a lesser degree higher purchase originations. The
estimated private mortgage insurance available market increased driven by higher refinance originations and
higher purchase market penetration. Given the volume experienced in 2020, we expect mortgage originations to
remain strong into the first quarter of 2021 fueled by sustained low interest rates driving refinances and by
continued strength in the purchase originations market.

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117

Our primary persistency declined to 59% for the year ended December 31, 2020 compared to 76% for the
year ended December 31, 2019. Lower persistency has impacted business performance trends in several ways
including, but not limited to, offsetting insurance in-force growth from new insurance written, elevating single
premium policy cancellations resulting in higher earned premiums, accelerating the amortization of our existing
reinsurance transactions reducing their associated PMIERs capital credit in 2020 and shifting the concentration of
our primary insurance in-force. For the year ended December 31, 2020, our primary insurance in-force has less
than 10% concentration in 2014 and prior book years. Our 2005 through 2008 book year concentration is
approximately 5%.

The U.S. private mortgage insurance industry is highly competitive. There are currently six active mortgage

insurers, including us. The majority of the new insurance written in our U.S. mortgage insurance business is
priced using our proprietary risk-based pricing engine, GenRATE, which provides lenders with a granular
approach to pricing for borrowers. All active U.S. mortgage insurers utilize proprietary risk-based pricing
engines. Given evolving market dynamics, we expect price competition to remain highly competitive. At the
same time, we believe mortgage insurers, including us, consider many variables when pricing their new
insurance written including the prevailing and future macroeconomic conditions.

New insurance written of $99.9 billion in 2020 increased 60% compared to 2019 primarily due to higher

mortgage refinancing originations and a larger private mortgage insurance market. Our largest customer
accounted for 12% and 16% of our total new insurance written during 2020 and 2019, respectively. No other
customer exceeded 10% of our new insurance written during 2020 and 2019. Additionally, no customer had
earned premiums that accounted for more than 10% of our U.S. mortgage insurance business total revenues for
the years ended December 31, 2020 and 2019. For more information on the potential impacts due to customer
concentration, see “Item 1A—Risk Factors—Our reliance on key customer or distribution relationships could
cause us to lose significant sales if one or more of those relationships terminate or are reduced.”

Our market share is influenced by the execution of our go to market strategy, including but not limited to,

pricing competitiveness relative to our peers and our selective participation in forward commitment transactions.
Our market share remains impacted by the negative ratings differential relative to our competitors, concerns
expressed about Genworth’s financial condition and the execution of its strategic plans. We continue to manage
the quality of new business through pricing and our underwriting guidelines, which we modify from time to time
when circumstances warrant.

Net earned premiums increased in 2020 compared to 2019 primarily from growth in our insurance in-force

and from an increase in single premium policy cancellations driven largely by higher mortgage refinancing,
partially offset by lower average premium rates. The year ended December 31, 2019 included a favorable
adjustment of $14 million related to our single premium earnings pattern review. As a result of COVID-19, we
experienced a significant increase in the number of reported delinquent loans between the second and fourth
quarters of 2020 as compared to recent pre-COVID-19 quarters. During this time and consistent with prior years,
servicers continued the practice of remitting premium during the early stages of default. As a result, we did not
experience an impact to earned premiums during 2020. Additionally, we have a business practice of refunding
the post-delinquent premiums to the insured party if the delinquent loan goes to claim. We record a liability and a
reduction to net earned premiums for the post-delinquent premiums we expect to refund. The post-delinquent
premium liability recorded in 2020 associated with the increased number of delinquent loans was not significant
to the change in earned premiums for the year ended December 31, 2020 as a result of the high concentration of
new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which
delinquencies go to claim (“roll rates” or “claim rates”) for these loans. The post-default premium liability
increased by $3 million primarily as a result of COVID-19 delinquencies and the total liability for all
delinquencies was $9 million as of December 31, 2020. As a result of COVID-19, certain state insurance
regulators have issued orders or provided guidance to insurers requiring or requesting the provision of grace
periods of varying lengths to insureds in the event of non-payment of premium. Regulators differ greatly in their
approaches but generally focus on the avoidance of cancellation of coverage for non-payment. We currently

comply with all state regulatory requirements and requests. If timely payment is not made, future premiums

could decrease and the certificate of insurance could be subject to cancellation after 60 days, or such longer time

as required under applicable law. During 2020, servicers also continued to remit premium on non-delinquent

loans and therefore we did not experience a significant change to earned premiums.

Our loss reserves and loss ratio continue to be negatively impacted by COVID-19. Borrowers who have

experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business

or the loss of a job have taken advantage of available forbearance programs and payment deferral options. As a

result, we have seen elevated new delinquencies which may ultimately cure at a higher rate than traditional

delinquencies should economic activity return to pre-COVID-19 levels. Unlike a hurricane where the natural

disaster occurs at a point in time and the rebuild starts soon after, COVID-19 is an ongoing health crisis and we

do not know when it will end, making it more difficult to determine the effectiveness of forbearance and the

resulting roll rates for new delinquencies in forbearance plans. Given this difference, our prior hurricane

experience was leveraged as one of many considerations in the establishment of an appropriate roll rate estimate

for new delinquencies in forbearance plans that have emerged as a result of COVID-19. Severity of loss on loans

that do go to claim, however, may be negatively impacted by the extended forbearance timeline, the associated

elevated expenses, the higher loan amount of the recent new delinquencies and the potential for home price

depreciation.

Our loss ratio was 39% for the year ended December 31, 2020, compared to 6% for the year ended

December 31, 2019. The increase was largely from higher new delinquencies in 2020 primarily from an increase

in borrower forbearance as a result of COVID-19. We also strengthened reserves on existing delinquencies by

$65 million during 2020 driven primarily by the deterioration of early cure emergence patterns impacting claim

frequency along with a modest increase in claim severity. This reserve strengthening compares to favorable

reserve adjustments of $23 million in 2019 mostly associated with lower expected claim rates. The favorable

reserve adjustments of $23 million along with a $14 million favorable adjustment to earned premiums from our

single premium earnings pattern review reduced the loss ratio by three percentage points in 2019. In addition, we

experienced lower net benefits from cures and aging of existing delinquencies in 2020. New primary

delinquencies of 85,074 contributed $308 million of loss expense during 2020 largely determined by applying a

roll rate estimate which considers the emergence of cures on forbearance and non-forbearance delinquencies and

the ongoing economic impact due to the pandemic. Approximately 82% of our primary new delinquencies

between the second and fourth quarters of 2020 were subject to a forbearance plan as compared to less than 5%

in recent quarters prior to COVID-19. For the year ended December 31, 2019, we had $120 million of loss

expense from 33,236 new primary delinquencies. Prior to COVID-19, traditional measures of credit quality, such

as FICO score and whether a loan had a prior delinquency were most predictive of new delinquencies. Because

the pandemic has affected a broad portion of the population, attribution analysis of COVID-19 new delinquencies

revealed that additional factors such as higher debt-to-income ratios, geographic regions more affected by the

virus or with a higher concentration of affected industries, loan size and servicer process differences rose in

significance.

GMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina

law and enforced by the NCDOI, GMICO’s domestic insurance regulator, was approximately 12.3:1 and 12.5:1

as of December 31, 2020 and 2019, respectively. This risk-to-capital ratio remains below the NCDOI’s

maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk in-force

for delinquent loans given the established loss reserves against all delinquencies. As a result, we do not expect

any immediate, material pressure to GMICO’s risk-to-capital ratio in the short term as a result of COVID-19.

GMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by

GMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the

amount of policy lapses and the amount of additional capital that is generated or distributed by the business or

capital support provided.

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119

Our primary persistency declined to 59% for the year ended December 31, 2020 compared to 76% for the

year ended December 31, 2019. Lower persistency has impacted business performance trends in several ways

including, but not limited to, offsetting insurance in-force growth from new insurance written, elevating single

premium policy cancellations resulting in higher earned premiums, accelerating the amortization of our existing

reinsurance transactions reducing their associated PMIERs capital credit in 2020 and shifting the concentration of

our primary insurance in-force. For the year ended December 31, 2020, our primary insurance in-force has less

than 10% concentration in 2014 and prior book years. Our 2005 through 2008 book year concentration is

approximately 5%.

The U.S. private mortgage insurance industry is highly competitive. There are currently six active mortgage

insurers, including us. The majority of the new insurance written in our U.S. mortgage insurance business is

priced using our proprietary risk-based pricing engine, GenRATE, which provides lenders with a granular

approach to pricing for borrowers. All active U.S. mortgage insurers utilize proprietary risk-based pricing

engines. Given evolving market dynamics, we expect price competition to remain highly competitive. At the

same time, we believe mortgage insurers, including us, consider many variables when pricing their new

insurance written including the prevailing and future macroeconomic conditions.

New insurance written of $99.9 billion in 2020 increased 60% compared to 2019 primarily due to higher

mortgage refinancing originations and a larger private mortgage insurance market. Our largest customer

accounted for 12% and 16% of our total new insurance written during 2020 and 2019, respectively. No other

customer exceeded 10% of our new insurance written during 2020 and 2019. Additionally, no customer had

earned premiums that accounted for more than 10% of our U.S. mortgage insurance business total revenues for

the years ended December 31, 2020 and 2019. For more information on the potential impacts due to customer

concentration, see “Item 1A—Risk Factors—Our reliance on key customer or distribution relationships could

cause us to lose significant sales if one or more of those relationships terminate or are reduced.”

Our market share is influenced by the execution of our go to market strategy, including but not limited to,

pricing competitiveness relative to our peers and our selective participation in forward commitment transactions.

Our market share remains impacted by the negative ratings differential relative to our competitors, concerns

expressed about Genworth’s financial condition and the execution of its strategic plans. We continue to manage

the quality of new business through pricing and our underwriting guidelines, which we modify from time to time

when circumstances warrant.

Net earned premiums increased in 2020 compared to 2019 primarily from growth in our insurance in-force

and from an increase in single premium policy cancellations driven largely by higher mortgage refinancing,

partially offset by lower average premium rates. The year ended December 31, 2019 included a favorable

adjustment of $14 million related to our single premium earnings pattern review. As a result of COVID-19, we

experienced a significant increase in the number of reported delinquent loans between the second and fourth

quarters of 2020 as compared to recent pre-COVID-19 quarters. During this time and consistent with prior years,

servicers continued the practice of remitting premium during the early stages of default. As a result, we did not

experience an impact to earned premiums during 2020. Additionally, we have a business practice of refunding

the post-delinquent premiums to the insured party if the delinquent loan goes to claim. We record a liability and a

reduction to net earned premiums for the post-delinquent premiums we expect to refund. The post-delinquent

premium liability recorded in 2020 associated with the increased number of delinquent loans was not significant

to the change in earned premiums for the year ended December 31, 2020 as a result of the high concentration of

new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which

delinquencies go to claim (“roll rates” or “claim rates”) for these loans. The post-default premium liability

increased by $3 million primarily as a result of COVID-19 delinquencies and the total liability for all

delinquencies was $9 million as of December 31, 2020. As a result of COVID-19, certain state insurance

regulators have issued orders or provided guidance to insurers requiring or requesting the provision of grace

periods of varying lengths to insureds in the event of non-payment of premium. Regulators differ greatly in their

approaches but generally focus on the avoidance of cancellation of coverage for non-payment. We currently

comply with all state regulatory requirements and requests. If timely payment is not made, future premiums
could decrease and the certificate of insurance could be subject to cancellation after 60 days, or such longer time
as required under applicable law. During 2020, servicers also continued to remit premium on non-delinquent
loans and therefore we did not experience a significant change to earned premiums.

Our loss reserves and loss ratio continue to be negatively impacted by COVID-19. Borrowers who have
experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business
or the loss of a job have taken advantage of available forbearance programs and payment deferral options. As a
result, we have seen elevated new delinquencies which may ultimately cure at a higher rate than traditional
delinquencies should economic activity return to pre-COVID-19 levels. Unlike a hurricane where the natural
disaster occurs at a point in time and the rebuild starts soon after, COVID-19 is an ongoing health crisis and we
do not know when it will end, making it more difficult to determine the effectiveness of forbearance and the
resulting roll rates for new delinquencies in forbearance plans. Given this difference, our prior hurricane
experience was leveraged as one of many considerations in the establishment of an appropriate roll rate estimate
for new delinquencies in forbearance plans that have emerged as a result of COVID-19. Severity of loss on loans
that do go to claim, however, may be negatively impacted by the extended forbearance timeline, the associated
elevated expenses, the higher loan amount of the recent new delinquencies and the potential for home price
depreciation.

Our loss ratio was 39% for the year ended December 31, 2020, compared to 6% for the year ended

December 31, 2019. The increase was largely from higher new delinquencies in 2020 primarily from an increase
in borrower forbearance as a result of COVID-19. We also strengthened reserves on existing delinquencies by
$65 million during 2020 driven primarily by the deterioration of early cure emergence patterns impacting claim
frequency along with a modest increase in claim severity. This reserve strengthening compares to favorable
reserve adjustments of $23 million in 2019 mostly associated with lower expected claim rates. The favorable
reserve adjustments of $23 million along with a $14 million favorable adjustment to earned premiums from our
single premium earnings pattern review reduced the loss ratio by three percentage points in 2019. In addition, we
experienced lower net benefits from cures and aging of existing delinquencies in 2020. New primary
delinquencies of 85,074 contributed $308 million of loss expense during 2020 largely determined by applying a
roll rate estimate which considers the emergence of cures on forbearance and non-forbearance delinquencies and
the ongoing economic impact due to the pandemic. Approximately 82% of our primary new delinquencies
between the second and fourth quarters of 2020 were subject to a forbearance plan as compared to less than 5%
in recent quarters prior to COVID-19. For the year ended December 31, 2019, we had $120 million of loss
expense from 33,236 new primary delinquencies. Prior to COVID-19, traditional measures of credit quality, such
as FICO score and whether a loan had a prior delinquency were most predictive of new delinquencies. Because
the pandemic has affected a broad portion of the population, attribution analysis of COVID-19 new delinquencies
revealed that additional factors such as higher debt-to-income ratios, geographic regions more affected by the
virus or with a higher concentration of affected industries, loan size and servicer process differences rose in
significance.

GMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina
law and enforced by the NCDOI, GMICO’s domestic insurance regulator, was approximately 12.3:1 and 12.5:1
as of December 31, 2020 and 2019, respectively. This risk-to-capital ratio remains below the NCDOI’s
maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk in-force
for delinquent loans given the established loss reserves against all delinquencies. As a result, we do not expect
any immediate, material pressure to GMICO’s risk-to-capital ratio in the short term as a result of COVID-19.
GMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by
GMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the
amount of policy lapses and the amount of additional capital that is generated or distributed by the business or
capital support provided.

118

119

Under PMIERs, we are subject to operational and financial requirements that private mortgage insurers

must meet in order to remain eligible to insure loans that are purchased by the GSEs. Each approved mortgage
insurer is required to provide the GSEs with an annual certification and a quarterly report evidencing its
compliance with PMIERs. On June 29, 2020, the GSEs issued the PMIERs Amendment, which included both
temporary and permanent amendments to PMIERs and became effective on June 30, 2020. In September 2020,
the GSEs issued an amended and restated version of the PMIERs Amendment that was effective retroactively on
June 30, 2020 and included new reporting requirements that became effective on December 31, 2020. The GSEs
issued another revised and restated version in December 2020 that extended certain defined periods within the
PMIERs Amendment. In addition, in September 2020, certain GSE Restrictions were imposed with respect to
capital on our U.S. mortgage insurance business. For additional details related to PMIERs, the PMIERs
Amendment and the GSE Restrictions, see “Item 1—Regulation—Mortgage Insurance Regulation—Other U.S.
Regulation and Agency Qualification Requirements.” These restrictions will remain in effect until the later of six
quarters or until the collective GSE Conditions are met.

As of December 31, 2020, our U.S. mortgage insurance business had estimated available assets of

$4,588 million against $3,359 million net required assets under PMIERs compared to available assets of
$4,451 million against $3,377 million net required assets as of September 30, 2020 and available assets of $3,811
million against $2,754 million net required assets as of December 31, 2019. The estimated sufficiency as of
December 31, 2020 was $1,229 million or 137% above the published PMIERs requirements, compared to
$1,074 million or 132% above the published PMIERs requirements as of September 30, 2020 and $1,057 million
or 138% above the PMIERs requirements as of December 31, 2019. PMIERs sufficiency is based on the
published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions
recently imposed on our U.S. mortgage insurance business. The increase in the PMIERs sufficiency compared to
September 30, 2020 was driven in part by the completion of an insurance linked note transaction in October
2020, which added $311 million of additional PMIERs capital credit as of December 31, 2020, and elevated
lapses driven by prevailing low interest rates, partially offset by elevated new insurance written. In addition,
elevated lapses continued to drive an acceleration of the amortization of our existing reinsurance transactions,
which caused a reduction in PMIERs capital credit in the fourth quarter of 2020. Our PMIERs required assets as
of December 31, 2020 and September 30, 2020 benefited from the application of a 0.30 multiplier applied to the
risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier
to all eligible delinquencies provided $1,046 million of benefit to our December 31, 2020 PMIERs required
assets compared to $1,217 million benefit as of September 30, 2020.

On October 22, 2020 we obtained $350 million of fully collateralized excess of loss reinsurance coverage

from Triangle Re 2020 on a portfolio of existing mortgage insurance policies written from January 2020 through
August 2020. For additional details see note 8 to our consolidated financial statements under “Item 8—Financial
Statements and Supplementary Data.” Our credit risk transfer transactions provided an estimated aggregate of
$936 million of PMIERs capital credit as of December 31, 2020. We may execute future credit risk transfer
transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in
response to potential changes in performance and PMIERs requirements over time.

Our U.S. mortgage insurance business paid dividends of $437 million in 2020 generated from the net cash

proceeds of GMHI’s 2025 Senior Notes offering. As a result of the uncertainty regarding the impact of
COVID-19 and the recently imposed PMIERs Amendment and GSE Restrictions on our U.S. mortgage insurance
business, we intend to preserve PMIERs available assets. Accordingly, we intend to defer the payment of
additional dividends in 2021. The amount and timing of future dividends will depend on the economic recovery
from COVID-19, among other factors.

As discussed under “Item 1—Business—Regulation,” pursuant to its authority under the Dodd-Frank Act,
the CFPB issued the QM Rule that became effective on January 10, 2014, establishing underwriting and product
feature requirements for mortgages to be deemed QMs. The regulations include the QM Patch, which provides
that mortgages that comply with certain prohibitions and limitations and meet the GSE underwriting and product

guidelines are deemed to be QMs until the earlier of (i) when the GSEs exit FHFA conservatorship or (ii) the

mandatory compliance date of the final amendments to the QM Rule. The QM Patch permits loans that exceed a

debt-to-income ratio of 43% to be eligible for QM status. Many of the loans that qualify under the QM Patch

require credit enhancement, of which private mortgage insurance is the predominate form of coverage. On

June 22, 2020, the CFPB issued a Notice of Proposed Rulemaking seeking comments on a proposed amendment

to the QM Rule, which among other things, would remove the QM loan definition’s 43% debt-to-income ratio

and replace it with a limit based on the loan’s pricing. On August 18, 2020, the CFPB issued an additional Notice

of Proposed Rulemaking adding a “seasoning” approach to the QM “safe harbor.” The proposed rule exempts

lenders from liability when they make a reasonable, good faith determination of a consumer’s ability to repay any

non-QM loan that has experienced minimal delinquencies within the first three years after origination. Both rules

have been published in final form in the Federal Register. The QM Rule has an optional effective date of

March 1, 2021 and a mandatory effective date of July 1, 2021. The “seasoning” rule goes into effect on March 1,

2021. We do not expect the final rules to significantly impact our U.S. mortgage insurance business.

The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for

Segment results of operations

the periods indicated:

(Amounts in millions)

Revenues:

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 971

$746

$ 115

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,106

978

841

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18 —

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustments to income from continuing operations:

Increase

(decrease) and

percentage

Years ended December 31,

change

2020

2019

2018

2020 vs. 2019

$856

117

4

133

(4)

6

381

206

21

626

480

102

378

50

191

15

256

722

153

569

1 —

(5) NM(1)

13%

14%

50%

13%

16

2

128

331 NM(1)

15

6

8%

40%

18 NM(1)

370

145%

(242)

(51)

(34)%

(33)%

(191)

(34)%

93

2

36

169

14

—

219

622

132

490

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

(1) —

(1) —

—

5 NM(1)

(1) NM(1)

Adjusted operating income available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 381

$568

$490

$(187)

(33)%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

120

121

Under PMIERs, we are subject to operational and financial requirements that private mortgage insurers

must meet in order to remain eligible to insure loans that are purchased by the GSEs. Each approved mortgage

insurer is required to provide the GSEs with an annual certification and a quarterly report evidencing its

compliance with PMIERs. On June 29, 2020, the GSEs issued the PMIERs Amendment, which included both

temporary and permanent amendments to PMIERs and became effective on June 30, 2020. In September 2020,

the GSEs issued an amended and restated version of the PMIERs Amendment that was effective retroactively on

June 30, 2020 and included new reporting requirements that became effective on December 31, 2020. The GSEs

issued another revised and restated version in December 2020 that extended certain defined periods within the

PMIERs Amendment. In addition, in September 2020, certain GSE Restrictions were imposed with respect to

capital on our U.S. mortgage insurance business. For additional details related to PMIERs, the PMIERs

Amendment and the GSE Restrictions, see “Item 1—Regulation—Mortgage Insurance Regulation—Other U.S.

Regulation and Agency Qualification Requirements.” These restrictions will remain in effect until the later of six

quarters or until the collective GSE Conditions are met.

As of December 31, 2020, our U.S. mortgage insurance business had estimated available assets of

$4,588 million against $3,359 million net required assets under PMIERs compared to available assets of

$4,451 million against $3,377 million net required assets as of September 30, 2020 and available assets of $3,811

million against $2,754 million net required assets as of December 31, 2019. The estimated sufficiency as of

December 31, 2020 was $1,229 million or 137% above the published PMIERs requirements, compared to

$1,074 million or 132% above the published PMIERs requirements as of September 30, 2020 and $1,057 million

or 138% above the PMIERs requirements as of December 31, 2019. PMIERs sufficiency is based on the

published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions

recently imposed on our U.S. mortgage insurance business. The increase in the PMIERs sufficiency compared to

September 30, 2020 was driven in part by the completion of an insurance linked note transaction in October

2020, which added $311 million of additional PMIERs capital credit as of December 31, 2020, and elevated

lapses driven by prevailing low interest rates, partially offset by elevated new insurance written. In addition,

elevated lapses continued to drive an acceleration of the amortization of our existing reinsurance transactions,

which caused a reduction in PMIERs capital credit in the fourth quarter of 2020. Our PMIERs required assets as

of December 31, 2020 and September 30, 2020 benefited from the application of a 0.30 multiplier applied to the

risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier

to all eligible delinquencies provided $1,046 million of benefit to our December 31, 2020 PMIERs required

assets compared to $1,217 million benefit as of September 30, 2020.

On October 22, 2020 we obtained $350 million of fully collateralized excess of loss reinsurance coverage

from Triangle Re 2020 on a portfolio of existing mortgage insurance policies written from January 2020 through

August 2020. For additional details see note 8 to our consolidated financial statements under “Item 8—Financial

Statements and Supplementary Data.” Our credit risk transfer transactions provided an estimated aggregate of

$936 million of PMIERs capital credit as of December 31, 2020. We may execute future credit risk transfer

transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in

response to potential changes in performance and PMIERs requirements over time.

Our U.S. mortgage insurance business paid dividends of $437 million in 2020 generated from the net cash

proceeds of GMHI’s 2025 Senior Notes offering. As a result of the uncertainty regarding the impact of

COVID-19 and the recently imposed PMIERs Amendment and GSE Restrictions on our U.S. mortgage insurance

business, we intend to preserve PMIERs available assets. Accordingly, we intend to defer the payment of

additional dividends in 2021. The amount and timing of future dividends will depend on the economic recovery

from COVID-19, among other factors.

As discussed under “Item 1—Business—Regulation,” pursuant to its authority under the Dodd-Frank Act,

the CFPB issued the QM Rule that became effective on January 10, 2014, establishing underwriting and product

feature requirements for mortgages to be deemed QMs. The regulations include the QM Patch, which provides

that mortgages that comply with certain prohibitions and limitations and meet the GSE underwriting and product

guidelines are deemed to be QMs until the earlier of (i) when the GSEs exit FHFA conservatorship or (ii) the
mandatory compliance date of the final amendments to the QM Rule. The QM Patch permits loans that exceed a
debt-to-income ratio of 43% to be eligible for QM status. Many of the loans that qualify under the QM Patch
require credit enhancement, of which private mortgage insurance is the predominate form of coverage. On
June 22, 2020, the CFPB issued a Notice of Proposed Rulemaking seeking comments on a proposed amendment
to the QM Rule, which among other things, would remove the QM loan definition’s 43% debt-to-income ratio
and replace it with a limit based on the loan’s pricing. On August 18, 2020, the CFPB issued an additional Notice
of Proposed Rulemaking adding a “seasoning” approach to the QM “safe harbor.” The proposed rule exempts
lenders from liability when they make a reasonable, good faith determination of a consumer’s ability to repay any
non-QM loan that has experienced minimal delinquencies within the first three years after origination. Both rules
have been published in final form in the Federal Register. The QM Rule has an optional effective date of
March 1, 2021 and a mandatory effective date of July 1, 2021. The “seasoning” rule goes into effect on March 1,
2021. We do not expect the final rules to significantly impact our U.S. mortgage insurance business.

Segment results of operations

The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for

the periods indicated:

Years ended December 31,

Increase
(decrease) and
percentage
change

(Amounts in millions)

2020

2019

2018

2020 vs. 2019

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 971
133
(4)
6

$856
117

$746
93

1 —
4

2

13%
$ 115
16
14%
(5) NM(1)
50%
2

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,106

978

841

128

13%

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to income from continuing operations:
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted operating income available to Genworth Financial, Inc.’s

381
50
206
191
15
21
18 —

626

480
102

378

256

722
153

569

36
169
14
—

219

622
132

490

331 NM(1)
8%
15
40%
6
18 NM(1)

370

145%

(242)
(51)

(34)%
(33)%

(191)

(34)%

4
(1) —

(1) —
—

5 NM(1)
(1) NM(1)

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 381

$568

$490

$(187)

(33)%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

120

121

2020 compared to 2019

selected operating performance measures regarding our U.S. Mortgage Insurance segment as of or for the dates

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased
primarily attributable to higher losses largely from new delinquencies driven in large part by a significant
increase in borrower forbearance as a result of COVID-19, reserve strengthening of $51 million on existing
delinquencies and from lower net benefits from cures and aging of existing delinquencies in 2020. These
decreases were partially offset by higher premiums largely driven by higher insurance in-force and an increase in
policy cancellations in our single premium mortgage insurance product primarily due to higher mortgage
refinancing in 2020. The year ended December 31, 2019 included favorable reserve adjustments of $18 million
mostly associated with lower expected claim rates and a favorable adjustment of $11 million related to our single
premium earnings pattern review.

Revenues

Premiums increased mainly attributable to higher insurance in-force and an increase in policy cancellations
in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset
by lower average premium rates in 2020. The year ended December 31, 2019 included a favorable adjustment of
$14 million related to our single premium earnings pattern review.

Net investment income increased primarily due to higher average invested assets, partially offset by lower

investment yields in 2020.

Net investment losses in 2020 were primarily driven by impairments and net losses from the sale of fixed

maturity securities. Net investment gains in 2019 were largely from net gains from the sale of fixed maturity
securities.

Benefits and expenses

Benefits and other changes in policy reserves increased largely from new delinquencies driven primarily by
a significant increase in borrower forbearance as a result of COVID-19 and strengthening of existing reserves of
$65 million in 2020 primarily driven by the deterioration of early cure emergence patterns impacting claim
frequency along with a modest increase in claim severity. We also experienced lower net benefits from cures and
aging of existing delinquencies in 2020. Included in 2019 were favorable reserve adjustments of $23 million
mostly associated with lower expected claim rates.

Acquisition and operating expenses, net of deferrals, increased primarily from higher operating costs driven

mostly by increased sales in 2020.

Amortization of deferred acquisition costs and intangibles increased primarily due to accelerated DAC

amortization of $6 million driven by elevated lapses in 2020.

Interest expense in 2020 relates to GMHI’s 2025 Senior Notes issued in August 2020.

Provision for income taxes. The effective tax rate was 21.2% and 21.3% for the years ended December 31,

2020 and 2019, respectively, consistent with the U.S. corporate federal income tax rate.

U.S. Mortgage Insurance selected operating performance measures

We revised the product descriptions in our U.S. Mortgage Insurance segment in 2020 to conform with
industry convention and certain regulatory definitions, including classifications under PMIERs. Prior year
amounts have been reclassified to conform to the current year presentation. The following table sets forth

indicated:

(Amounts in millions)

Risk in-force:

As of or for the years ended

December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Primary insurance in-force (1) . . . . . . . . . . . . . . . . . .

$207,900

$181,800

$157,100

$26,100

14%

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,500

$ 46,200

$ 40,100

$ 6,300

Pool

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100

200

300

(100)

Total risk in-force . . . . . . . . . . . . . . . . . . . . . .

$ 52,600

$ 46,400

$ 40,400

$ 6,200

New insurance written . . . . . . . . . . . . . . . . . . . . . . .

$ 99,900

$ 62,400

$ 40,000

$37,500

Net premiums written . . . . . . . . . . . . . . . . . . . . . . .

$

894

$

818

$

764

$

76

14%

(50)%

13%

60%

9%

(1)

In the fourth quarter of 2020, the company revised the presentation of its U.S. Mortgage Insurance

segment’s primary insurance in-force to represent the aggregate unpaid principal balance for loans we

insure. Prior year amounts have been reclassified to conform to the current year presentation. Original loan

balances are primarily used to determine premiums.

2020 compared to 2019

Primary insurance in-force and risk in-force

Primary insurance in-force increased largely from new insurance written, partially offset by lapses and

cancellations as we experienced lower persistency in 2020. Primary persistency was 59% and 76% for the years

ended December 31, 2020 and 2019, respectively. This decrease in persistency resulted in elevated single

premium policy cancellations in 2020. Total risk in-force increased largely from higher primary insurance

in-force.

New insurance written

Net premiums written

by higher ceded premiums in 2020.

Loss and expense ratios

dates indicated:

New insurance written increased principally due to higher mortgage refinancing originations and a larger

private mortgage insurance available market in 2020.

Net premiums written increased primarily from higher average primary insurance in-force, partially offset

The following table sets forth the loss and expense ratios for our U.S. Mortgage Insurance segment for the

Years ended December 31,

Increase (decrease)

2020

2019

2018

2020 vs. 2019

Loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expense ratio (net earned premiums) . . . . . . . . . . . . . . . .

39%

23%

6%

24%

5%

25%

33%

(1)%

The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The

expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. In our business,

general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and

intangibles.

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14%
(50)%

13%

60%
9%

$ 52,500
100

$ 46,200
200

$ 40,100
300

$ 6,300
(100)

As of or for the years ended
December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

$207,900

$181,800

$157,100

$26,100

14%

selected operating performance measures regarding our U.S. Mortgage Insurance segment as of or for the dates
indicated:

(Amounts in millions)

Primary insurance in-force (1) . . . . . . . . . . . . . . . . . .
Risk in-force:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pool

Total risk in-force . . . . . . . . . . . . . . . . . . . . . .

$ 52,600

$ 46,400

$ 40,400

$ 6,200

New insurance written . . . . . . . . . . . . . . . . . . . . . . .
Net premiums written . . . . . . . . . . . . . . . . . . . . . . .

$ 99,900
894
$

$ 62,400
818
$

$ 40,000
764
$

$37,500
76
$

2020 compared to 2019

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased

primarily attributable to higher losses largely from new delinquencies driven in large part by a significant

increase in borrower forbearance as a result of COVID-19, reserve strengthening of $51 million on existing

delinquencies and from lower net benefits from cures and aging of existing delinquencies in 2020. These

decreases were partially offset by higher premiums largely driven by higher insurance in-force and an increase in

policy cancellations in our single premium mortgage insurance product primarily due to higher mortgage

refinancing in 2020. The year ended December 31, 2019 included favorable reserve adjustments of $18 million

mostly associated with lower expected claim rates and a favorable adjustment of $11 million related to our single

premium earnings pattern review.

Revenues

Premiums increased mainly attributable to higher insurance in-force and an increase in policy cancellations

in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset

by lower average premium rates in 2020. The year ended December 31, 2019 included a favorable adjustment of

$14 million related to our single premium earnings pattern review.

Net investment income increased primarily due to higher average invested assets, partially offset by lower

investment yields in 2020.

Net investment losses in 2020 were primarily driven by impairments and net losses from the sale of fixed

maturity securities. Net investment gains in 2019 were largely from net gains from the sale of fixed maturity

securities.

Benefits and expenses

Benefits and other changes in policy reserves increased largely from new delinquencies driven primarily by

a significant increase in borrower forbearance as a result of COVID-19 and strengthening of existing reserves of

$65 million in 2020 primarily driven by the deterioration of early cure emergence patterns impacting claim

frequency along with a modest increase in claim severity. We also experienced lower net benefits from cures and

aging of existing delinquencies in 2020. Included in 2019 were favorable reserve adjustments of $23 million

mostly associated with lower expected claim rates.

Acquisition and operating expenses, net of deferrals, increased primarily from higher operating costs driven

mostly by increased sales in 2020.

Amortization of deferred acquisition costs and intangibles increased primarily due to accelerated DAC

amortization of $6 million driven by elevated lapses in 2020.

Interest expense in 2020 relates to GMHI’s 2025 Senior Notes issued in August 2020.

Provision for income taxes. The effective tax rate was 21.2% and 21.3% for the years ended December 31,

2020 and 2019, respectively, consistent with the U.S. corporate federal income tax rate.

U.S. Mortgage Insurance selected operating performance measures

We revised the product descriptions in our U.S. Mortgage Insurance segment in 2020 to conform with

industry convention and certain regulatory definitions, including classifications under PMIERs. Prior year

amounts have been reclassified to conform to the current year presentation. The following table sets forth

(1)

In the fourth quarter of 2020, the company revised the presentation of its U.S. Mortgage Insurance
segment’s primary insurance in-force to represent the aggregate unpaid principal balance for loans we
insure. Prior year amounts have been reclassified to conform to the current year presentation. Original loan
balances are primarily used to determine premiums.

2020 compared to 2019

Primary insurance in-force and risk in-force

Primary insurance in-force increased largely from new insurance written, partially offset by lapses and
cancellations as we experienced lower persistency in 2020. Primary persistency was 59% and 76% for the years
ended December 31, 2020 and 2019, respectively. This decrease in persistency resulted in elevated single
premium policy cancellations in 2020. Total risk in-force increased largely from higher primary insurance
in-force.

New insurance written

New insurance written increased principally due to higher mortgage refinancing originations and a larger

private mortgage insurance available market in 2020.

Net premiums written

Net premiums written increased primarily from higher average primary insurance in-force, partially offset

by higher ceded premiums in 2020.

Loss and expense ratios

The following table sets forth the loss and expense ratios for our U.S. Mortgage Insurance segment for the

dates indicated:

Years ended December 31,

Increase (decrease)

2020

2019

2018

2020 vs. 2019

Loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense ratio (net earned premiums) . . . . . . . . . . . . . . . .

39%
23%

6%
24%

5%
25%

33%
(1)%

The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The

expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. In our business,
general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and
intangibles.

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2020 compared to 2019

The loss ratio increased largely from new delinquencies driven primarily by a significant increase in
borrower forbearance as a result of COVID-19 and strengthening of existing reserves of $65 million in 2020
primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a
modest increase in claim severity. We also experienced lower net benefits from cures and aging of existing
delinquencies in 2020. Included in 2019 were $23 million of favorable reserve adjustments mostly associated
with lower expected claim rates and a $14 million favorable adjustment to earned premiums associated with the
review of our single premium earnings pattern. These adjustments reduced the loss ratio by three percentage
points in 2019.

The expense ratio (net earned premiums) decreased primarily from higher net earned premiums, partially

offset by higher operating costs and DAC amortization in 2020. Net earned premiums increased mainly
attributable to higher insurance in-force and an increase in policy cancellations in our single premium mortgage
insurance product driven largely by mortgage refinancing, partially offset by lower average premium rates in
2020. We recorded a $14 million favorable adjustment related to our single premium earnings pattern review in
2019.

U.S. mortgage insurance loan portfolio

loan portfolio as of December 31:

The following table sets forth selected financial information regarding our U.S. primary mortgage insurance

(Amounts in millions)

2020

2019

2018

Primary insurance in-force by loan-to-value ratio at origination:

95.01% and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 34,520

$ 32,502

$ 27,762

90.01% to 95.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80.01% to 90.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80.00% and below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92,689

80,637

101

83,189

65,978

116

72,475

56,739

127

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$207,947

$181,785

$157,103

Primary risk in-force by loan-to-value ratio at origination:

95.01% and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

90.01% to 95.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80.01% to 90.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80.00% and below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,279

26,774

16,401

21

$

8,365

23,953

13,903

25

$

7,125

20,941

12,043

27

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,475

$ 46,246

$ 40,136

Primary insurance in-force by credit quality at origination:

Over 760 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 78,488

$ 69,129

$ 59,949

740—759 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

720—739 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

700—719 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

680—699 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

660—679 (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

640—659 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

620—639 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

<620 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

740—759 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

720—739 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

700—719 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

680—699 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

660—679 (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

640—659 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

620—639 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

<620 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,635

30,058

25,870

20,140

9,819

5,935

2,902

1,100

8,497

7,673

6,579

5,100

2,442

1,472

737

284

29,961

26,184

21,567

16,935

8,504

5,379

2,794

1,332

7,685

6,717

5,464

4,286

2,113

1,322

709

344

25,377

22,196

17,853

14,284

8,080

5,011

2,766

1,587

6,548

5,726

4,544

3,636

2,019

1,237

703

411

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$207,947

$181,785

$157,103

Primary risk in-force by credit quality at origination:

Over 760 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 19,691

$ 17,606

$ 15,312

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,475

$ 46,246

$ 40,136

(1)

Loans with unknown FICO scores are included in the 660-679 category.

Based upon FICO at loan closing, prime loans represented 99% of our primary risk in-force as of

December 31, 2020 and 2019.

Delinquent loans and claims

Our delinquency management process begins with notification by the loan servicer of a delinquency on an

insured loan. “Delinquency” is defined in our master policies as the borrower’s failure to pay when due an

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2020 compared to 2019

U.S. mortgage insurance loan portfolio

The loss ratio increased largely from new delinquencies driven primarily by a significant increase in

borrower forbearance as a result of COVID-19 and strengthening of existing reserves of $65 million in 2020

primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a

modest increase in claim severity. We also experienced lower net benefits from cures and aging of existing

delinquencies in 2020. Included in 2019 were $23 million of favorable reserve adjustments mostly associated

with lower expected claim rates and a $14 million favorable adjustment to earned premiums associated with the

review of our single premium earnings pattern. These adjustments reduced the loss ratio by three percentage

points in 2019.

The expense ratio (net earned premiums) decreased primarily from higher net earned premiums, partially

offset by higher operating costs and DAC amortization in 2020. Net earned premiums increased mainly

attributable to higher insurance in-force and an increase in policy cancellations in our single premium mortgage

insurance product driven largely by mortgage refinancing, partially offset by lower average premium rates in

2020. We recorded a $14 million favorable adjustment related to our single premium earnings pattern review in

2019.

The following table sets forth selected financial information regarding our U.S. primary mortgage insurance

loan portfolio as of December 31:

(Amounts in millions)

2020

2019

2018

Primary insurance in-force by loan-to-value ratio at origination:
95.01% and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90.01% to 95.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.01% to 90.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.00% and below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 34,520
92,689
80,637
101

$ 32,502
83,189
65,978
116

$ 27,762
72,475
56,739
127

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$207,947

$181,785

$157,103

Primary risk in-force by loan-to-value ratio at origination:
95.01% and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90.01% to 95.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.01% to 90.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.00% and below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

9,279
26,774
16,401
21

$

8,365
23,953
13,903
25

$

7,125
20,941
12,043
27

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,475

$ 46,246

$ 40,136

Primary insurance in-force by credit quality at origination:
Over 760 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
740—759 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
720—739 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700—719 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
680—699 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
660—679 (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
640—659 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
620—639 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<620 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 78,488
33,635
30,058
25,870
20,140
9,819
5,935
2,902
1,100

$ 69,129
29,961
26,184
21,567
16,935
8,504
5,379
2,794
1,332

$ 59,949
25,377
22,196
17,853
14,284
8,080
5,011
2,766
1,587

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$207,947

$181,785

$157,103

Primary risk in-force by credit quality at origination:
Over 760 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
740—759 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
720—739 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700—719 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
680—699 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
660—679 (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
640—659 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
620—639 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<620 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 19,691
8,497
7,673
6,579
5,100
2,442
1,472
737
284

$ 17,606
7,685
6,717
5,464
4,286
2,113
1,322
709
344

$ 15,312
6,548
5,726
4,544
3,636
2,019
1,237
703
411

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,475

$ 46,246

$ 40,136

(1)

Loans with unknown FICO scores are included in the 660-679 category.

Based upon FICO at loan closing, prime loans represented 99% of our primary risk in-force as of

December 31, 2020 and 2019.

Delinquent loans and claims

Our delinquency management process begins with notification by the loan servicer of a delinquency on an

insured loan. “Delinquency” is defined in our master policies as the borrower’s failure to pay when due an

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amount equal to the scheduled monthly mortgage payment under the terms of the mortgage. Generally, the
master policies require an insured to notify us of a delinquency if the borrower fails to make two consecutive
monthly mortgage payments prior to the due date of the next mortgage payment. We generally consider a loan to
be delinquent and establish required reserves after the insured notifies us that the borrower has failed to make
two schedule mortgage payments. Borrowers default for a variety of reasons, including a reduction of income,
unemployment, divorce, illness/death, inability to manage credit, falling home prices and interest rate levels.
Borrowers may cure delinquencies by making all of the delinquent loan payments, agreeing to a loan
modification, or by selling the property in full satisfaction of all amounts due under the mortgage. In most cases,
delinquencies that are not cured result in a claim under our policy. The following table sets forth the number of
loans insured, the number of delinquent loans and the delinquency rate for our U.S. mortgage insurance portfolio
as of December 31:

2020

2019

2018

location of the lender.

Primary insurance:
Insured loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .
Percentage of delinquent loans (delinquency rate)

924,624
44,904

851,070
16,392

772,470
16,860

4.86%

1.93%

2.18%

The delinquency rate as of December 31, 2020 increased compared to December 31, 2019 and 2018
primarily as a result of the rise in unemployment and the significant increase in borrower forbearance driven by
COVID-19.

The following tables set forth primary delinquencies, direct primary case reserves and risk in-force by aged

missed payment status in our U.S. mortgage insurance portfolio as of December 31:

(Dollar amounts in millions)

Payments in default:
3 payments or less . . . . . . . . . . . . . . . . . . . . . . .
4 - 11 payments . . . . . . . . . . . . . . . . . . . . . . . . .
12 payments or more . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Dollar amounts in millions)

Delinquencies

Direct case
reserves (1)

Risk
in-force

Reserves as %
of risk in-force

2020

10,484
30,324
4,096

44,904

$ 43
331
143

$517

$ 549
1,853
204

$2,606

8%
18%
70%

20%

2019

Delinquencies

Direct case
reserves (1)

Risk
in-force

Reserves as %
of risk in-force

Payments in default:
3 payments or less . . . . . . . . . . . . . . . . . . . . . . .
4 - 11 payments . . . . . . . . . . . . . . . . . . . . . . . . .
12 payments or more . . . . . . . . . . . . . . . . . . . . .

8,618
4,876
2,898

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,392

$ 28
78
99

$205

$386
225
146

$757

7%
35%
68%

27%

(1) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

As of December 31, 2020, we have experienced an increase in total missed payments and payments that are

delinquent for 4-11 months due in large part to borrowers entering a forbearance plan driven by COVID-19.
Forbearance plans may be extended up to 15 months, therefore, it is possible we could experience elevated
delinquencies in this aged category during 2021. Resolution of a delinquency in a plan, whether it ultimately
results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer.

Beginning in the second quarter of 2020, total primary delinquencies started to increase considerably driven

primarily by a significant increase in borrower forbearance as a result of COVID-19. We estimated the loss

reserve for forbearance delinquencies by applying a roll rate estimate which considers the emergence of cures on

forbearance and non-forbearance delinquencies and the ongoing economic impact due to the pandemic. The large

volume of additional forbearance delinquencies combined with lower loss expectations on delinquencies subject

to a forbearance plan drove the decrease in reserves as a percentage of risk in-force as of December 31, 2020.

Primary insurance delinquency rates differ from region to region in the United States at any one time

depending upon economic conditions and cyclical growth patterns. The tables below set forth the dispersion of

direct primary case reserves and our primary delinquency rates for the 10 largest states and the 10 largest

Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by our risk in-force as of the dates indicated.

Delinquency rates are shown by region based upon the location of the underlying property, rather than the

Percent of primary

risk in-force as of

December 31, 2020

Percent of direct

case reserves as of

December 31, 2020 (1)

2020

2019

2018

Delinquency rate as of December 31,

By State:

California . . . . . . . . . . . . . . . . . . . . . . . .

Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Florida (2) . . . . . . . . . . . . . . . . . . . . . . . . .

Illinois (2) . . . . . . . . . . . . . . . . . . . . . . . . .

New York (2) . . . . . . . . . . . . . . . . . . . . . .

Michigan . . . . . . . . . . . . . . . . . . . . . . . . .

Washington . . . . . . . . . . . . . . . . . . . . . . .

Pennsylvania (2) . . . . . . . . . . . . . . . . . . . .

North Carolina . . . . . . . . . . . . . . . . . . . .

Arizona . . . . . . . . . . . . . . . . . . . . . . . . . .

By MSA or MD:

Chicago-Naperville . . . . . . . . . . . . . . .

Phoenix . . . . . . . . . . . . . . . . . . . . . . . .

New York . . . . . . . . . . . . . . . . . . . . . .

Atlanta . . . . . . . . . . . . . . . . . . . . . . . . .

Washington DC-Arlington . . . . . . . . .

Houston . . . . . . . . . . . . . . . . . . . . . . . .

Riverside-San Bernardino . . . . . . . . . .

Los Angeles-Long Beach . . . . . . . . . .

Dallas . . . . . . . . . . . . . . . . . . . . . . . . . .

Seattle-Bellevue . . . . . . . . . . . . . . . . . .

11%

8%

7%

5%

5%

4%

4%

4%

4%

3%

3%

3%

3%

2%

2%

2%

2%

2%

2%

2%

11%

8%

10%

6%

11%

2%

3%

3%

2%

2%

4%

2%

8%

3%

2%

3%

2%

2%

2%

2%

6.20%

5.82%

6.92%

5.21%

6.92%

2.93%

5.37%

4.11%

3.84%

4.54%

1.42%

2.02%

2.13%

2.25%

2.98%

1.43%

1.10%

2.12%

1.79%

1.46%

1.27%

2.28%

2.89%

2.25%

3.61%

1.40%

1.04%

2.75%

2.27%

1.54%

6.36% 2.50%

4.63% 1.38%

10.25% 3.68%

6.68% 2.14%

6.09% 1.47%

7.59% 2.62%

7.08% 2.08%

7.57% 1.35%

5.10% 1.85%

6.33% 0.98%

2.44%

1.41%

5.25%

2.54%

1.64%

3.12%

1.95%

1.26%

2.01%

0.97%

(1) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

(2)

Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time

it takes for a foreclosure to be completed.

Percent of primary

risk in-force as of

December 31, 2020

Percent of direct

case reserves as of

December 31, 2020 (1)

Delinquency rate as of December 31,

2020

2019

2018

(1) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

The frequency of delinquencies may not correlate directly with the number of claims received because

delinquencies may cure. The rate at which delinquencies cure is influenced by borrowers’ financial resources and

circumstances and regional economic differences. Whether a delinquency leads to a claim correlates highly with

the borrower’s equity at the time of delinquency, as it influences the borrower’s willingness to continue to make

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amount equal to the scheduled monthly mortgage payment under the terms of the mortgage. Generally, the

master policies require an insured to notify us of a delinquency if the borrower fails to make two consecutive

monthly mortgage payments prior to the due date of the next mortgage payment. We generally consider a loan to

be delinquent and establish required reserves after the insured notifies us that the borrower has failed to make

two schedule mortgage payments. Borrowers default for a variety of reasons, including a reduction of income,

unemployment, divorce, illness/death, inability to manage credit, falling home prices and interest rate levels.

Borrowers may cure delinquencies by making all of the delinquent loan payments, agreeing to a loan

modification, or by selling the property in full satisfaction of all amounts due under the mortgage. In most cases,

delinquencies that are not cured result in a claim under our policy. The following table sets forth the number of

loans insured, the number of delinquent loans and the delinquency rate for our U.S. mortgage insurance portfolio

as of December 31:

Primary insurance:

2020

2019

2018

Insured loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

924,624

44,904

851,070

16,392

772,470

16,860

Percentage of delinquent loans (delinquency rate)

. . . . . .

4.86%

1.93%

2.18%

The delinquency rate as of December 31, 2020 increased compared to December 31, 2019 and 2018

primarily as a result of the rise in unemployment and the significant increase in borrower forbearance driven by

COVID-19.

The following tables set forth primary delinquencies, direct primary case reserves and risk in-force by aged

missed payment status in our U.S. mortgage insurance portfolio as of December 31:

Delinquencies

Direct case

reserves (1)

Risk

in-force

Reserves as %

of risk in-force

(Dollar amounts in millions)

Payments in default:

3 payments or less . . . . . . . . . . . . . . . . . . . . . . .

4 - 11 payments . . . . . . . . . . . . . . . . . . . . . . . . .

12 payments or more . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,484

30,324

4,096

44,904

$ 43

331

143

$517

$ 549

1,853

204

$2,606

2020

2019

Delinquencies

Direct case

reserves (1)

Risk

in-force

Reserves as %

of risk in-force

(Dollar amounts in millions)

Payments in default:

3 payments or less . . . . . . . . . . . . . . . . . . . . . . .

4 - 11 payments . . . . . . . . . . . . . . . . . . . . . . . . .

12 payments or more . . . . . . . . . . . . . . . . . . . . .

8,618

4,876

2,898

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,392

$ 28

78

99

$205

$386

225

146

$757

(1) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

As of December 31, 2020, we have experienced an increase in total missed payments and payments that are

delinquent for 4-11 months due in large part to borrowers entering a forbearance plan driven by COVID-19.

Forbearance plans may be extended up to 15 months, therefore, it is possible we could experience elevated

delinquencies in this aged category during 2021. Resolution of a delinquency in a plan, whether it ultimately

results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer.

8%

18%

70%

20%

7%

35%

68%

27%

Beginning in the second quarter of 2020, total primary delinquencies started to increase considerably driven

primarily by a significant increase in borrower forbearance as a result of COVID-19. We estimated the loss
reserve for forbearance delinquencies by applying a roll rate estimate which considers the emergence of cures on
forbearance and non-forbearance delinquencies and the ongoing economic impact due to the pandemic. The large
volume of additional forbearance delinquencies combined with lower loss expectations on delinquencies subject
to a forbearance plan drove the decrease in reserves as a percentage of risk in-force as of December 31, 2020.

Primary insurance delinquency rates differ from region to region in the United States at any one time
depending upon economic conditions and cyclical growth patterns. The tables below set forth the dispersion of
direct primary case reserves and our primary delinquency rates for the 10 largest states and the 10 largest
Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by our risk in-force as of the dates indicated.
Delinquency rates are shown by region based upon the location of the underlying property, rather than the
location of the lender.

Percent of primary
risk in-force as of
December 31, 2020

Percent of direct
case reserves as of
December 31, 2020 (1)

Delinquency rate as of December 31,

2020

2019

2018

By State:
California . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida (2) . . . . . . . . . . . . . . . . . . . . . . . . .
Illinois (2) . . . . . . . . . . . . . . . . . . . . . . . . .
New York (2) . . . . . . . . . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania (2) . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . .

11%
8%
7%
5%
5%
4%
4%
4%
4%
3%

11%
8%
10%
6%
11%
2%
3%
3%
2%
2%

6.20%
5.82%
6.92%
5.21%
6.92%
2.93%
5.37%
4.11%
3.84%
4.54%

1.42%
2.02%
2.13%
2.25%
2.98%
1.43%
1.10%
2.12%
1.79%
1.46%

1.27%
2.28%
2.89%
2.25%
3.61%
1.40%
1.04%
2.75%
2.27%
1.54%

(1) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.
(2)

Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time
it takes for a foreclosure to be completed.

Percent of primary
risk in-force as of
December 31, 2020

Percent of direct
case reserves as of
December 31, 2020 (1)

Delinquency rate as of December 31,

2020

2019

2018

By MSA or MD:
Chicago-Naperville . . . . . . . . . . . . . . .
Phoenix . . . . . . . . . . . . . . . . . . . . . . . .
New York . . . . . . . . . . . . . . . . . . . . . .
Atlanta . . . . . . . . . . . . . . . . . . . . . . . . .
Washington DC-Arlington . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . .
Riverside-San Bernardino . . . . . . . . . .
Los Angeles-Long Beach . . . . . . . . . .
Dallas . . . . . . . . . . . . . . . . . . . . . . . . . .
Seattle-Bellevue . . . . . . . . . . . . . . . . . .

3%
3%
3%
2%
2%
2%
2%
2%
2%
2%

4%
2%
8%
3%
2%
3%
2%
2%
2%
2%

6.36% 2.50%
4.63% 1.38%
10.25% 3.68%
6.68% 2.14%
6.09% 1.47%
7.59% 2.62%
7.08% 2.08%
7.57% 1.35%
5.10% 1.85%
6.33% 0.98%

2.44%
1.41%
5.25%
2.54%
1.64%
3.12%
1.95%
1.26%
2.01%
0.97%

(1) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

The frequency of delinquencies may not correlate directly with the number of claims received because
delinquencies may cure. The rate at which delinquencies cure is influenced by borrowers’ financial resources and
circumstances and regional economic differences. Whether a delinquency leads to a claim correlates highly with
the borrower’s equity at the time of delinquency, as it influences the borrower’s willingness to continue to make

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payments, the borrower’s or the insured’s ability to sell the home for an amount sufficient to satisfy all amounts
due under the mortgage loan and the borrower’s financial ability to continue making payments. When we receive
notice of a delinquency, we use our proprietary model to determine whether a delinquent loan is a candidate for a
modification. When our model identifies such a candidate, our loan workout specialists prioritize cases for loss
mitigation based upon the likelihood that the loan will result in a claim. Loss mitigation actions include loan
modification, extension of credit to bring a loan current, foreclosure forbearance, pre-foreclosure sale and
deed-in-lieu. These loss mitigation efforts often are an effective way to reduce our claim exposure and ultimate
payouts.

The following table sets forth the dispersion of our direct primary case reserves and primary insurance
in-force and risk in-force by year of policy origination, weighted average mortgage interest rate and delinquency
rate as of December 31, 2020:

(Amounts in millions)

Policy Year
. . . . . . . . . . . .
2004 and prior
2005 to 2008 . . . . . . . . . . . . . .
2009 to 2012 . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . .

Total portfolio . . . . . . . .

Weighted
average
rate (1)

Percent of direct
case reserves (2)

Primary
insurance
in-force

Percent
of total

Primary
risk
in-force

Percent
of total

Delinquency
rate

6.12%
5.50%
4.25%
4.14%
4.46%
4.16%
3.88%
4.25%
4.76%
4.20%
3.29%

3.89%

3%
25
1
1
3
5
9
12
14
19
8

$

708 — % $

202 — %

10,614
1,210
1,820
3,699
7,887
15,385
16,289
17,235
39,463
93,637

5
1
1
2
4
7
8
8
19
45

2,716
320
512
999
2,104
4,063
4,180
4,322
9,840
23,217

5
1
1
2
4
8
8
8
19
44

16.82%
13.35%
6.31%
4.84%
6.06%
5.66%
5.46%
6.51%
7.70%
5.60%
1.09%

100%

$207,947

100% $52,475

100%

4.86%

(1) Average annual mortgage interest rate weighted by insurance in-force.
(2) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

For policy years after 2008, the average annual mortgage interest rate has been consistently below 5%, with

its lowest point at 3.29% for policy year 2020. Loss reserves in policy years 2005 through 2008 are outsized
compared to their representation of risk in-force. The size of these policy years at origination combined with the
significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty
remains with respect to the ultimate losses we will experience on these policy years, they have become a smaller
percentage of our total mortgage insurance portfolio. The largest portion of loss reserves has shifted to newer
book years as a result of COVID-19 given their significant representation of risk in-force.

The ratio of the claim paid to the current risk in-force for a loan is referred to as “claim severity.” The

current risk in-force is equal to the unpaid principal amount multiplied by the coverage percentage. The main
determinants of claim severity are the age of the mortgage loan, the value of the underlying property, accrued
interest on the loan, expenses advanced by the insured and foreclosure expenses. These amounts depend partly
upon the time required to complete foreclosure, which varies depending upon state laws. Pre-foreclosure sales,
acquisitions and other early workout and claim administration actions help to reduce overall claim severity. Our
average primary mortgage insurance claim severity was 106%, 112% and 118% for the years ended
December 31, 2020, 2019 and 2018, respectively. The average claim severities do not include the effects of
agreements on non-performing loans.

Australia Mortgage Insurance segment

Trends and conditions

Results of our mortgage insurance business in Australia are affected primarily by changes in regulatory

environments, employment levels, consumer borrowing behavior, lender mortgage-related strategies, including

lender servicing practices, and other economic and housing market influences, including interest rate trends,

home price appreciation or depreciation, mortgage origination volume, levels and aging of mortgage

delinquencies and movements in foreign currency exchange rates. During 2020, the Australian dollar weakened

against the U.S. dollar compared to 2019, which negatively impacted the results of our mortgage insurance

business in Australia as reported in U.S. dollars. Any future movement in foreign exchange rates could impact

future results.

Australia has made significant progress in containing the spread of COVID-19, and a recovery in economic

activity is underway. However, recovery has been varied and uneven throughout the country, with activity

restricted by regional lockdowns to contain COVID-19 outbreaks. Early in the pandemic, the Australian

Government took steps to support jobs, incomes and businesses by providing multiple economic stimulus

packages, including wage subsidies, income support to households and cash flow support to businesses. In

addition, many of our lender customers created programs that allow affected borrowers the option to defer their

mortgage payments, without penalty, for an initial period of up to six months. Under regulatory guidance,

borrowers participating in these programs, unless previously delinquent, are reported as current during the

deferral period. As of December 31, 2020, the business had over 8,100 insured loans in-force still participating in

a payment deferral program. This is down from approximately 31,000 reported at the end of the third quarter of

2020 and represents approximately 1% of our total insured loans in-force as of December 31, 2020. For many

borrowers, the six-month deferral period expired in September 2020. Therefore, on September 22, 2020, APRA

released guidance regarding treatment of loans impacted by COVID-19, whereby banks may extend payment

deferrals to cover a maximum period of ten months from the start of a payment deferral, or until March 28, 2021,

whichever comes first. APRA’s expectation was that lenders would only grant new or extended loan payment

deferral arrangements after undertaking an appropriate credit assessment to ascertain if an extension or new

deferral was appropriate for the borrower given their circumstances. The guidance also included options for loans

to be restructured without being treated as delinquent. In response, lenders worked to complete serviceability

assessments to determine the most appropriate solutions for borrowers experiencing hardships, including, in

some cases, extension of payment deferral programs. The Australian government provided further support for

incomes, jobs and businesses with additional measures announced in the Federal Budget in October 2020.

However, payment support under one of its programs, “JobKeeper,” has decreased in phases over the past several

months and is scheduled to end on March 28, 2021. Many uncertainties surrounding COVID-19 remain, and the

near-term economic outlook depends on Australia’s ability to continue to curb the spread of the virus and to also

secure and efficiently administer vaccines, as well as continued fiscal and monetary support from the

government. We continue to actively consider the potential economic impacts and work closely with our lender

customers to support borrowers who have been impacted by COVID-19.

In its November 2020 Statement on Monetary Policy, the Reserve Bank of Australia (“RBA”) noted that the

outbreak of COVID-19 caused the biggest peacetime contraction in the Australian economy since the 1930’s,

resulting in a sharp decline in GDP, which is not expected to return to pre-pandemic levels until the end of 2021.

While an economic recovery is underway, it has been uneven in pace and varied across the country. In November

2020, the RBA decreased its official cash rate to 0.10% and maintained it at that level as of the end of 2020,

down from 0.75% at the end of 2019, noting that monetary and fiscal support will be required for some time. The

RBA also noted that given the outlook for employment and inflation, it will not increase the cash rate target until

inflation can be sustained within a target range of 2% to 3%, and it does not expect to increase the cash rate for at

least three years. Labor market conditions have improved from initial COVID-19 impacted levels in early 2020,

but employment remains well below pre-pandemic levels. The December 2020 unemployment rate rose to 6.6%

from 5.1% at the end of 2019. The unemployment rate could increase in the near-term as JobKeeper winds down

by March 28, 2021.

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payments, the borrower’s or the insured’s ability to sell the home for an amount sufficient to satisfy all amounts

due under the mortgage loan and the borrower’s financial ability to continue making payments. When we receive

notice of a delinquency, we use our proprietary model to determine whether a delinquent loan is a candidate for a

modification. When our model identifies such a candidate, our loan workout specialists prioritize cases for loss

mitigation based upon the likelihood that the loan will result in a claim. Loss mitigation actions include loan

modification, extension of credit to bring a loan current, foreclosure forbearance, pre-foreclosure sale and

deed-in-lieu. These loss mitigation efforts often are an effective way to reduce our claim exposure and ultimate

payouts.

The following table sets forth the dispersion of our direct primary case reserves and primary insurance

in-force and risk in-force by year of policy origination, weighted average mortgage interest rate and delinquency

rate as of December 31, 2020:

(Amounts in millions)

Policy Year

2004 and prior

. . . . . . . . . . . .

2005 to 2008 . . . . . . . . . . . . . .

2009 to 2012 . . . . . . . . . . . . . .

2013 . . . . . . . . . . . . . . . . . . . .

2014 . . . . . . . . . . . . . . . . . . . .

2015 . . . . . . . . . . . . . . . . . . . .

2016 . . . . . . . . . . . . . . . . . . . .

2017 . . . . . . . . . . . . . . . . . . . .

2018 . . . . . . . . . . . . . . . . . . . .

2019 . . . . . . . . . . . . . . . . . . . .

2020 . . . . . . . . . . . . . . . . . . . .

Weighted

average

rate (1)

Percent of direct

case reserves (2)

Primary

insurance

in-force

Percent

of total

Primary

risk

in-force

Percent

of total

Delinquency

rate

6.12%

5.50%

4.25%

4.14%

4.46%

4.16%

3.88%

4.25%

4.76%

4.20%

3.29%

3.89%

3%

25

1

1

3

5

9

12

14

19

8

$

708 — % $

202 — %

10,614

1,210

1,820

3,699

7,887

15,385

16,289

17,235

39,463

93,637

5

1

1

2

4

7

8

8

19

45

2,716

320

512

999

2,104

4,063

4,180

4,322

9,840

23,217

5

1

1

2

4

8

8

8

19

44

16.82%

13.35%

6.31%

4.84%

6.06%

5.66%

5.46%

6.51%

7.70%

5.60%

1.09%

4.86%

Total portfolio . . . . . . . .

100%

$207,947

100% $52,475

100%

(1) Average annual mortgage interest rate weighted by insurance in-force.

(2) Direct primary case reserves exclude loss adjustment expenses, IBNR and reinsurance reserves.

For policy years after 2008, the average annual mortgage interest rate has been consistently below 5%, with

its lowest point at 3.29% for policy year 2020. Loss reserves in policy years 2005 through 2008 are outsized

compared to their representation of risk in-force. The size of these policy years at origination combined with the

significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty

remains with respect to the ultimate losses we will experience on these policy years, they have become a smaller

percentage of our total mortgage insurance portfolio. The largest portion of loss reserves has shifted to newer

book years as a result of COVID-19 given their significant representation of risk in-force.

The ratio of the claim paid to the current risk in-force for a loan is referred to as “claim severity.” The

current risk in-force is equal to the unpaid principal amount multiplied by the coverage percentage. The main

determinants of claim severity are the age of the mortgage loan, the value of the underlying property, accrued

interest on the loan, expenses advanced by the insured and foreclosure expenses. These amounts depend partly

upon the time required to complete foreclosure, which varies depending upon state laws. Pre-foreclosure sales,

acquisitions and other early workout and claim administration actions help to reduce overall claim severity. Our

average primary mortgage insurance claim severity was 106%, 112% and 118% for the years ended

December 31, 2020, 2019 and 2018, respectively. The average claim severities do not include the effects of

agreements on non-performing loans.

Australia Mortgage Insurance segment

Trends and conditions

Results of our mortgage insurance business in Australia are affected primarily by changes in regulatory
environments, employment levels, consumer borrowing behavior, lender mortgage-related strategies, including
lender servicing practices, and other economic and housing market influences, including interest rate trends,
home price appreciation or depreciation, mortgage origination volume, levels and aging of mortgage
delinquencies and movements in foreign currency exchange rates. During 2020, the Australian dollar weakened
against the U.S. dollar compared to 2019, which negatively impacted the results of our mortgage insurance
business in Australia as reported in U.S. dollars. Any future movement in foreign exchange rates could impact
future results.

Australia has made significant progress in containing the spread of COVID-19, and a recovery in economic

activity is underway. However, recovery has been varied and uneven throughout the country, with activity
restricted by regional lockdowns to contain COVID-19 outbreaks. Early in the pandemic, the Australian
Government took steps to support jobs, incomes and businesses by providing multiple economic stimulus
packages, including wage subsidies, income support to households and cash flow support to businesses. In
addition, many of our lender customers created programs that allow affected borrowers the option to defer their
mortgage payments, without penalty, for an initial period of up to six months. Under regulatory guidance,
borrowers participating in these programs, unless previously delinquent, are reported as current during the
deferral period. As of December 31, 2020, the business had over 8,100 insured loans in-force still participating in
a payment deferral program. This is down from approximately 31,000 reported at the end of the third quarter of
2020 and represents approximately 1% of our total insured loans in-force as of December 31, 2020. For many
borrowers, the six-month deferral period expired in September 2020. Therefore, on September 22, 2020, APRA
released guidance regarding treatment of loans impacted by COVID-19, whereby banks may extend payment
deferrals to cover a maximum period of ten months from the start of a payment deferral, or until March 28, 2021,
whichever comes first. APRA’s expectation was that lenders would only grant new or extended loan payment
deferral arrangements after undertaking an appropriate credit assessment to ascertain if an extension or new
deferral was appropriate for the borrower given their circumstances. The guidance also included options for loans
to be restructured without being treated as delinquent. In response, lenders worked to complete serviceability
assessments to determine the most appropriate solutions for borrowers experiencing hardships, including, in
some cases, extension of payment deferral programs. The Australian government provided further support for
incomes, jobs and businesses with additional measures announced in the Federal Budget in October 2020.
However, payment support under one of its programs, “JobKeeper,” has decreased in phases over the past several
months and is scheduled to end on March 28, 2021. Many uncertainties surrounding COVID-19 remain, and the
near-term economic outlook depends on Australia’s ability to continue to curb the spread of the virus and to also
secure and efficiently administer vaccines, as well as continued fiscal and monetary support from the
government. We continue to actively consider the potential economic impacts and work closely with our lender
customers to support borrowers who have been impacted by COVID-19.

In its November 2020 Statement on Monetary Policy, the Reserve Bank of Australia (“RBA”) noted that the

outbreak of COVID-19 caused the biggest peacetime contraction in the Australian economy since the 1930’s,
resulting in a sharp decline in GDP, which is not expected to return to pre-pandemic levels until the end of 2021.
While an economic recovery is underway, it has been uneven in pace and varied across the country. In November
2020, the RBA decreased its official cash rate to 0.10% and maintained it at that level as of the end of 2020,
down from 0.75% at the end of 2019, noting that monetary and fiscal support will be required for some time. The
RBA also noted that given the outlook for employment and inflation, it will not increase the cash rate target until
inflation can be sustained within a target range of 2% to 3%, and it does not expect to increase the cash rate for at
least three years. Labor market conditions have improved from initial COVID-19 impacted levels in early 2020,
but employment remains well below pre-pandemic levels. The December 2020 unemployment rate rose to 6.6%
from 5.1% at the end of 2019. The unemployment rate could increase in the near-term as JobKeeper winds down
by March 28, 2021.

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129

this customer will reduce gross written premiums in 2021, it is expected to modestly impact future financial

results. This customer represented 11% of our gross written premiums for the year ended December 31, 2020. No

other customer represented 10% or more of gross written premiums in 2020.

One additional consideration related to our customer contracts is that some contain provisions that allow the

customer the option to terminate their contract, on a prospective basis for new business, within a specified period

following a ratings downgrade. Given the potential economic impacts of COVID-19, our mortgage insurance

business in Australia could be subject to future ratings downgrades. If that occurs, the business will work with its

customers to demonstrate its credit strength and endeavor to avoid termination of any existing contracts.

Our mortgage insurance business in Australia evaluates its capital position in relation to the PCA as

determined by APRA and utilizes its ICAAP as the framework to ensure that our Australia group of companies

as a whole, and each regulated entity individually, are capitalized to meet regulatory requirements. As of

December 31, 2020, our estimated PCA ratio was approximately 165%, representing a decrease from 191% as of

December 31, 2019, largely from loss reserve strengthening predominantly driven by a refinement in

methodology and anticipated claims outcomes due to the economic impacts caused by COVID-19, a DAC

write-off of AUD$182 million recorded in the first quarter of 2020 in connection with the completion of liability

adequacy testing under local AAS, which did not impact U.S. GAAP, and strong new business written in 2020.

Effective January 1, 2021, our Australia mortgage insurance business renewed its excess of loss reinsurance

program with an aggregate coverage limit of AUD$800 million. All five treaties included in the excess of loss

reinsurance program have a one-year base term with options to extend for five to nine years and qualify for full

capital credit offset within APRA’s regulatory capital requirements.

As of December 31, 2020, home prices in the combined capital cities of Australia were approximately 2%
higher compared to December 31, 2019 as home values rebounded in the fourth quarter of 2020 following five
consecutive months of month-over-month declines. The Melbourne housing market was the only capital city with
annual home price declines after COVID-19 outbreaks due in part to lengthy lockdowns throughout 2020. While
the housing markets across the capital cities are recovering, the outlook remains uncertain and will depend
largely on the country’s ability to contain the spread of COVID-19.

Our mortgage insurance business in Australia completed a review of its premium earnings pattern in the
fourth quarter of 2020, which resulted in no changes to the earnings pattern adopted in the fourth quarter of 2017.
The adjustment to our premium earnings pattern in the fourth quarter of 2017 was applied on a retrospective
basis under U.S. GAAP, however, under local AAS this adjustment was applied on a prospective basis. Due to
this divergence in accounting application, the financial results and certain metrics, such as the loss ratio and
expense ratios, for our mortgage insurance business in Australia were different between the two accounting
standards through the fourth quarter of 2020. These differences will continue in future periods but will become
less significant as time passes.

Our mortgage insurance business in Australia assessed the adequacy of its unearned premium liability under

local AAS as part of its first quarter of 2020 results. The liability adequacy test under AAS resulted in a
deficiency, mostly driven by higher expected future claims. Accordingly, our Australia mortgage insurance
business wrote-off AUD$182 million of its DAC balance as part of its first quarter of 2020 results. There was no
deficiency adjustment under U.S. GAAP primarily due to a higher unearned premium reserve and a lower DAC
balance. This further contributed to differences in results for our Australia mortgage insurance business under the
two accounting standards for the year ended December 31, 2020. Results of liability adequacy and premium
deficiency tests conducted for AAS and U.S. GAAP, respectively, in the fourth quarter of 2020 did not indicate a
deficiency and therefore, no additional charges were recorded.

Our mortgage insurance business in Australia had higher losses in 2020 compared to 2019 mostly due to an

increase in IBNR reserves from both a refinement in methodology to better align the provision with historical
delinquency behavior and from the establishment of a reserve for loans in payment deferral programs based on
the assumption that some of these loans will ultimately become delinquent and proceed to claim regardless of
being placed in a deferral program. The increase in losses was also due to the economic impacts caused by
COVID-19, including delinquencies that are not proceeding to foreclosure at a normal pace due to court closures
and the moratorium on property possession. The increase was partially offset by favorable aging of existing
delinquencies and lower new reported delinquencies, net of cures, in 2020 as the impact of COVID-19
restrictions and government and lender support packages resulted in a change to the normal delinquency
development and progression patterns. The loss ratio for our Australia mortgage insurance business for the year
ended December 31, 2020 was 65%. Due to COVID-19, our mortgage insurance business in Australia anticipates
claims and reported delinquencies to increase as we move into 2021. In addition, until normal patterns of
delinquency development and progression return, we expect to continue to see increases in our IBNR reserves,
which could further materially impact losses.

New insurance written increased in 2020 compared to 2019 from continued strong lender customer flow

mortgage origination volume supported by continued low interest rates, partially offset by a lower level of bulk
insurance in 2020. We had higher gross written premiums in 2020 compared to 2019 largely as a result of higher
flow new insurance written from higher mortgage origination volume in 2020. Net earned premiums were lower
in 2020 compared to 2019 primarily from portfolio seasoning and lower policy cancellations.

Our mortgage insurance business in Australia is concentrated in a small number of key customers. For the

year ended December 31, 2020, our largest customer represented 58% of gross written premiums. In October
2019, we renewed our supply and service contract with this customer, effective January 1, 2020, for a term of
three years. In November 2020, the contract with our second largest customer based on gross written premiums
in 2020 was not renewed following a request-for-proposal process. While the termination of the contract with

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131

this customer will reduce gross written premiums in 2021, it is expected to modestly impact future financial
results. This customer represented 11% of our gross written premiums for the year ended December 31, 2020. No
other customer represented 10% or more of gross written premiums in 2020.

One additional consideration related to our customer contracts is that some contain provisions that allow the
customer the option to terminate their contract, on a prospective basis for new business, within a specified period
following a ratings downgrade. Given the potential economic impacts of COVID-19, our mortgage insurance
business in Australia could be subject to future ratings downgrades. If that occurs, the business will work with its
customers to demonstrate its credit strength and endeavor to avoid termination of any existing contracts.

Our mortgage insurance business in Australia evaluates its capital position in relation to the PCA as
determined by APRA and utilizes its ICAAP as the framework to ensure that our Australia group of companies
as a whole, and each regulated entity individually, are capitalized to meet regulatory requirements. As of
December 31, 2020, our estimated PCA ratio was approximately 165%, representing a decrease from 191% as of
December 31, 2019, largely from loss reserve strengthening predominantly driven by a refinement in
methodology and anticipated claims outcomes due to the economic impacts caused by COVID-19, a DAC
write-off of AUD$182 million recorded in the first quarter of 2020 in connection with the completion of liability
adequacy testing under local AAS, which did not impact U.S. GAAP, and strong new business written in 2020.
Effective January 1, 2021, our Australia mortgage insurance business renewed its excess of loss reinsurance
program with an aggregate coverage limit of AUD$800 million. All five treaties included in the excess of loss
reinsurance program have a one-year base term with options to extend for five to nine years and qualify for full
capital credit offset within APRA’s regulatory capital requirements.

As of December 31, 2020, home prices in the combined capital cities of Australia were approximately 2%

higher compared to December 31, 2019 as home values rebounded in the fourth quarter of 2020 following five

consecutive months of month-over-month declines. The Melbourne housing market was the only capital city with

annual home price declines after COVID-19 outbreaks due in part to lengthy lockdowns throughout 2020. While

the housing markets across the capital cities are recovering, the outlook remains uncertain and will depend

largely on the country’s ability to contain the spread of COVID-19.

Our mortgage insurance business in Australia completed a review of its premium earnings pattern in the

fourth quarter of 2020, which resulted in no changes to the earnings pattern adopted in the fourth quarter of 2017.

The adjustment to our premium earnings pattern in the fourth quarter of 2017 was applied on a retrospective

basis under U.S. GAAP, however, under local AAS this adjustment was applied on a prospective basis. Due to

this divergence in accounting application, the financial results and certain metrics, such as the loss ratio and

expense ratios, for our mortgage insurance business in Australia were different between the two accounting

standards through the fourth quarter of 2020. These differences will continue in future periods but will become

less significant as time passes.

Our mortgage insurance business in Australia assessed the adequacy of its unearned premium liability under

local AAS as part of its first quarter of 2020 results. The liability adequacy test under AAS resulted in a

deficiency, mostly driven by higher expected future claims. Accordingly, our Australia mortgage insurance

business wrote-off AUD$182 million of its DAC balance as part of its first quarter of 2020 results. There was no

deficiency adjustment under U.S. GAAP primarily due to a higher unearned premium reserve and a lower DAC

balance. This further contributed to differences in results for our Australia mortgage insurance business under the

two accounting standards for the year ended December 31, 2020. Results of liability adequacy and premium

deficiency tests conducted for AAS and U.S. GAAP, respectively, in the fourth quarter of 2020 did not indicate a

deficiency and therefore, no additional charges were recorded.

Our mortgage insurance business in Australia had higher losses in 2020 compared to 2019 mostly due to an

increase in IBNR reserves from both a refinement in methodology to better align the provision with historical

delinquency behavior and from the establishment of a reserve for loans in payment deferral programs based on

the assumption that some of these loans will ultimately become delinquent and proceed to claim regardless of

being placed in a deferral program. The increase in losses was also due to the economic impacts caused by

COVID-19, including delinquencies that are not proceeding to foreclosure at a normal pace due to court closures

and the moratorium on property possession. The increase was partially offset by favorable aging of existing

delinquencies and lower new reported delinquencies, net of cures, in 2020 as the impact of COVID-19

restrictions and government and lender support packages resulted in a change to the normal delinquency

development and progression patterns. The loss ratio for our Australia mortgage insurance business for the year

ended December 31, 2020 was 65%. Due to COVID-19, our mortgage insurance business in Australia anticipates

claims and reported delinquencies to increase as we move into 2021. In addition, until normal patterns of

delinquency development and progression return, we expect to continue to see increases in our IBNR reserves,

which could further materially impact losses.

New insurance written increased in 2020 compared to 2019 from continued strong lender customer flow

mortgage origination volume supported by continued low interest rates, partially offset by a lower level of bulk

insurance in 2020. We had higher gross written premiums in 2020 compared to 2019 largely as a result of higher

flow new insurance written from higher mortgage origination volume in 2020. Net earned premiums were lower

in 2020 compared to 2019 primarily from portfolio seasoning and lower policy cancellations.

Our mortgage insurance business in Australia is concentrated in a small number of key customers. For the

year ended December 31, 2020, our largest customer represented 58% of gross written premiums. In October

2019, we renewed our supply and service contract with this customer, effective January 1, 2020, for a term of

three years. In November 2020, the contract with our second largest customer based on gross written premiums

in 2020 was not renewed following a request-for-proposal process. While the termination of the contract with

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131

Segment results of operations

The following table sets forth the results of operations relating to our Australia Mortgage Insurance segment

payment deferral programs. The decrease was also attributable to lower earned premiums largely from portfolio

seasoning and lower policy cancellations and lower net investment income in 2020.

for the periods indicated:

(Amounts in millions)

Years ended December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Premiums decreased predominantly from portfolio seasoning and lower policy cancellations in 2020. The

year ended December 31, 2020 included a decrease of $5 million attributable to changes in foreign exchange

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$312
$274
55
32
66
23
1 —

$373
67
(15)
2

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

373

390

427

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104
177
69
74
29
33
5 —
7

8

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

292

Income from continuing operations before income taxes . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations available to Genworth
Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to income from continuing operations available to
Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net (2) . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted operating income available to Genworth Financial, Inc.’s
common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (38)
(23)
43
1

(17)

73
5
(4)
5
(1)

78

(95)
(29)

(66)

(30)

(12)%
(42)%
187%
NM(1)

(4)%

70%
7%
(12)%
NM(1)
(13)%

36%

(54)%
(55)%

(54)%

(47)%

(36)

(61)%

110
65
43

—

9

227

200
60

140

70

70

214

176
53

123

64

59

81
24

57

34

23

(35)

(12)

3 —
10

4

8

—

(2)

(23)
3
6

(192)%
NM(1)
150%

$

1

$ 51

$ 76

$ (50)

(98)%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for the
portion of net investment gains (losses) attributable to noncontrolling interests of $31 million, $11 million
and $(7) million, respectively.
For the year ended December 31, 2020, goodwill impairment was adjusted for the portion attributable to
noncontrolling interests of $2 million.

(3)

2020 compared to 2019

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased
primarily from loss reserve strengthening of $91 million driven by a refinement in methodology and anticipated
claims outcomes due to the economic impacts caused by COVID-19, including IBNR reserves on loans in

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133

Revenues

rates.

Net investment income decreased largely from lower yields in 2020.

Net investment gains increased primarily from derivative gains in 2020 compared to derivative losses in

2019 and higher net gains from the sale of investment securities in 2020. The year ended December 31, 2020

included a decrease of $4 million attributable to changes in foreign exchange rates.

Benefits and expenses

Benefits and other changes in policy reserves increased primarily from loss reserve strengthening of

$130 million driven by a refinement in methodology and anticipated claims outcomes due to the economic

impacts caused by COVID-19, including IBNR reserves on loans in payment deferral programs. These increases

were partially offset by favorable aging of existing delinquencies and lower new reported delinquencies, net of

cures, in 2020.

We recorded a goodwill impairment charge of $5 million in 2020, which represented the full amount of

goodwill related to our mortgage insurance business in Australia.

Provision for income taxes. The effective tax rate was 30.0% for the years ended December 31, 2020 and

2019, consistent with our jurisdictional rate.

Net income attributable to noncontrolling interests. The decrease was predominantly related to lower

premiums and lower net investment income, partially offset by higher net investment gains in 2020.

Australia Mortgage Insurance selected operating performance measures

As of December 31, 2020, our mortgage insurance business in Australia had structured insurance

transactions with three lenders where it was in a secondary loss position. The insurance portfolio metrics

associated with these transactions, which include insurance in-force, risk in-force, new insurance written, loans

in-force and delinquent loans, are excluded from the following tables. These arrangements represented

approximately $181 million and $162 million of risk in-force as of December 31, 2020 and 2019, respectively.

The following table sets forth selected operating performance measures regarding our Australia Mortgage

Insurance segment as of or for the dates indicated:

(Amounts in millions)

Insurance in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risk in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New insurance written . . . . . . . . . . . . . . . . . . . . . . . . . .

$235,400

$ 82,100

$ 21,700

$215,700

$ 75,100

$ 18,700

$218,200

$ 76,000

$ 16,600

Net premiums written . . . . . . . . . . . . . . . . . . . . . . . . . .

$

353

$

272

$

242

$19,700

$ 7,000

$ 3,000

$

81

9%

9%

16%

30%

As of or for the years ended

December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Our mortgage insurance business in Australia currently provides 100% coverage on the majority of the loans

we insure in those markets. For the purpose of representing our risk in-force, we have computed an “effective”

Segment results of operations

for the periods indicated:

(Amounts in millions)

Revenues:

The following table sets forth the results of operations relating to our Australia Mortgage Insurance segment

Years ended December 31,

percentage change

2020

2019

2018

2020 vs. 2019

Increase (decrease) and

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$274

$312

$373

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32

66

55

23

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 —

67

(15)

2

$ (38)

(23)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

373

390

427

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . . .

177

74

29

Goodwill impairment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 —

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

292

Income from continuing operations before income taxes . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . .

Adjustments to income from continuing operations available to

Genworth Financial, Inc.’s common stockholders:

104

69

33

8

214

176

53

123

64

59

110

65

43

—

9

227

200

60

140

70

70

7

81

24

57

34

23

(12)%

(42)%

187%

NM(1)

(4)%

70%

7%

(12)%

NM(1)

(13)%

36%

(54)%

(55)%

(54)%

(47)%

43

1

(17)

73

5

(4)

5

(1)

78

(95)

(29)

(66)

(30)

(36)

(61)%

Net investment (gains) losses, net (2) . . . . . . . . . . . . . . . . . . . . . . . . .

(35)

(12)

Goodwill impairment, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 —

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

4

8

—

(2)

(23)

3

6

(192)%

NM(1)

150%

Adjusted operating income available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1

$ 51

$ 76

$ (50)

(98)%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

(2)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for the

portion of net investment gains (losses) attributable to noncontrolling interests of $31 million, $11 million

(3)

For the year ended December 31, 2020, goodwill impairment was adjusted for the portion attributable to

and $(7) million, respectively.

noncontrolling interests of $2 million.

2020 compared to 2019

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased

primarily from loss reserve strengthening of $91 million driven by a refinement in methodology and anticipated

claims outcomes due to the economic impacts caused by COVID-19, including IBNR reserves on loans in

payment deferral programs. The decrease was also attributable to lower earned premiums largely from portfolio
seasoning and lower policy cancellations and lower net investment income in 2020.

Revenues

Premiums decreased predominantly from portfolio seasoning and lower policy cancellations in 2020. The

year ended December 31, 2020 included a decrease of $5 million attributable to changes in foreign exchange
rates.

Net investment income decreased largely from lower yields in 2020.

Net investment gains increased primarily from derivative gains in 2020 compared to derivative losses in
2019 and higher net gains from the sale of investment securities in 2020. The year ended December 31, 2020
included a decrease of $4 million attributable to changes in foreign exchange rates.

Benefits and expenses

Benefits and other changes in policy reserves increased primarily from loss reserve strengthening of

$130 million driven by a refinement in methodology and anticipated claims outcomes due to the economic
impacts caused by COVID-19, including IBNR reserves on loans in payment deferral programs. These increases
were partially offset by favorable aging of existing delinquencies and lower new reported delinquencies, net of
cures, in 2020.

We recorded a goodwill impairment charge of $5 million in 2020, which represented the full amount of

goodwill related to our mortgage insurance business in Australia.

Provision for income taxes. The effective tax rate was 30.0% for the years ended December 31, 2020 and

2019, consistent with our jurisdictional rate.

Net income attributable to noncontrolling interests. The decrease was predominantly related to lower

premiums and lower net investment income, partially offset by higher net investment gains in 2020.

Australia Mortgage Insurance selected operating performance measures

As of December 31, 2020, our mortgage insurance business in Australia had structured insurance
transactions with three lenders where it was in a secondary loss position. The insurance portfolio metrics
associated with these transactions, which include insurance in-force, risk in-force, new insurance written, loans
in-force and delinquent loans, are excluded from the following tables. These arrangements represented
approximately $181 million and $162 million of risk in-force as of December 31, 2020 and 2019, respectively.

The following table sets forth selected operating performance measures regarding our Australia Mortgage

Insurance segment as of or for the dates indicated:

(Amounts in millions)

As of or for the years ended
December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Insurance in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New insurance written . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums written . . . . . . . . . . . . . . . . . . . . . . . . . .

$235,400
$ 82,100
$ 21,700
353
$

$215,700
$ 75,100
$ 18,700
272
$

$218,200
$ 76,000
$ 16,600
242
$

$19,700
$ 7,000
$ 3,000
81
$

9%
9%
16%
30%

Our mortgage insurance business in Australia currently provides 100% coverage on the majority of the loans

we insure in those markets. For the purpose of representing our risk in-force, we have computed an “effective”

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133

risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds
received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a
factor of 35% that represents our highest expected average per-claim payment for any one underwriting year over
the life of our business in Australia. We also have certain risk share arrangements where we provide pro-rata
coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements,
the applicable pro-rata coverage amount provided is used when applying the factor.

2020 compared to 2019

Insurance in-force and risk in-force

Insurance in-force and risk in-force increased $20.9 billion and $7.3 billion, respectively, from changes
attributable to foreign exchange rates. Excluding the effects of changes in foreign exchange rates, insurance
in-force and risk in-force decreased primarily driven by policy cancellations in 2020.

New insurance written

New insurance written increased for the year ended December 31, 2020 primarily from higher lender
customer flow mortgage origination volume supported by continued low interest rates, partially offset by a lower
level of bulk insurance in 2020, as well as a decrease of $200 million attributable to changes in foreign exchange
rates.

Net premiums written

Most of our Australian mortgage insurance policies provide for single premiums at the time that loan
proceeds are advanced. We initially record the single premiums to unearned premium reserves and recognize the
premiums earned over time in accordance with the expected pattern of risk emergence. As of December 31,
2020, our unearned premium reserves were $1.2 billion, compared to $1.0 billion as of December 31, 2019. The
change in unearned premiums included an increase of $105 million attributable to changes in foreign exchange
rates.

Net premiums written increased for the year ended December 31, 2020 primarily due to higher flow new

insurance written from an increase in mortgage origination volume in 2020.

Loss and expense ratios

The following table sets forth the loss and expense ratios for our Australia Mortgage Insurance segment for

the dates indicated:

Years ended December 31,
2018
2019
2020

Increase (decrease)
2020 vs. 2019

Loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense ratio (net earned premiums) . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Expense ratio (net premiums written)

65%
39%
30%

33%
33%
38%

30%
29%
45%

32%
6%
(8)%

The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The
expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio
(net premiums written) is the ratio of general expenses to net premiums written. In our mortgage insurance
business in Australia, general expenses consist of acquisition and operating expenses, net of deferrals,
amortization of DAC and intangibles and goodwill impairment charges.

2020 compared to 2019

The loss ratio increased for the year ended December 31, 2020 primarily attributable to loss reserve

strengthening of $130 million driven by a refinement in methodology and anticipated claims outcomes due to the

above.

134

135

economic impacts caused by COVID-19, including IBNR reserves on loans in payment deferral programs,

partially offset by favorable aging of existing delinquencies and lower new reported delinquencies, net of cures,

in 2020. The increase was also from lower premiums from portfolio seasoning and lower policy cancellations in

2020.

The expense ratio (net earned premiums) increased for the year ended December 31, 2020 primarily from

lower net earned premiums as discussed above.

The expense ratio (net premiums written) decreased for the year ended December 31, 2020 primarily from

higher net premiums written primarily due to an increase in flow mortgage origination volume.

Australia mortgage insurance loan portfolio

The following table sets forth selected financial information regarding the loan-to-value ratio of effective

risk in-force of our Australia mortgage insurance loan portfolio as of December 31:

(Amounts in millions)

2020

2019

2018

95.01% and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,322

$10,153

$11,261

90.01% to 95.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80.01% to 90.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80.00% and below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,144

27,099

20,489

21,284

23,556

20,156

21,081

22,475

21,161

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$82,054

$75,149

$75,978

Overall risk in-force increased $7.3 billion attributable to changes in foreign exchange rates in 2020.

Delinquent loans and claims

The claim process in our Australia Mortgage Insurance segment is similar to the process we follow in our

U.S. mortgage insurance business. See “—U.S. Mortgage Insurance—Delinquent loans and claims.” The

following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate

for our Australia mortgage insurance portfolio as of December 31:

2020

2019

2018

Insured loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,195,907

1,290,216

1,332,906

Delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percentage of delinquent loans (delinquency rate) . . . . . . . . . .

6,964

0.58%

7,221

0.56%

7,145

0.54%

Flow loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,099,408

1,189,019

1,226,219

Flow delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percentage of flow delinquent loans (delinquency rate) . . . . . .

6,717

0.61%

7,003

0.59%

6,931

0.57%

Bulk loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96,499

101,197

106,687

Bulk delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percentage of bulk delinquent loans (delinquency rate) . . . . . .

247

0.26%

218

0.22%

214

0.20%

Flow loans in-force decreased primarily from policy cancellations in 2020. Flow delinquent loans decreased

from cures and claims paid exceeding new delinquencies in 2020. The decrease in flow delinquent loans was also

attributable to loan deferral programs implemented during 2020 related to loans impacted by COVID-19,

contributing to a delay in reported delinquencies on loans that may ultimately become delinquent. Loans included

in loan deferral programs are counted as current and accordingly, are not included as delinquent in the table

risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds

received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a

factor of 35% that represents our highest expected average per-claim payment for any one underwriting year over

the life of our business in Australia. We also have certain risk share arrangements where we provide pro-rata

coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements,

the applicable pro-rata coverage amount provided is used when applying the factor.

2020 compared to 2019

Insurance in-force and risk in-force

Insurance in-force and risk in-force increased $20.9 billion and $7.3 billion, respectively, from changes

attributable to foreign exchange rates. Excluding the effects of changes in foreign exchange rates, insurance

in-force and risk in-force decreased primarily driven by policy cancellations in 2020.

New insurance written increased for the year ended December 31, 2020 primarily from higher lender

customer flow mortgage origination volume supported by continued low interest rates, partially offset by a lower

level of bulk insurance in 2020, as well as a decrease of $200 million attributable to changes in foreign exchange

New insurance written

Net premiums written

rates.

rates.

Loss and expense ratios

the dates indicated:

Most of our Australian mortgage insurance policies provide for single premiums at the time that loan

proceeds are advanced. We initially record the single premiums to unearned premium reserves and recognize the

premiums earned over time in accordance with the expected pattern of risk emergence. As of December 31,

2020, our unearned premium reserves were $1.2 billion, compared to $1.0 billion as of December 31, 2019. The

change in unearned premiums included an increase of $105 million attributable to changes in foreign exchange

Net premiums written increased for the year ended December 31, 2020 primarily due to higher flow new

insurance written from an increase in mortgage origination volume in 2020.

The following table sets forth the loss and expense ratios for our Australia Mortgage Insurance segment for

Years ended December 31,

Increase (decrease)

2020

2019

2018

2020 vs. 2019

Loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expense ratio (net earned premiums) . . . . . . . . . . . . . . . .

Expense ratio (net premiums written)

. . . . . . . . . . . . . . .

65%

39%

30%

33%

33%

38%

30%

29%

45%

32%

6%

(8)%

The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The

expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio

(net premiums written) is the ratio of general expenses to net premiums written. In our mortgage insurance

business in Australia, general expenses consist of acquisition and operating expenses, net of deferrals,

amortization of DAC and intangibles and goodwill impairment charges.

2020 compared to 2019

The loss ratio increased for the year ended December 31, 2020 primarily attributable to loss reserve

strengthening of $130 million driven by a refinement in methodology and anticipated claims outcomes due to the

economic impacts caused by COVID-19, including IBNR reserves on loans in payment deferral programs,
partially offset by favorable aging of existing delinquencies and lower new reported delinquencies, net of cures,
in 2020. The increase was also from lower premiums from portfolio seasoning and lower policy cancellations in
2020.

The expense ratio (net earned premiums) increased for the year ended December 31, 2020 primarily from

lower net earned premiums as discussed above.

The expense ratio (net premiums written) decreased for the year ended December 31, 2020 primarily from

higher net premiums written primarily due to an increase in flow mortgage origination volume.

Australia mortgage insurance loan portfolio

The following table sets forth selected financial information regarding the loan-to-value ratio of effective

risk in-force of our Australia mortgage insurance loan portfolio as of December 31:

(Amounts in millions)

2020

2019

2018

95.01% and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90.01% to 95.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.01% to 90.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.00% and below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,322
24,144
27,099
20,489

$10,153
21,284
23,556
20,156

$11,261
21,081
22,475
21,161

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$82,054

$75,149

$75,978

Overall risk in-force increased $7.3 billion attributable to changes in foreign exchange rates in 2020.

Delinquent loans and claims

The claim process in our Australia Mortgage Insurance segment is similar to the process we follow in our

U.S. mortgage insurance business. See “—U.S. Mortgage Insurance—Delinquent loans and claims.” The
following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate
for our Australia mortgage insurance portfolio as of December 31:

2020

2019

2018

Insured loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of delinquent loans (delinquency rate) . . . . . . . . . .

1,195,907
6,964
0.58%

1,290,216
7,221
0.56%

1,332,906
7,145
0.54%

Flow loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flow delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of flow delinquent loans (delinquency rate) . . . . . .

1,099,408
6,717
0.61%

1,189,019
7,003
0.59%

1,226,219
6,931
0.57%

Bulk loans in-force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bulk delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of bulk delinquent loans (delinquency rate) . . . . . .

96,499
247
0.26%

101,197
218
0.22%

106,687
214
0.20%

Flow loans in-force decreased primarily from policy cancellations in 2020. Flow delinquent loans decreased
from cures and claims paid exceeding new delinquencies in 2020. The decrease in flow delinquent loans was also
attributable to loan deferral programs implemented during 2020 related to loans impacted by COVID-19,
contributing to a delay in reported delinquencies on loans that may ultimately become delinquent. Loans included
in loan deferral programs are counted as current and accordingly, are not included as delinquent in the table
above.

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135

Insurance delinquency rates differ by the various states and territories of Australia at any one time
depending upon economic conditions and cyclical growth patterns. The table below sets forth our delinquency
rates for the states and territories of Australia by our risk in-force as of the dates indicated. Delinquency rates are
shown by region based upon the location of the underlying property, rather than the location of the lender.

Percent of
risk in-force as of
December 31, 2020

Delinquency rate as of December 31,

2020

2019

2018

By state and territory:
New South Wales . . . . . . . . . . . . . . . . . . . . . . . .
Queensland . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Victoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Western Australia . . . . . . . . . . . . . . . . . . . . . . . .
South Australia . . . . . . . . . . . . . . . . . . . . . . . . . .
Australian Capital Territory . . . . . . . . . . . . . . . .
Tasmania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Northern Territory . . . . . . . . . . . . . . . . . . . . . . . .

28%
23
23
13
6
3
2
1
1

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

0.47%
0.70%
0.47%
0.97%
0.66%
0.23%
0.25%
0.06%
0.80%

0.58%

0.42%
0.75%
0.41%
1.00%
0.65%
0.24%
0.29%
0.02%
0.71%

0.56%

0.38%
0.70%
0.40%
0.98%
0.68%
0.17%
0.31%
0.05%
0.68%

0.54%

Delinquency rates increased mainly from lower flow loans in-force as a result of policy cancellations,

partially offset by cures and claims paid exceeding new delinquencies in 2020.

U.S. Life Insurance segment

COVID-19

The most significant impacts in our U.S. life insurance businesses from COVID-19 in 2020 were related to
continued elevated mortality and the low interest rate environment. Our long-term care insurance products were
favorably impacted by higher mortality in 2020. Conversely, in 2020, higher mortality rates had unfavorable
impacts in our life insurance products and we observed minimal impact from COVID-19 in our fixed annuity
products. Our products have also been negatively impacted by the current low interest rate environment,
particularly as it relates to loss recognition testing and asset adequacy analysis.

In our long-term care insurance products, we have experienced some degree of higher mortality during
COVID-19 which has had a favorable impact on claim reserves and our operating results. Although it is not our
practice to track cause of death for policyholders and claimants, we believe the favorable results of our long-term
care insurance business in 2020 were likely impacted by COVID-19 but we expect the impacts to be temporary.
We believe COVID-19 has accelerated mortality on our most vulnerable claimants, which may reduce mortality
rates in future periods as the impacts of the pandemic subside. We have also experienced lower new claims
incidence; however, we do not expect this to be permanent but rather a temporary reduction while
shelter-in-place and social distancing protocols are in effect. We have temporarily discontinued in-person
assessments to assess eligibility for benefits, and are utilizing virtual assessments in the interim, with an
in-person assessment to follow once social distancing protocols are relaxed. For claimants without the
technology to perform virtual assessments, we have alternate options for gathering information. Our long-term
care insurance benefit utilization will be monitored for impact, although it is too early to tell the magnitude and/
or direction of that impact.

Additionally, our U.S. life insurance companies are dependent on the approval of actuarially justified
in-force rate actions in our long-term care insurance business, including those rate actions which were previously
filed and are currently pending review and approval. We have experienced some delays and could experience
additional delays in receiving approvals of these rate actions during COVID-19, although we did not have a
significant impact on our financial results during 2020 as a result of these delays.

We continue to provide customer service to our policyholders during this uncertain time and are available to

address questions or concerns regarding their policies. We are continually assessing our operational processes

and monitoring potential impacts to morbidity due to COVID-19.

In our U.S life insurance companies, we have complied with guidance issued by certain insurance

regulators, such as mandates that policies cannot be lapsed or cancelled if premiums are not paid or requirements

to provide extensions of grace periods during the COVID-19 pandemic. Although most of these mandates have

been lifted, we continue to monitor developments related to COVID-19 such as state directives that are issued

during this time and we will comply with any new guidance issued by our state insurance regulators. For

statutory reporting, we were not required to non-admit premium receivables over 90 days if we were in a no lapse

mandate through December 30, 2020. Going forward, we may also seek permitted practices during this time to

help our capital position and our ongoing RBC requirements if COVID-19 continues for an extended period of

time. We have also contacted our reinsurance counterparties to inform them of the actions we have taken in

response to state bulletins on extension of grace periods and prohibition of lapsation as well as offering flexibility

to our policyholders who are on claim.

We have not experienced a significant impact on our premiums in our U.S. life insurance businesses while

there have been premium deferrals/grace period mandates in place in certain states. Given our current ratings, our

sales volume is low in our long-term care insurance products. In 2016, we suspended sales of our traditional life

insurance and fixed annuity products. For traditional life insurance policies, where regular premiums are

typically required, and universal life insurance contracts, where premiums are typically flexible but frequently

require minimum premiums to be paid, subject to state mandates for additional grace periods during COVID-19,

policies follow normal lapse or nonforfeiture options, if the policyholders decided not to pay their premiums.

There is no requirement to pay premiums in our fixed annuity contracts and benefits would adjust contractually

based on actual premiums paid in these products.

We actively monitor cash and highly liquid investment positions in each of our U.S. life insurance

companies against operating targets that are designed to ensure that we will have the cash necessary to meet our

obligations as they come due. The targets are set based on stress scenarios that have the effect of increasing our

expected cash outflows and decreasing our expected cash inflows. Liquidity risk is assessed by comparing

subsidiary cash to potential cash needs under a stressed liquidity scenario. The stressed scenario reflects potential

policyholder surrenders, variability of normal operating cash flow and potential increase in collateral

requirements under our cleared derivative program.

While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on the

U.S. life insurance business will depend on the length and severity of the pandemic and shape of the economic

recovery. Further declines in interest rates as well as equity market volatility as a result of COVID-19 would

increase reserves and capital requirements in our U.S. life insurance business. For sensitivities related to interest

rates, lapses and mortality on our U.S. life insurance products, see “—Critical Accounting Estimates.” We will

continue to monitor COVID-19 impacts and evaluate all of our assumptions that may need updating as a result of

longer-term trends related to the pandemic. See “Item 1A—Risk Factors—COVID-19 could materially adversely

affect our financial condition and results of operations” for additional details.

Trends and conditions

Results of our U.S. life insurance businesses depend significantly upon the extent to which our actual future

experience is consistent with assumptions and methodologies we have used in calculating our reserves. Many

factors can affect the results of our U.S. life insurance businesses. Because these factors are not known in

advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine

with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will

continue to monitor our experience and assumptions closely and make changes to our assumptions and

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137

Insurance delinquency rates differ by the various states and territories of Australia at any one time

depending upon economic conditions and cyclical growth patterns. The table below sets forth our delinquency

rates for the states and territories of Australia by our risk in-force as of the dates indicated. Delinquency rates are

shown by region based upon the location of the underlying property, rather than the location of the lender.

By state and territory:

New South Wales . . . . . . . . . . . . . . . . . . . . . . . .

Queensland . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Victoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Western Australia . . . . . . . . . . . . . . . . . . . . . . . .

South Australia . . . . . . . . . . . . . . . . . . . . . . . . . .

Australian Capital Territory . . . . . . . . . . . . . . . .

Tasmania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Northern Territory . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Percent of

risk in-force as of

December 31, 2020

Delinquency rate as of December 31,

2020

2019

2018

28%

23

23

13

6

3

2

1

1

0.47%

0.70%

0.47%

0.97%

0.66%

0.23%

0.25%

0.06%

0.80%

0.58%

0.42%

0.75%

0.41%

1.00%

0.65%

0.24%

0.29%

0.02%

0.71%

0.56%

0.38%

0.70%

0.40%

0.98%

0.68%

0.17%

0.31%

0.05%

0.68%

0.54%

Delinquency rates increased mainly from lower flow loans in-force as a result of policy cancellations,

partially offset by cures and claims paid exceeding new delinquencies in 2020.

U.S. Life Insurance segment

COVID-19

The most significant impacts in our U.S. life insurance businesses from COVID-19 in 2020 were related to

continued elevated mortality and the low interest rate environment. Our long-term care insurance products were

favorably impacted by higher mortality in 2020. Conversely, in 2020, higher mortality rates had unfavorable

impacts in our life insurance products and we observed minimal impact from COVID-19 in our fixed annuity

products. Our products have also been negatively impacted by the current low interest rate environment,

particularly as it relates to loss recognition testing and asset adequacy analysis.

In our long-term care insurance products, we have experienced some degree of higher mortality during

COVID-19 which has had a favorable impact on claim reserves and our operating results. Although it is not our

practice to track cause of death for policyholders and claimants, we believe the favorable results of our long-term

care insurance business in 2020 were likely impacted by COVID-19 but we expect the impacts to be temporary.

We believe COVID-19 has accelerated mortality on our most vulnerable claimants, which may reduce mortality

rates in future periods as the impacts of the pandemic subside. We have also experienced lower new claims

incidence; however, we do not expect this to be permanent but rather a temporary reduction while

shelter-in-place and social distancing protocols are in effect. We have temporarily discontinued in-person

assessments to assess eligibility for benefits, and are utilizing virtual assessments in the interim, with an

in-person assessment to follow once social distancing protocols are relaxed. For claimants without the

technology to perform virtual assessments, we have alternate options for gathering information. Our long-term

care insurance benefit utilization will be monitored for impact, although it is too early to tell the magnitude and/

or direction of that impact.

Additionally, our U.S. life insurance companies are dependent on the approval of actuarially justified

in-force rate actions in our long-term care insurance business, including those rate actions which were previously

filed and are currently pending review and approval. We have experienced some delays and could experience

additional delays in receiving approvals of these rate actions during COVID-19, although we did not have a

significant impact on our financial results during 2020 as a result of these delays.

We continue to provide customer service to our policyholders during this uncertain time and are available to

address questions or concerns regarding their policies. We are continually assessing our operational processes
and monitoring potential impacts to morbidity due to COVID-19.

In our U.S life insurance companies, we have complied with guidance issued by certain insurance

regulators, such as mandates that policies cannot be lapsed or cancelled if premiums are not paid or requirements
to provide extensions of grace periods during the COVID-19 pandemic. Although most of these mandates have
been lifted, we continue to monitor developments related to COVID-19 such as state directives that are issued
during this time and we will comply with any new guidance issued by our state insurance regulators. For
statutory reporting, we were not required to non-admit premium receivables over 90 days if we were in a no lapse
mandate through December 30, 2020. Going forward, we may also seek permitted practices during this time to
help our capital position and our ongoing RBC requirements if COVID-19 continues for an extended period of
time. We have also contacted our reinsurance counterparties to inform them of the actions we have taken in
response to state bulletins on extension of grace periods and prohibition of lapsation as well as offering flexibility
to our policyholders who are on claim.

We have not experienced a significant impact on our premiums in our U.S. life insurance businesses while

there have been premium deferrals/grace period mandates in place in certain states. Given our current ratings, our
sales volume is low in our long-term care insurance products. In 2016, we suspended sales of our traditional life
insurance and fixed annuity products. For traditional life insurance policies, where regular premiums are
typically required, and universal life insurance contracts, where premiums are typically flexible but frequently
require minimum premiums to be paid, subject to state mandates for additional grace periods during COVID-19,
policies follow normal lapse or nonforfeiture options, if the policyholders decided not to pay their premiums.
There is no requirement to pay premiums in our fixed annuity contracts and benefits would adjust contractually
based on actual premiums paid in these products.

We actively monitor cash and highly liquid investment positions in each of our U.S. life insurance

companies against operating targets that are designed to ensure that we will have the cash necessary to meet our
obligations as they come due. The targets are set based on stress scenarios that have the effect of increasing our
expected cash outflows and decreasing our expected cash inflows. Liquidity risk is assessed by comparing
subsidiary cash to potential cash needs under a stressed liquidity scenario. The stressed scenario reflects potential
policyholder surrenders, variability of normal operating cash flow and potential increase in collateral
requirements under our cleared derivative program.

While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on the

U.S. life insurance business will depend on the length and severity of the pandemic and shape of the economic
recovery. Further declines in interest rates as well as equity market volatility as a result of COVID-19 would
increase reserves and capital requirements in our U.S. life insurance business. For sensitivities related to interest
rates, lapses and mortality on our U.S. life insurance products, see “—Critical Accounting Estimates.” We will
continue to monitor COVID-19 impacts and evaluate all of our assumptions that may need updating as a result of
longer-term trends related to the pandemic. See “Item 1A—Risk Factors—COVID-19 could materially adversely
affect our financial condition and results of operations” for additional details.

Trends and conditions

Results of our U.S. life insurance businesses depend significantly upon the extent to which our actual future

experience is consistent with assumptions and methodologies we have used in calculating our reserves. Many
factors can affect the results of our U.S. life insurance businesses. Because these factors are not known in
advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine
with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will
continue to monitor our experience and assumptions closely and make changes to our assumptions and

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methodologies, as appropriate, for our U.S. life insurance products. Even small changes in assumptions or small
deviations of actual experience from assumptions can have, and in the past have had, material impacts on our
DAC amortization, reserve levels, results of operations and financial condition.

Our liability for policy and contract claims is reviewed quarterly and we completed a detailed review of our
claim reserve assumptions and methodologies for our long-term care insurance business in the fourth quarter of
2020 as discussed further below. In the fourth quarter of 2020, we performed assumption reviews for our U.S.
life insurance products, including our long-term care and life insurance products, and completed our loss
recognition testing as discussed below. Our review of assumptions, as part of our testing in the fourth quarter of
2020, included expected claim incidence and terminations, benefit utilization, mortality, persistency, interest
rates and in-force rate actions, among other assumptions. In addition, we performed cash flow testing separately
for each of our U.S. life insurance companies on a statutory accounting basis in the fourth quarter of 2020.

Our U.S. life insurance subsidiaries are subject to the NAIC’s RBC standards and other minimum statutory

capital and surplus requirements. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries
was approximately 229% and 213% as of December 31, 2020 and 2019, respectively. The increase was largely
driven by statutory income as a result of benefits in our long-term care insurance business from higher
terminations and lower claim incidence, partially offset by increases in statutory reserves related to Actuarial
Guideline 38 and cash flow testing in GLICNY.

The RBC of each of our U.S. life insurance subsidiaries exceeded the level of RBC that would require any

of them to take or become subject to any corrective action in their respective domiciliary state as of
December 31, 2020. However, the RBC ratio of our U.S. life insurance subsidiaries has been negatively impacted
over the past few years as a result of statutory losses driven by the declining performance of the business and
increases in our statutory reserves, including results of Actuarial Guideline 38, cash flow testing and assumption
reviews particularly in our long-term care insurance business. In the first quarter of 2020, low interest rates and
equity market declines negatively impacted our variable annuity products resulting in material statutory reserve
increases. However, in the remaining quarters of 2020, elevated mortality in our long-term care insurance
business and equity market recovery impacts on our variable annuity products favorably impacted our statutory
capital and surplus. However, low interest rates increased our statutory reserves under Actuarial Guideline 38
which offset these favorable impacts. Additionally, we increased reserves related to cash flow testing in GLICNY
as a result of reflecting New York specific assumptions, which was only partially offset by higher anticipated
future rate increases. Any future statutory losses would decrease the RBC ratio of our U.S. life insurance
subsidiaries. We continue to face challenges in our principal life insurance subsidiaries, particularly those
subsidiaries that rely heavily on in-force rate actions as a source of earnings and capital. We may see variability
in statutory results and a further decline in the RBC ratios of these subsidiaries given the time lag between the
approval of in-force rate actions versus when the benefits from the in-force rate actions (including increased
premiums and associated benefit reductions) are fully realized in our financial results. Further declines in the
RBC ratio of our life insurance subsidiaries could result in heightened supervision and regulatory action.

Long-term care insurance

The long-term profitability of our long-term care insurance business depends upon how our actual
experience compares with our valuation assumptions, including but not limited to morbidity, mortality and
persistency. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past
has had, and may in the future have, a material adverse effect on our results of operations, financial condition and
business. Results of our long-term care insurance business are also influenced by our ability to achieve in-force
rate actions, improve investment yields and manage expenses and reinsurance, among other factors. Changes in
regulations or government programs, including long-term care insurance rate action legislation, regulation and/or
practices, could also impact our long-term care insurance business either positively or negatively.

In the fourth quarter of 2020, we completed loss recognition and cash flow testing and reviewed key

assumptions for future policy benefits, or active life reserves, for our long-term care insurance business,
including, expected claim incidence and terminations, benefit utilization, interest rates and in-force rate actions,

among other assumptions. As of December 31, 2020, our loss recognition testing margin for our long-term care

insurance business, excluding the acquired block, was positive and slightly higher than the 2019 level. We

continue to test our acquired block of long-term care insurance separately. In 2020, our loss recognition testing

margin for the acquired block was positive but slightly lower than the 2019 level. Our long-term care insurance

margins in 2020 included an unfavorable update for recent benefit utilization experience, among other

assumption updates, which drove updates to our in-force rate action plan. We will continue to regularly review

our methodologies and assumptions in light of emerging experience and may be required to make adjustments to

our long-term care insurance reserves in the future, which could also impact our loss recognition and cash flow

testing results. For a discussion of additional information related to margins for our long-term care insurance

business, see “ —Critical Accounting Estimates—Future policy benefits.”

Our assumptions are sensitive to slight variability in actual experience and small changes in assumptions

could result in decreases in the margin of our long-term care insurance blocks to at/or below zero in future years.

To the extent, based on reviews, the margin of our long-term care insurance block, excluding the acquired block,

is negative, we would be required to recognize a loss, by amortizing more DAC and/or establishing additional

benefit reserves. For our acquired block of long-term care insurance, the impacts of adverse changes in

assumptions would also be reflected as a loss if our margin for this block is reduced below zero by establishing

additional benefit reserves. A significant decrease in our loss recognition testing margin of our long-term care

insurance blocks could have a material adverse effect on our business, results of operations and financial

condition.

During the fourth quarter of 2020, we reviewed our assumptions and methodologies relating to our claim

reserves of our long-term care insurance business and recorded a modest net benefit primarily related to

assumption updates to claim incidence and claim and policy terminations, based on our current long-term view of

these assumptions. The 2020 impacts from COVID-19 are not currently expected to be indicative of future trends

or loss performance. The prior year claim reserve review, which we completed during the third quarter of 2019,

did not have a significant impact on claim reserve levels. Based on that review, we did not make any significant

changes to the assumptions or methodologies, other than routine updates to investment returns and benefit

utilization rates as we typically do each quarter. For a discussion of additional information related to changes to

our assumptions and methodologies to our long-term care insurance claim reserves, see “—Critical Accounting

Estimates—Liability for policy and contract claims.”

As a result of the review of our claim reserves completed in prior years, we have been establishing higher

claim reserves on new claims, which has negatively impacted earnings and we expect this to continue going

forward. Also, average claim reserves for new claims are trending higher over time as the mix of claims

continues to evolve, with an increasing number of policies with higher daily benefit amounts and higher inflation

factors going on claim. In addition, although new claim counts on our older long-term care insurance blocks of

business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks

of business and expect continued growth in new claims on these blocks as policyholders reach older attained ages

with higher likelihood of going on claim.

Given the ongoing challenges in our long-term care insurance business, we continue pursuing initiatives to

improve the risk and profitability profile of our business including: premium rate increases and associated benefit

reductions on our in-force policies; managing expense levels; executing investment strategies targeting higher

returns; and enhancing our financial and actuarial analytical capabilities. Executing on our multi-year long-term

care insurance in-force rate action plan with premium rate increases and associated benefit reductions on our

legacy long-term care insurance policies is critical to the business. For an update on in-force rate actions, refer to

“Significant Developments—U.S. Life Insurance.”

The approval process for in-force rate actions and the amount and timing of the premium rate increases and

associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a

rate increase can take a significant amount of time, and the approved amount may be phased in over time. After

approval, insureds are provided with written notice of the increase and increases are generally applied on the

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methodologies, as appropriate, for our U.S. life insurance products. Even small changes in assumptions or small

deviations of actual experience from assumptions can have, and in the past have had, material impacts on our

DAC amortization, reserve levels, results of operations and financial condition.

Our liability for policy and contract claims is reviewed quarterly and we completed a detailed review of our

claim reserve assumptions and methodologies for our long-term care insurance business in the fourth quarter of

2020 as discussed further below. In the fourth quarter of 2020, we performed assumption reviews for our U.S.

life insurance products, including our long-term care and life insurance products, and completed our loss

recognition testing as discussed below. Our review of assumptions, as part of our testing in the fourth quarter of

2020, included expected claim incidence and terminations, benefit utilization, mortality, persistency, interest

rates and in-force rate actions, among other assumptions. In addition, we performed cash flow testing separately

for each of our U.S. life insurance companies on a statutory accounting basis in the fourth quarter of 2020.

Our U.S. life insurance subsidiaries are subject to the NAIC’s RBC standards and other minimum statutory

capital and surplus requirements. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries

was approximately 229% and 213% as of December 31, 2020 and 2019, respectively. The increase was largely

driven by statutory income as a result of benefits in our long-term care insurance business from higher

terminations and lower claim incidence, partially offset by increases in statutory reserves related to Actuarial

Guideline 38 and cash flow testing in GLICNY.

The RBC of each of our U.S. life insurance subsidiaries exceeded the level of RBC that would require any

of them to take or become subject to any corrective action in their respective domiciliary state as of

December 31, 2020. However, the RBC ratio of our U.S. life insurance subsidiaries has been negatively impacted

over the past few years as a result of statutory losses driven by the declining performance of the business and

increases in our statutory reserves, including results of Actuarial Guideline 38, cash flow testing and assumption

reviews particularly in our long-term care insurance business. In the first quarter of 2020, low interest rates and

equity market declines negatively impacted our variable annuity products resulting in material statutory reserve

increases. However, in the remaining quarters of 2020, elevated mortality in our long-term care insurance

business and equity market recovery impacts on our variable annuity products favorably impacted our statutory

capital and surplus. However, low interest rates increased our statutory reserves under Actuarial Guideline 38

which offset these favorable impacts. Additionally, we increased reserves related to cash flow testing in GLICNY

as a result of reflecting New York specific assumptions, which was only partially offset by higher anticipated

future rate increases. Any future statutory losses would decrease the RBC ratio of our U.S. life insurance

subsidiaries. We continue to face challenges in our principal life insurance subsidiaries, particularly those

subsidiaries that rely heavily on in-force rate actions as a source of earnings and capital. We may see variability

in statutory results and a further decline in the RBC ratios of these subsidiaries given the time lag between the

approval of in-force rate actions versus when the benefits from the in-force rate actions (including increased

premiums and associated benefit reductions) are fully realized in our financial results. Further declines in the

RBC ratio of our life insurance subsidiaries could result in heightened supervision and regulatory action.

Long-term care insurance

The long-term profitability of our long-term care insurance business depends upon how our actual

experience compares with our valuation assumptions, including but not limited to morbidity, mortality and

persistency. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past

has had, and may in the future have, a material adverse effect on our results of operations, financial condition and

business. Results of our long-term care insurance business are also influenced by our ability to achieve in-force

rate actions, improve investment yields and manage expenses and reinsurance, among other factors. Changes in

regulations or government programs, including long-term care insurance rate action legislation, regulation and/or

practices, could also impact our long-term care insurance business either positively or negatively.

In the fourth quarter of 2020, we completed loss recognition and cash flow testing and reviewed key

assumptions for future policy benefits, or active life reserves, for our long-term care insurance business,

including, expected claim incidence and terminations, benefit utilization, interest rates and in-force rate actions,

among other assumptions. As of December 31, 2020, our loss recognition testing margin for our long-term care
insurance business, excluding the acquired block, was positive and slightly higher than the 2019 level. We
continue to test our acquired block of long-term care insurance separately. In 2020, our loss recognition testing
margin for the acquired block was positive but slightly lower than the 2019 level. Our long-term care insurance
margins in 2020 included an unfavorable update for recent benefit utilization experience, among other
assumption updates, which drove updates to our in-force rate action plan. We will continue to regularly review
our methodologies and assumptions in light of emerging experience and may be required to make adjustments to
our long-term care insurance reserves in the future, which could also impact our loss recognition and cash flow
testing results. For a discussion of additional information related to margins for our long-term care insurance
business, see “ —Critical Accounting Estimates—Future policy benefits.”

Our assumptions are sensitive to slight variability in actual experience and small changes in assumptions
could result in decreases in the margin of our long-term care insurance blocks to at/or below zero in future years.
To the extent, based on reviews, the margin of our long-term care insurance block, excluding the acquired block,
is negative, we would be required to recognize a loss, by amortizing more DAC and/or establishing additional
benefit reserves. For our acquired block of long-term care insurance, the impacts of adverse changes in
assumptions would also be reflected as a loss if our margin for this block is reduced below zero by establishing
additional benefit reserves. A significant decrease in our loss recognition testing margin of our long-term care
insurance blocks could have a material adverse effect on our business, results of operations and financial
condition.

During the fourth quarter of 2020, we reviewed our assumptions and methodologies relating to our claim

reserves of our long-term care insurance business and recorded a modest net benefit primarily related to
assumption updates to claim incidence and claim and policy terminations, based on our current long-term view of
these assumptions. The 2020 impacts from COVID-19 are not currently expected to be indicative of future trends
or loss performance. The prior year claim reserve review, which we completed during the third quarter of 2019,
did not have a significant impact on claim reserve levels. Based on that review, we did not make any significant
changes to the assumptions or methodologies, other than routine updates to investment returns and benefit
utilization rates as we typically do each quarter. For a discussion of additional information related to changes to
our assumptions and methodologies to our long-term care insurance claim reserves, see “—Critical Accounting
Estimates—Liability for policy and contract claims.”

As a result of the review of our claim reserves completed in prior years, we have been establishing higher

claim reserves on new claims, which has negatively impacted earnings and we expect this to continue going
forward. Also, average claim reserves for new claims are trending higher over time as the mix of claims
continues to evolve, with an increasing number of policies with higher daily benefit amounts and higher inflation
factors going on claim. In addition, although new claim counts on our older long-term care insurance blocks of
business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks
of business and expect continued growth in new claims on these blocks as policyholders reach older attained ages
with higher likelihood of going on claim.

Given the ongoing challenges in our long-term care insurance business, we continue pursuing initiatives to

improve the risk and profitability profile of our business including: premium rate increases and associated benefit
reductions on our in-force policies; managing expense levels; executing investment strategies targeting higher
returns; and enhancing our financial and actuarial analytical capabilities. Executing on our multi-year long-term
care insurance in-force rate action plan with premium rate increases and associated benefit reductions on our
legacy long-term care insurance policies is critical to the business. For an update on in-force rate actions, refer to
“Significant Developments—U.S. Life Insurance.”

The approval process for in-force rate actions and the amount and timing of the premium rate increases and

associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a
rate increase can take a significant amount of time, and the approved amount may be phased in over time. After
approval, insureds are provided with written notice of the increase and increases are generally applied on the

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insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the
implementation cycle is complete and are, therefore, expected to be realized over time.

In 2019, the NAIC established the Long-Term Care Insurance (EX) Task Force to address efforts to create a
national standard for reviewing and approving long-term care insurance rate increase requests. This task force is
charged with developing a consistent national approach for reviewing rate increase requests that results in
actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate
subsidization, among others. The task force is planning to provide a proposal to the Executive (EX) Committee
of the NAIC by the Summer 2021 National Meeting.

Life insurance

Results of our life insurance business are impacted primarily by mortality, persistency, investment yields,

expenses, reinsurance and statutory reserve requirements, among other factors. We no longer solicit sales of
traditional life insurance products; however, we continue to service our existing retained and reinsured blocks of
business.

Mortality levels may deviate each period from historical trends. Overall mortality experience was higher in
2020 compared to 2019, attributable in part to COVID-19. We have experienced higher mortality than our then-
current and priced-for assumptions in recent years for our universal life insurance blocks. We have also been
experiencing higher mortality related charges resulting from an increase in rates charged by our reinsurance
partners reflecting natural block aging and higher mortality compared to expectations.

In the fourth quarters of 2020 and 2019, we performed our annual review of life insurance assumptions and

loss recognition test. Our reviews focused on assumptions for interest rates, persistency and mortality, among
other assumptions. As part of our review in the fourth quarter of 2020, we recorded a $60 million after-tax
benefit in our term universal and universal life insurance products primarily from favorable assumption updates.
The favorable updates in our term universal life insurance product were primarily driven by a model refinement
related to persistency and grace period timing. Other assumption updates mostly focused on future cost of
insurance rates and long-term trends in mortality, persistency and interest rates. We also recorded a $50 million
after-tax charge related to universal life insurance DAC recoverability testing primarily as a result of reflecting
these updated assumptions. As part of our review in the fourth quarter of 2019, we recorded $107 million of
after-tax charges in our universal and term universal life insurance products primarily from assumption changes
related to the lower interest rate environment.

We also updated mortality assumptions for certain universal and term universal life insurance products as
well as our term life insurance products in the fourth quarters of 2020 and 2019. Our mortality experience for
older ages and late-duration premium periods and conversion products is emerging. Assumption changes in our
term life insurance products focused on mortality improvements during the post-level premium period based on
observed trends in emerging experience. This change to the mortality assumption increased the loss recognition
testing margin in our term life insurance products. We will continue to regularly review our mortality
assumptions as well as all of our other assumptions in light of emerging experience. We may be required to make
further adjustments in the future to our assumptions which could impact our universal and term universal life
insurance reserves or our loss recognition testing results of our term life insurance products. Any further
materially adverse changes to our assumptions, including mortality or interest rates, could have a materially
negative impact on our results of operations, financial condition and business. For a discussion of additional
information related to changes to our life insurance assumptions, see “—Critical Accounting Estimates.”

Compared to 1998 and prior years, we had a significant increase in term life insurance sales between 1999
and 2009, particularly in 1999 and 2000. The blocks of business issued since 2000 vary in size as compared to
the large 1999 and 2000 blocks of business. As our large 10- and 15-year level premium period term life
insurance policies written in 1999 and 2000 transitioned to their post-level guaranteed premium rate period, we
experienced lower persistency compared to our pricing and valuation assumptions which accelerated DAC
amortization in previous years. As our large 20-year level premium period business written in 1999 entered its
post-level period, we experienced higher lapses resulting in accelerated DAC amortization in 2019. This trend

continued in the first quarter of 2020 for the 1999 block, as it reached the end of its level premium period.

Additionally, we have experienced a similar trend with the 20-year level premium period business written in

2000 as it entered its post-level period during 2020 and we expect that trend to continue into 2021 albeit to a

lesser extent. If lapse experience on future 10-, 15- and 20-year level premium period blocks emerges similar to

our large 20-year level premium period business written in 1999 and 2000, we would expect volatility in DAC

amortization if persistency is lower than original assumptions, which would reduce profitability in our term life

insurance products. However, going forward, given our smaller block sizes and reinsurance agreements in place,

we would expect the impact to DAC amortization on policies entering the post-level period to be lower than what

we experienced in 2019 and 2020. We have also taken actions to mitigate potentially unfavorable impacts

through the use of reinsurance, particularly for certain term life insurance policies issued between 2001 and 2004.

Additionally, the extension of grace periods or no lapsation mandated by state regulators during COVID-19 has

impacted the timing and level of lapses for these blocks of business.

We began selling term universal life insurance in late 2009, with sales peaking in 2011 prior to

discontinuing sales of the product in 2012. We priced these products assuming high lapses upon expiration of the

level premium period and we continue to expect those higher lapses. As our 10-year level premium period term

universal life insurance policies written in 2009 and 2010 entered their post-level premium period in late 2019

and 2020, we recorded higher reserves during the premium grace period which were released when the policies

lapsed. With the model refinement implemented as part of our 2020 assumption updates, we no longer expect to

see this dynamic to the same extent when term universal life insurance blocks enter the post-level period.

Fixed annuities

Results of our fixed annuities business are affected primarily by investment performance, interest rate

levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality,

persistency and expense and commission levels. We no longer solicit sales of traditional fixed annuity products;

however, we continue to service our existing retained and reinsured blocks of business.

We monitor and change crediting rates on fixed annuities on a regular basis to maintain spreads and targeted

returns, if applicable. However, if interest rates remain at current levels or decrease, we could see declines in

spreads which impact the margins on our products, particularly our single premium immediate annuity products.

Due to the premium deficiency that existed in 2016, we have continued to monitor our single premium

immediate annuity products more frequently than annually. In 2020, the results of our loss recognition testing did

not result in a premium deficiency; therefore, our liability for future policy benefits was sufficient. However, we

did record additional charges to net income during 2019 and 2018. If investment performance deteriorates or

interest rates decrease or remain at the current levels for an extended period of time, we could incur additional

charges in the future. The impacts of future adverse changes in our assumptions could result in the establishment

of additional future policy benefit reserves and would be immediately reflected as a loss if our margin for this

block is again reduced below zero. Any favorable variation would result in additional margin and higher income

recognized over the remaining duration of the in-force block but would not have an immediate benefit to net

income. For additional information, see “—Critical Accounting Estimates—Future Policy Benefits.”

For fixed indexed annuities, equity market and interest rate performance and volatility could also result in

additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts.

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insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the

implementation cycle is complete and are, therefore, expected to be realized over time.

In 2019, the NAIC established the Long-Term Care Insurance (EX) Task Force to address efforts to create a

national standard for reviewing and approving long-term care insurance rate increase requests. This task force is

charged with developing a consistent national approach for reviewing rate increase requests that results in

actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate

subsidization, among others. The task force is planning to provide a proposal to the Executive (EX) Committee

of the NAIC by the Summer 2021 National Meeting.

Life insurance

business.

Results of our life insurance business are impacted primarily by mortality, persistency, investment yields,

expenses, reinsurance and statutory reserve requirements, among other factors. We no longer solicit sales of

traditional life insurance products; however, we continue to service our existing retained and reinsured blocks of

Mortality levels may deviate each period from historical trends. Overall mortality experience was higher in

2020 compared to 2019, attributable in part to COVID-19. We have experienced higher mortality than our then-

current and priced-for assumptions in recent years for our universal life insurance blocks. We have also been

experiencing higher mortality related charges resulting from an increase in rates charged by our reinsurance

partners reflecting natural block aging and higher mortality compared to expectations.

In the fourth quarters of 2020 and 2019, we performed our annual review of life insurance assumptions and

loss recognition test. Our reviews focused on assumptions for interest rates, persistency and mortality, among

other assumptions. As part of our review in the fourth quarter of 2020, we recorded a $60 million after-tax

benefit in our term universal and universal life insurance products primarily from favorable assumption updates.

The favorable updates in our term universal life insurance product were primarily driven by a model refinement

related to persistency and grace period timing. Other assumption updates mostly focused on future cost of

insurance rates and long-term trends in mortality, persistency and interest rates. We also recorded a $50 million

after-tax charge related to universal life insurance DAC recoverability testing primarily as a result of reflecting

these updated assumptions. As part of our review in the fourth quarter of 2019, we recorded $107 million of

after-tax charges in our universal and term universal life insurance products primarily from assumption changes

related to the lower interest rate environment.

We also updated mortality assumptions for certain universal and term universal life insurance products as

well as our term life insurance products in the fourth quarters of 2020 and 2019. Our mortality experience for

older ages and late-duration premium periods and conversion products is emerging. Assumption changes in our

term life insurance products focused on mortality improvements during the post-level premium period based on

observed trends in emerging experience. This change to the mortality assumption increased the loss recognition

testing margin in our term life insurance products. We will continue to regularly review our mortality

assumptions as well as all of our other assumptions in light of emerging experience. We may be required to make

further adjustments in the future to our assumptions which could impact our universal and term universal life

insurance reserves or our loss recognition testing results of our term life insurance products. Any further

materially adverse changes to our assumptions, including mortality or interest rates, could have a materially

negative impact on our results of operations, financial condition and business. For a discussion of additional

information related to changes to our life insurance assumptions, see “—Critical Accounting Estimates.”

Compared to 1998 and prior years, we had a significant increase in term life insurance sales between 1999

and 2009, particularly in 1999 and 2000. The blocks of business issued since 2000 vary in size as compared to

the large 1999 and 2000 blocks of business. As our large 10- and 15-year level premium period term life

insurance policies written in 1999 and 2000 transitioned to their post-level guaranteed premium rate period, we

experienced lower persistency compared to our pricing and valuation assumptions which accelerated DAC

amortization in previous years. As our large 20-year level premium period business written in 1999 entered its

post-level period, we experienced higher lapses resulting in accelerated DAC amortization in 2019. This trend

continued in the first quarter of 2020 for the 1999 block, as it reached the end of its level premium period.
Additionally, we have experienced a similar trend with the 20-year level premium period business written in
2000 as it entered its post-level period during 2020 and we expect that trend to continue into 2021 albeit to a
lesser extent. If lapse experience on future 10-, 15- and 20-year level premium period blocks emerges similar to
our large 20-year level premium period business written in 1999 and 2000, we would expect volatility in DAC
amortization if persistency is lower than original assumptions, which would reduce profitability in our term life
insurance products. However, going forward, given our smaller block sizes and reinsurance agreements in place,
we would expect the impact to DAC amortization on policies entering the post-level period to be lower than what
we experienced in 2019 and 2020. We have also taken actions to mitigate potentially unfavorable impacts
through the use of reinsurance, particularly for certain term life insurance policies issued between 2001 and 2004.
Additionally, the extension of grace periods or no lapsation mandated by state regulators during COVID-19 has
impacted the timing and level of lapses for these blocks of business.

We began selling term universal life insurance in late 2009, with sales peaking in 2011 prior to

discontinuing sales of the product in 2012. We priced these products assuming high lapses upon expiration of the
level premium period and we continue to expect those higher lapses. As our 10-year level premium period term
universal life insurance policies written in 2009 and 2010 entered their post-level premium period in late 2019
and 2020, we recorded higher reserves during the premium grace period which were released when the policies
lapsed. With the model refinement implemented as part of our 2020 assumption updates, we no longer expect to
see this dynamic to the same extent when term universal life insurance blocks enter the post-level period.

Fixed annuities

Results of our fixed annuities business are affected primarily by investment performance, interest rate

levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality,
persistency and expense and commission levels. We no longer solicit sales of traditional fixed annuity products;
however, we continue to service our existing retained and reinsured blocks of business.

We monitor and change crediting rates on fixed annuities on a regular basis to maintain spreads and targeted

returns, if applicable. However, if interest rates remain at current levels or decrease, we could see declines in
spreads which impact the margins on our products, particularly our single premium immediate annuity products.
Due to the premium deficiency that existed in 2016, we have continued to monitor our single premium
immediate annuity products more frequently than annually. In 2020, the results of our loss recognition testing did
not result in a premium deficiency; therefore, our liability for future policy benefits was sufficient. However, we
did record additional charges to net income during 2019 and 2018. If investment performance deteriorates or
interest rates decrease or remain at the current levels for an extended period of time, we could incur additional
charges in the future. The impacts of future adverse changes in our assumptions could result in the establishment
of additional future policy benefit reserves and would be immediately reflected as a loss if our margin for this
block is again reduced below zero. Any favorable variation would result in additional margin and higher income
recognized over the remaining duration of the in-force block but would not have an immediate benefit to net
income. For additional information, see “—Critical Accounting Estimates—Future Policy Benefits.”

For fixed indexed annuities, equity market and interest rate performance and volatility could also result in

additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts.

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Segment results of operations

2020 compared to 2019

The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the

periods indicated:

(Amounts in millions)

Years ended December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,858
2,878
517
595

$2,861
2,852
82
643

$2,867
2,781
29
641

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,848

6,438

6,318

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . . . . . . .
Adjustments to income (loss) from continuing operations:
Net investment (gains) losses, net (2)
. . . . . . . . . . . . . . . . . . . .
(Gains) losses on early extinguishment of debt . . . . . . . . . . . .
Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . .
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted operating income (loss) available to Genworth

4,781
383
620
418
5

6,207

641
163

478

(525)
4
1
110

4,979
419
604
372
17

6,391

47
34

13

(89)
—

3
18

5,416
461
584
257
16

6,734

(416)
(68)

(348)

(35)
—
—
7

$

(3)
26
435
(48)

410

(198)
(36)
16
46
(12)

(184)

594
129

465

(436)
4
(2)
92

— %
1%
NM (1)
(7)%

6%

(4)%
(9)%
3%
12%
(71)%

(3)%

NM (1)
NM (1)

NM (1)

NM (1)
NM (1)
(67)%
NM (1)

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . .

$

68

$ (55) $ (376)

$ 123

NM (1)

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for
DAC and other intangible amortization and certain benefit reserves of $(8) million, $(7) million and $(6)
million, respectively.

The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders for the businesses included in our U.S. Life Insurance segment for the periods indicated:

(Amounts in millions)

Adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders:

Years ended
December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 237
(247)
78

$ 57
(181)
69

$(348)
(107)
79

$180
(66)
9

NM (1)
(36)%
13%

Total adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . .

$ 68

$ (55) $(376)

$123

NM (1)

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our long-

term care insurance business increased $180 million primarily from an increase in claim terminations

driven mostly by higher mortality as well as favorable development on IBNR claims and higher

investment income in 2020. We also increased reserves by $157 million in 2020 to account for changes

to incidence and mortality experience driven by COVID-19, which we believe are temporary.

• The adjusted operating loss available to Genworth Financial Inc.’s common stockholders in our life

insurance business increased $66 million predominantly attributable to higher reserves in our 10-year

term universal life insurance block as it entered its post-level premium period during the premium

grace period, higher mortality in 2020 compared to 2019, higher lapses primarily associated with our

large 20-year term life insurance block as it entered its post-level premium period and a DAC

impairment of $50 million in 2020. The higher loss was partially offset by a favorable unlocking of

$60 million in our term universal and universal life insurance products as part of our annual review of

assumptions in the fourth quarter of 2020 compared to unfavorable unlocking of $107 million in 2019

(see “—Critical Accounting Estimates” for additional information).

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our fixed

annuities business increased $9 million predominantly from $39 million of unfavorable charges related

to loss recognition testing in 2019 that did not recur and lower interest credited due to block runoff,

partially offset by lower net spreads in 2020.

Revenues

Premiums

• Our long-term care insurance business increased $37 million largely from $114 million of increased

premiums in 2020 from in-force rate actions approved and implemented, partially offset by policy

terminations and policies entering paid-up status in 2020.

• Our life insurance business decreased $40 million mainly attributable to the continued runoff of our

term and whole life insurance products in 2020.

Net investment income

2020.

• Our long-term care insurance business increased $106 million largely from higher average invested

assets and higher income from limited partnerships, bond calls and mortgage loan prepayments in

• Our life insurance business decreased $5 million principally related to lower average invested assets,

partially offset by higher income from bond calls and favorable prepayment speed adjustments on

mortgage-backed securities in 2020.

• Our fixed annuities business decreased $75 million largely attributable to lower average invested assets

due to block runoff and lower income from limited partnerships, partially offset by higher income from

bond calls and mortgage loan prepayments in 2020.

Net investment gains (losses)

• Net investment gains in our long-term care insurance business increased $427 million predominantly

related to net gains from the sale of U.S. government securities due to portfolio rebalancing and asset

142

143

Segment results of operations

2020 compared to 2019

The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our long-
term care insurance business increased $180 million primarily from an increase in claim terminations
driven mostly by higher mortality as well as favorable development on IBNR claims and higher
investment income in 2020. We also increased reserves by $157 million in 2020 to account for changes
to incidence and mortality experience driven by COVID-19, which we believe are temporary.

• The adjusted operating loss available to Genworth Financial Inc.’s common stockholders in our life

insurance business increased $66 million predominantly attributable to higher reserves in our 10-year
term universal life insurance block as it entered its post-level premium period during the premium
grace period, higher mortality in 2020 compared to 2019, higher lapses primarily associated with our
large 20-year term life insurance block as it entered its post-level premium period and a DAC
impairment of $50 million in 2020. The higher loss was partially offset by a favorable unlocking of
$60 million in our term universal and universal life insurance products as part of our annual review of
assumptions in the fourth quarter of 2020 compared to unfavorable unlocking of $107 million in 2019
(see “—Critical Accounting Estimates” for additional information).

• Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our fixed

annuities business increased $9 million predominantly from $39 million of unfavorable charges related
to loss recognition testing in 2019 that did not recur and lower interest credited due to block runoff,
partially offset by lower net spreads in 2020.

Revenues

Premiums

• Our long-term care insurance business increased $37 million largely from $114 million of increased
premiums in 2020 from in-force rate actions approved and implemented, partially offset by policy
terminations and policies entering paid-up status in 2020.

• Our life insurance business decreased $40 million mainly attributable to the continued runoff of our

term and whole life insurance products in 2020.

Net investment income

• Our long-term care insurance business increased $106 million largely from higher average invested
assets and higher income from limited partnerships, bond calls and mortgage loan prepayments in
2020.

• Our life insurance business decreased $5 million principally related to lower average invested assets,
partially offset by higher income from bond calls and favorable prepayment speed adjustments on
mortgage-backed securities in 2020.

• Our fixed annuities business decreased $75 million largely attributable to lower average invested assets
due to block runoff and lower income from limited partnerships, partially offset by higher income from
bond calls and mortgage loan prepayments in 2020.

Net investment gains (losses)

• Net investment gains in our long-term care insurance business increased $427 million predominantly
related to net gains from the sale of U.S. government securities due to portfolio rebalancing and asset

142

143

periods indicated:

(Amounts in millions)

Revenues:

Years ended December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

(3)

26

435

(48)

410

(198)

(36)

16

46

(12)

(184)

594

129

465

4

(2)

92

— %

1%

NM (1)

(7)%

6%

(4)%

(9)%

3%

12%

(71)%

(3)%

NM (1)

NM (1)

NM (1)

NM (1)

NM (1)

(67)%

NM (1)

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,858

2,878

$2,861

2,852

$2,867

2,781

$

517

595

82

643

29

641

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,848

6,438

6,318

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . .

4,781

4,979

5,416

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . .

6,207

6,391

6,734

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . . . . . . .

Adjustments to income (loss) from continuing operations:

383

620

418

5

641

163

478

4

1

419

604

372

17

47

34

13

(89)

—

3

18

461

584

257

16

(416)

(68)

(348)

—

—

7

Net investment (gains) losses, net (2)

. . . . . . . . . . . . . . . . . . . .

(525)

(35)

(436)

(Gains) losses on early extinguishment of debt . . . . . . . . . . . .

Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . .

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110

Adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . .

$

68

$ (55) $ (376)

$ 123

NM (1)

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

(2)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for

DAC and other intangible amortization and certain benefit reserves of $(8) million, $(7) million and $(6)

million, respectively.

The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s

common stockholders for the businesses included in our U.S. Life Insurance segment for the periods indicated:

Years ended

December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

(Amounts in millions)

Adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders:

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 237

$ 57

$(348)

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(247)

(181)

(107)

Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

69

79

$180

(66)

9

NM (1)

(36)%

13%

Total adjusted operating income (loss) available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . .

$ 68

$ (55) $(376)

$123

NM (1)

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

exposure management as a result of the prolonged low interest rate environment and higher unrealized
gains from changes in the fair value of equity securities in 2020.

• Net investment gains in our life insurance business increased $9 million predominantly from higher net

gains from the sale of investment securities in 2020.

Policy fees and other income. The decrease was attributable to our life insurance business primarily driven
by a $21 million favorable correction related to ceded premiums on universal life insurance policies in 2019 that
did not recur and an unfavorable unlocking of $6 million in our universal and term universal life insurance
products as part of our annual review of assumptions in the fourth quarter of 2020 compared to a favorable
unlocking of $10 million in 2019. The decrease was also attributable to a decline in our universal and term
universal life insurance in-force and higher ceded reinsurance costs in 2020.

Benefits and expenses

Benefits and other changes in policy reserves

• Our long-term care insurance business decreased $96 million primarily due to an increase in claim

income in 2020.

terminations driven mostly by higher mortality and favorable development on IBNR claims. Given our
assumption that COVID-19 has temporarily decreased the number of new claims submitted, IBNR
reserves were strengthened by $108 million, partially offsetting the favorable development on IBNR
claims. In addition, we increased claim reserves by $91 million reflecting our assumption that
COVID-19 accelerated our mortality experience on the most vulnerable claimants, leaving the
remaining claim population less likely to terminate compared to the pre-pandemic average population.
These decreases were also partially offset by aging of the in-force block, a less favorable impact of
$107 million from reduced benefits in 2020 related to in-force rate actions approved and implemented
and higher incremental reserves of $89 million recorded in connection with an accrual for profits
followed by losses. The year ended December 31, 2020 also included a $17 million net favorable
impact from the completion of our annual review of assumptions and methodologies.

• Our life insurance business decreased $58 million primarily attributable to a favorable unlocking of

$124 million in our term universal and universal life insurance products as part of our annual review of
assumptions in the fourth quarter of 2020 compared to an unfavorable unlocking of $82 million in 2019
(see “—Critical Accounting Estimates—Policyholder account balances” for additional information).
This decrease was partially offset by higher reserves in our 10-year term universal life insurance block
as it entered its post-level premium period during the premium grace period and from higher mortality
in 2020 compared to 2019 attributable in part to COVID-19.

• Our fixed annuities business decreased $44 million principally from $39 million of unfavorable

charges in 2019 that did not recur related to loss recognition testing and from lower interest credited
due to block runoff, partially offset by unfavorable market impacts, including low interest rates.

Interest credited. The decrease in interest credited was primarily related to our fixed annuities business

largely driven by a decline in the average account value in 2020.

Acquisition and operating expenses, net of deferrals. The increase was predominantly related to our long-
term care insurance business principally from higher commissions and premium taxes in 2020 associated with
our in-force rate action plan.

Amortization of deferred acquisition costs and intangibles

• Our long-term care insurance business decreased $10 million primarily related to higher persistency on

policies that are not on active claim.

• Our life insurance business increased $68 million principally from a DAC impairment of $63 million,

higher lapses primarily associated with our large 20-year term life insurance block as it entered its post-

level premium period and higher reinsurance rates in 2020. These increases were partially offset by a

less unfavorable unlocking of $21 million in our universal and term universal life insurance products as

part of our annual review of assumptions in the fourth quarter of 2020 compared to 2019.

• Our fixed annuities business decreased $12 million principally from lower account values due to block

runoff in 2020.

Interest expense. The decrease in interest expense was due to our life insurance business principally related

to the early redemption of non-recourse funding obligations, partially offset by the write-off of $4 million in

deferred borrowing costs in 2020.

Provision (benefit) for income taxes. The effective tax rate decreased to 25.5% for the year ended

December 31, 2020 from 72.1% for the year ended December 31, 2019. The decrease in the effective tax rate is

primarily attributable to gains on forward starting swaps settled prior to the enactment of the TCJA which will

continue to be tax effected at 35% as they are amortized into net investment income in relation to higher pre-tax

U.S. Life Insurance selected operating performance measures

Long-term care insurance

The following table sets forth selected operating performance measures regarding our individual and group

long-term care insurance products for the periods indicated:

Years ended December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

(Amounts in millions)

Net earned premiums:

Individual long-term care insurance . . . . . . . . . . . . . . .

$2,497

$2,464

$2,447

Group long-term care insurance . . . . . . . . . . . . . . . . . .

123

119

114

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,620

$2,583

$2,561

$33

4

$37

1%

3%

1%

Loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71%

77%

95%

(6)%

The loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss

adjustment expenses to net earned premiums.

2020 compared to 2019

2020.

Net earned premiums increased in 2020 largely from $114 million of increased premiums from in-force rate

actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in

The loss ratio decreased in 2020 largely related to the increase in premiums and lower benefits and other

changes in reserves as discussed above.

144

145

exposure management as a result of the prolonged low interest rate environment and higher unrealized

gains from changes in the fair value of equity securities in 2020.

• Net investment gains in our life insurance business increased $9 million predominantly from higher net

gains from the sale of investment securities in 2020.

Policy fees and other income. The decrease was attributable to our life insurance business primarily driven

by a $21 million favorable correction related to ceded premiums on universal life insurance policies in 2019 that

did not recur and an unfavorable unlocking of $6 million in our universal and term universal life insurance

products as part of our annual review of assumptions in the fourth quarter of 2020 compared to a favorable

unlocking of $10 million in 2019. The decrease was also attributable to a decline in our universal and term

universal life insurance in-force and higher ceded reinsurance costs in 2020.

Benefits and expenses

Benefits and other changes in policy reserves

• Our long-term care insurance business decreased $96 million primarily due to an increase in claim

terminations driven mostly by higher mortality and favorable development on IBNR claims. Given our

assumption that COVID-19 has temporarily decreased the number of new claims submitted, IBNR

reserves were strengthened by $108 million, partially offsetting the favorable development on IBNR

claims. In addition, we increased claim reserves by $91 million reflecting our assumption that

COVID-19 accelerated our mortality experience on the most vulnerable claimants, leaving the

remaining claim population less likely to terminate compared to the pre-pandemic average population.

These decreases were also partially offset by aging of the in-force block, a less favorable impact of

$107 million from reduced benefits in 2020 related to in-force rate actions approved and implemented

and higher incremental reserves of $89 million recorded in connection with an accrual for profits

followed by losses. The year ended December 31, 2020 also included a $17 million net favorable

impact from the completion of our annual review of assumptions and methodologies.

• Our life insurance business decreased $58 million primarily attributable to a favorable unlocking of

$124 million in our term universal and universal life insurance products as part of our annual review of

assumptions in the fourth quarter of 2020 compared to an unfavorable unlocking of $82 million in 2019

(see “—Critical Accounting Estimates—Policyholder account balances” for additional information).

This decrease was partially offset by higher reserves in our 10-year term universal life insurance block

as it entered its post-level premium period during the premium grace period and from higher mortality

in 2020 compared to 2019 attributable in part to COVID-19.

• Our fixed annuities business decreased $44 million principally from $39 million of unfavorable

charges in 2019 that did not recur related to loss recognition testing and from lower interest credited

due to block runoff, partially offset by unfavorable market impacts, including low interest rates.

Interest credited. The decrease in interest credited was primarily related to our fixed annuities business

largely driven by a decline in the average account value in 2020.

Acquisition and operating expenses, net of deferrals. The increase was predominantly related to our long-

term care insurance business principally from higher commissions and premium taxes in 2020 associated with

our in-force rate action plan.

Amortization of deferred acquisition costs and intangibles

• Our long-term care insurance business decreased $10 million primarily related to higher persistency on

policies that are not on active claim.

• Our life insurance business increased $68 million principally from a DAC impairment of $63 million,

higher lapses primarily associated with our large 20-year term life insurance block as it entered its post-
level premium period and higher reinsurance rates in 2020. These increases were partially offset by a
less unfavorable unlocking of $21 million in our universal and term universal life insurance products as
part of our annual review of assumptions in the fourth quarter of 2020 compared to 2019.

• Our fixed annuities business decreased $12 million principally from lower account values due to block

runoff in 2020.

Interest expense. The decrease in interest expense was due to our life insurance business principally related

to the early redemption of non-recourse funding obligations, partially offset by the write-off of $4 million in
deferred borrowing costs in 2020.

Provision (benefit) for income taxes. The effective tax rate decreased to 25.5% for the year ended

December 31, 2020 from 72.1% for the year ended December 31, 2019. The decrease in the effective tax rate is
primarily attributable to gains on forward starting swaps settled prior to the enactment of the TCJA which will
continue to be tax effected at 35% as they are amortized into net investment income in relation to higher pre-tax
income in 2020.

U.S. Life Insurance selected operating performance measures

Long-term care insurance

The following table sets forth selected operating performance measures regarding our individual and group

long-term care insurance products for the periods indicated:

(Amounts in millions)

Net earned premiums:

Years ended December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Individual long-term care insurance . . . . . . . . . . . . . . .
Group long-term care insurance . . . . . . . . . . . . . . . . . .

$2,497
123

$2,464
119

$2,447
114

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,620

$2,583

$2,561

$33
4

$37

1%
3%

1%

Loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71%

77%

95%

(6)%

The loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss

adjustment expenses to net earned premiums.

2020 compared to 2019

Net earned premiums increased in 2020 largely from $114 million of increased premiums from in-force rate
actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in
2020.

The loss ratio decreased in 2020 largely related to the increase in premiums and lower benefits and other

changes in reserves as discussed above.

144

145

Life insurance

The following table sets forth selected operating performance measures regarding our life insurance

The following table sets forth selected operating performance measures regarding our fixed annuities as of

business as of or for the dates indicated:

(Amounts in millions)

Term and whole life insurance

As of or for years ended
December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Net earned premiums . . . . . . . . . . . . . . . . . . . . . .
Life insurance in-force, net of reinsurance . . . . .
Life insurance in-force before reinsurance . . . . .

$

238
59,919
362,082

$

278
81,644
399,887

$

306
97,542
434,563

$

(40)
(21,725)
(37,805)

Term universal life insurance

Net deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance in-force, net of reinsurance . . . . .
Life insurance in-force before reinsurance . . . . .

$

217
107,048
107,774

$

228
112,720
113,487

$

235
115,608
116,407

Universal life insurance

Net deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance in-force, net of reinsurance . . . . .
Life insurance in-force before reinsurance . . . . .

$

269
32,501
36,839

$

360
33,917
38,566

$

510
35,299
40,188

$

$

(11)
(5,672)
(5,713)

(91)
(1,416)
(1,727)

Total life insurance

Net earned premiums and deposits . . . . . . . . . . .
Life insurance in-force, net of reinsurance . . . . .
Life insurance in-force before reinsurance . . . . .

$

724
199,468
506,695

$

866
228,281
551,940

$

1,051
248,449
591,158

$

(142)
(28,813)
(45,245)

(14)%
(27)%
(9)%

(5)%
(5)%
(5)%

(25)%
(4)%
(4)%

(16)%
(13)%
(8)%

We no longer solicit sales of our traditional life insurance products; however, we continue to service our

existing blocks of business.

2020 compared to 2019

Term and whole life insurance

Net earned premiums decreased mainly attributable to the continued runoff of our term life insurance
products in 2020. Life insurance in-force also decreased as a result of the continued runoff of our term life
insurance products in 2020, including higher lapses primarily associated with a large 20-year term life insurance
block as it entered its post-level premium period.

Universal life insurance

Net deposits decreased during the year ended December 31, 2020 primarily attributable to $50 million of
funding agreements issued with the Federal Home Loan Bank (“FHLB”) of Atlanta in 2019 that did not recur,
lower renewals in 2020 and from continued runoff of our in-force block.

Fixed annuities

or for the dates indicated:

(Amounts in millions)

As of or for years ended

December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Account value, beginning of period . . . . . . . . . . . . . . . . . .

$13,023

$14,348

$16,401

$(1,325)

Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80

85

87

Surrenders, benefits and product charges . . . . . . . . . .

(1,886)

(2,137)

(2,318)

Net flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,806)

(2,052)

(2,231)

Interest credited and investment performance . . . . . .

Effect of accumulated net unrealized investment

gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

405

193

486

241

429

(251)

(5)

251

246

(81)

(48)

Account value, end of period . . . . . . . . . . . . . . . . . . . . . . .

$11,815

$13,023

$14,348

$(1,208)

(9)%

(6)%

12%

12%

(17)%

(20)%

(9)%

We no longer solicit sales of our traditional fixed annuity products; however, we continue to service our

Account value as of December 31, 2020 decreased compared to December 31, 2019 as surrenders, benefits

and product charges exceeded favorable market performance and interest credited.

existing block of business.

2020 compared to 2019

Runoff segment

COVID-19

variable annuity products.

The most significant impacts from COVID-19 in our Runoff segment in 2020 were related to the current

low interest rate environment and volatile equity markets, which have adversely impacted earnings in our

Although certain states had mandates in place that policies cannot be lapsed and a few still require grace

period extensions, we have not experienced a significant impact on our Runoff segment. Our variable annuity,

variable life insurance and corporate-owned life insurance products have not been actively sold since 2011. There

is no requirement to pay premiums in the majority of our variable annuity contracts and benefits would adjust

contractually based on actual premiums paid in these products.

While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on our

Runoff segment will depend on the length and severity of the pandemic and shape of the economic recovery. We

could see additional losses and declines in statutory risk-based capital driven by increases to the required capital

supporting our variable annuity products, as a result of the decline in equity markets and low interest rates. For a

further discussion of the impact of interest rates, see “Item 7A.—Quantitative and Qualitative Disclosures About

Market Risk.”

Trends and conditions

Results of our Runoff segment are affected primarily by investment performance, interest rate levels, net

interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results

of our Runoff segment can significantly impact our regulatory capital requirements, distributable earnings and

liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate

the impacts. In addition, we may consider reinsurance opportunities to further mitigate volatility in results and

manage capital in the future.

146

147

Life insurance

business as of or for the dates indicated:

(Amounts in millions)

Term and whole life insurance

As of or for years ended

December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Net earned premiums . . . . . . . . . . . . . . . . . . . . . .

$

238

$

278

$

306

$

(40)

Life insurance in-force, net of reinsurance . . . . .

Life insurance in-force before reinsurance . . . . .

59,919

362,082

81,644

399,887

97,542

434,563

(21,725)

(37,805)

Term universal life insurance

Net deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

217

$

228

$

235

$

(11)

Life insurance in-force, net of reinsurance . . . . .

Life insurance in-force before reinsurance . . . . .

107,048

107,774

112,720

113,487

115,608

116,407

(5,672)

(5,713)

Universal life insurance

Total life insurance

Net deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

269

$

360

$

510

$

(91)

Life insurance in-force, net of reinsurance . . . . .

Life insurance in-force before reinsurance . . . . .

32,501

36,839

33,917

38,566

35,299

40,188

(1,416)

(1,727)

Net earned premiums and deposits . . . . . . . . . . .

$

724

$

866

$

1,051

$

(142)

Life insurance in-force, net of reinsurance . . . . .

Life insurance in-force before reinsurance . . . . .

199,468

506,695

228,281

551,940

248,449

591,158

(28,813)

(45,245)

(14)%

(27)%

(9)%

(5)%

(5)%

(5)%

(25)%

(4)%

(4)%

(16)%

(13)%

(8)%

We no longer solicit sales of our traditional life insurance products; however, we continue to service our

existing blocks of business.

2020 compared to 2019

Term and whole life insurance

Net earned premiums decreased mainly attributable to the continued runoff of our term life insurance

products in 2020. Life insurance in-force also decreased as a result of the continued runoff of our term life

insurance products in 2020, including higher lapses primarily associated with a large 20-year term life insurance

block as it entered its post-level premium period.

Universal life insurance

Net deposits decreased during the year ended December 31, 2020 primarily attributable to $50 million of

funding agreements issued with the Federal Home Loan Bank (“FHLB”) of Atlanta in 2019 that did not recur,

lower renewals in 2020 and from continued runoff of our in-force block.

The following table sets forth selected operating performance measures regarding our life insurance

The following table sets forth selected operating performance measures regarding our fixed annuities as of

Fixed annuities

or for the dates indicated:

(Amounts in millions)

As of or for years ended
December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Account value, beginning of period . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surrenders, benefits and product charges . . . . . . . . . .

$13,023
80
(1,886)

$14,348
85
(2,137)

$16,401
87
(2,318)

$(1,325)
(5)
251

Net flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest credited and investment performance . . . . . .
Effect of accumulated net unrealized investment

(1,806)
405

(2,052)
486

(2,231)
429

gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

193

241

(251)

246
(81)

(48)

Account value, end of period . . . . . . . . . . . . . . . . . . . . . . .

$11,815

$13,023

$14,348

$(1,208)

(9)%
(6)%
12%

12%
(17)%

(20)%

(9)%

We no longer solicit sales of our traditional fixed annuity products; however, we continue to service our

existing block of business.

2020 compared to 2019

Account value as of December 31, 2020 decreased compared to December 31, 2019 as surrenders, benefits

and product charges exceeded favorable market performance and interest credited.

Runoff segment

COVID-19

The most significant impacts from COVID-19 in our Runoff segment in 2020 were related to the current

low interest rate environment and volatile equity markets, which have adversely impacted earnings in our
variable annuity products.

Although certain states had mandates in place that policies cannot be lapsed and a few still require grace
period extensions, we have not experienced a significant impact on our Runoff segment. Our variable annuity,
variable life insurance and corporate-owned life insurance products have not been actively sold since 2011. There
is no requirement to pay premiums in the majority of our variable annuity contracts and benefits would adjust
contractually based on actual premiums paid in these products.

While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on our
Runoff segment will depend on the length and severity of the pandemic and shape of the economic recovery. We
could see additional losses and declines in statutory risk-based capital driven by increases to the required capital
supporting our variable annuity products, as a result of the decline in equity markets and low interest rates. For a
further discussion of the impact of interest rates, see “Item 7A.—Quantitative and Qualitative Disclosures About
Market Risk.”

Trends and conditions

Results of our Runoff segment are affected primarily by investment performance, interest rate levels, net
interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results
of our Runoff segment can significantly impact our regulatory capital requirements, distributable earnings and
liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate
the impacts. In addition, we may consider reinsurance opportunities to further mitigate volatility in results and
manage capital in the future.

146

147

Equity market volatility and interest rate movements have caused fluctuations in the results of our variable
annuity products and regulatory capital requirements. In the future, equity and interest rate market performance
and volatility could result in additional gains or losses in these products although associated hedging activities
are expected to partially mitigate these impacts.

Segment results of operations

The following table sets forth the results of operations relating to our Runoff segment for the periods

indicated:

(Amounts in millions)

Years ended December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

Revenues:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$210
(26)
130

$187
(25)
140

$174
(33)
153

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

314

302

294

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to income from continuing operations:
. . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses, net (1)
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted operating income available to Genworth Financial,

48
166
48
23

285

29
4

25

27
158
52
18

255

47
8

39

39
150
57
33

279

15
2

13

23
(5)

21
(4)

27
(5)

$ 23
(1)
(10)

12

21
8
(4)
5

30

(18)
(4)

(14)

2
(1)

12%
(4)%
(7)%

4%

78%
5%
(8)%
28%

12%

(38)%
(50)%

(36)%

10%
(25)%

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43

$ 56

$ 35

$(13)

(23)%

(1)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for
DAC and other intangible amortization and certain benefit reserves of $(3) million, $(4) million and $(6)
million, respectively.

2020 compared to 2019

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased

predominantly due to less favorable equity market performance, an unfavorable assumption update of $5 million
and a decline in interest rates, partially offset by higher net spreads in 2020.

Revenues

Net investment income increased primarily driven by higher policy loan income in our corporate-owned life

insurance products and higher average invested assets in the variable annuity products in 2020.

Policy fees and other income decreased principally from lower fee income driven mostly by a decline in the

average account values in our variable annuity products in 2020.

Benefits and expenses

Benefits and other changes in policy reserves increased primarily attributable to higher GMDB reserves in

our variable annuity products due to less favorable equity market performance, an unfavorable assumption

update of $7 million and higher surrenders in 2020.

Interest credited increased largely related to higher account values in our corporate-owned life insurance

products in 2020.

Amortization of deferred acquisition costs and intangibles increased mainly related to higher DAC

amortization in our variable annuity products principally from less favorable equity market performance in 2020.

Provision for income taxes. The effective tax rate decreased to 14.5% for the year ended December 31, 2020

from 17.1% for the year ended December 31, 2019. The decrease is primarily attributable to tax benefits from tax

favored items in relation to lower pre-tax income in 2020.

Runoff selected operating performance measures

Variable annuity and variable life insurance products

The following table sets forth selected operating performance measures regarding our variable annuity and

variable life insurance products as of or for the dates indicated:

As of or for the years ended

December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

(Amounts in millions)

Account value, beginning of period . . . . . . . . . . . . . . . . . . . .

$5,042

$4,918

$5,884

$ 124

Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Surrenders, benefits and product charges . . . . . . . . . . . .

Net flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest credited and investment performance . . . . . . . .

20

(559)

(539)

498

25

(640)

(615)

739

26

(764)

(738)

(228)

Account value, end of period . . . . . . . . . . . . . . . . . . . . . . . . .

$5,001

$5,042

$4,918

(5)

81

76

(241)

$ (41)

3%

(20)%

13%

12%

(33)%

(1)%

We no longer solicit sales of our variable annuity or variable life insurance products; however, we continue

to service our existing blocks of business and accept additional deposits on existing contracts and policies.

Account value as of December 31, 2020 decreased compared to December 31, 2019 primarily related to

surrenders outpacing favorable equity market performance in 2020. In addition, average account value was lower

in 2020 compared to 2019, which decreased fee income in 2020 compared to 2019.

The following table presents the account value of our funding agreements as of or for the dates indicated:

As of or for the years

ended December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Account value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . .

$ 253

$ 381

$260

$(128)

Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Surrenders and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150 —

(106)

Net flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44

3

(136)

(136)

8

200

(85)

115

6

150

30

180

(5)

Account value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 300

$ 253

$381

$ 47

(34)%

NM(1)

22%

132%

(63)%

19%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

2020 compared to 2019

Funding agreements

(Amounts in millions)

148

149

Segment results of operations

indicated:

(Amounts in millions)

Revenues:

Equity market volatility and interest rate movements have caused fluctuations in the results of our variable

annuity products and regulatory capital requirements. In the future, equity and interest rate market performance

and volatility could result in additional gains or losses in these products although associated hedging activities

are expected to partially mitigate these impacts.

The following table sets forth the results of operations relating to our Runoff segment for the periods

Years ended December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$210

$187

$174

$ 23

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(26)

130

314

(25)

140

302

(33)

153

294

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . .

Adjustment to income from continuing operations:

48

166

48

23

285

29

4

25

27

158

52

18

255

47

8

39

39

150

57

33

279

15

2

13

Net investment (gains) losses, net (1)

. . . . . . . . . . . . . . . . . . . . . .

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

(5)

21

(4)

27

(5)

(1)

(10)

12

21

8

(4)

5

30

(18)

(4)

(14)

2

(1)

12%

(4)%

(7)%

4%

78%

5%

(8)%

28%

12%

(38)%

(50)%

(36)%

10%

(25)%

Adjusted operating income available to Genworth Financial,

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43

$ 56

$ 35

$(13)

(23)%

(1)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for

DAC and other intangible amortization and certain benefit reserves of $(3) million, $(4) million and $(6)

million, respectively.

2020 compared to 2019

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased

predominantly due to less favorable equity market performance, an unfavorable assumption update of $5 million

and a decline in interest rates, partially offset by higher net spreads in 2020.

Revenues

Net investment income increased primarily driven by higher policy loan income in our corporate-owned life

insurance products and higher average invested assets in the variable annuity products in 2020.

Policy fees and other income decreased principally from lower fee income driven mostly by a decline in the

average account values in our variable annuity products in 2020.

Benefits and expenses

Benefits and other changes in policy reserves increased primarily attributable to higher GMDB reserves in

our variable annuity products due to less favorable equity market performance, an unfavorable assumption
update of $7 million and higher surrenders in 2020.

Interest credited increased largely related to higher account values in our corporate-owned life insurance

products in 2020.

Amortization of deferred acquisition costs and intangibles increased mainly related to higher DAC

amortization in our variable annuity products principally from less favorable equity market performance in 2020.

Provision for income taxes. The effective tax rate decreased to 14.5% for the year ended December 31, 2020
from 17.1% for the year ended December 31, 2019. The decrease is primarily attributable to tax benefits from tax
favored items in relation to lower pre-tax income in 2020.

Runoff selected operating performance measures

Variable annuity and variable life insurance products

The following table sets forth selected operating performance measures regarding our variable annuity and

variable life insurance products as of or for the dates indicated:

(Amounts in millions)
Account value, beginning of period . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surrenders, benefits and product charges . . . . . . . . . . . .
Net flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest credited and investment performance . . . . . . . .
Account value, end of period . . . . . . . . . . . . . . . . . . . . . . . . .

As of or for the years ended
December 31,
2019
$4,918
25
(640)
(615)
739
$5,042

2020
$5,042
20
(559)
(539)
498
$5,001

2018
$5,884
26
(764)
(738)
(228)
$4,918

Increase (decrease) and
percentage change
2020 vs. 2019

$ 124
(5)
81
76
(241)
$ (41)

3%
(20)%
13%
12%
(33)%
(1)%

We no longer solicit sales of our variable annuity or variable life insurance products; however, we continue

to service our existing blocks of business and accept additional deposits on existing contracts and policies.

2020 compared to 2019

Account value as of December 31, 2020 decreased compared to December 31, 2019 primarily related to
surrenders outpacing favorable equity market performance in 2020. In addition, average account value was lower
in 2020 compared to 2019, which decreased fee income in 2020 compared to 2019.

Funding agreements

The following table presents the account value of our funding agreements as of or for the dates indicated:

As of or for the years
ended December 31,

Increase (decrease) and
percentage change

(Amounts in millions)
Account value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surrenders and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Account value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020
$ 253

2019
$ 381
150 —
(106)
44
3
$ 300

(136)
(136)
8
$ 253

2018
$260
200
(85)
115
6
$381

2020 vs. 2019

$(128)
150
30
180
(5)
$ 47

(34)%
NM(1)
22%
132%
(63)%
19%

148

149

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

2020 compared to 2019

Revenues

Account value as of December 31, 2020 increased compared to December 31, 2019 mainly attributable to

higher deposits from issuing funding agreements for asset-liability management and yield enhancement, partially
offset by surrenders and benefit payments in 2020.

Corporate and Other Activities

Results of operations

The following table sets forth the results of operations relating to Corporate and Other activities for the

Years ended December 31,

Increase (decrease) and
percentage change

2020

2019

2018

2020 vs. 2019

$

$

7
7
5
(2)

17

$

8
9
(31)
2

(12)

8
6
10
(3)

21

$ (1)
(2)
36
(4)

29

periods indicated:

(Amounts in millions)

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . ..
Acquisition and operating expenses, net of deferrals . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . ..
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . .

Loss from continuing operations before income taxes . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(200)
(23)

(278)
(53)

Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to loss from continuing operations:
31
(5)
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 —
(Gains) losses on early extinguishment of debt . . . . . . . . . . . . . .
1
Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . . ..
2
Fees associated with bond consent solicitation . . . . . . . . . . . . . . —
—
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(177)

(1)

(225)

(7) —

4
40
1
172

217

3
46
3
214

266

5
68
1
231

305

(284)
(56)

(228)

(10)
—
2
6

1
(6)
(2)
(42)

(49)

78
30

48

(36)
5
1
—
6

(13)%
(22)%
116%
(200)%

NM(1)

33%
(13)%
(67)%
(20)%

(18)%

28%
57%

21%

(116)%
NM(1)
100%
— %
86%

Adjusted operating loss available to Genworth Financial Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(176) $(200) $(230)

$ 24

12%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

2020 compared to 2019

Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders

The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders decreased

primarily related to lower interest expense and lower operating costs, partially offset by a lower benefit for
income taxes in 2020.

150

151

The change to net investment gains in 2020 from net investment losses in 2019 was predominantly related to

higher gains from the sale of investments securities and lower derivative losses in 2020.

The decrease in policy fees and other income was primarily related to losses from non-functional currency

remeasurement transactions in 2020 compared to gains in 2019.

Benefits and expenses

Acquisition and operating expenses, net of deferrals, decreased mainly driven by lower operating expenses

and a $4 million gain related to the repurchase of Genworth Holdings’ senior notes with 2021 maturity dates,

partially offset by a make-whole premium of $9 million related to the early redemption of Genworth Holdings’

senior notes originally scheduled to mature in June 2020 and higher employee-related expenses in 2020.

Interest expense decreased largely driven by the early redemption of Genworth Holdings’ senior notes

originally scheduled to mature in June 2020, a lower floating rate of interest on our junior subordinated notes and

the repurchase of Genworth Holdings’ senior notes with 2021 maturity dates in 2020.

The decrease in the benefit for income taxes was primarily attribute to a lower pre-tax loss in relation to

higher tax expense on foreign operations and prior year tax adjustments in 2020.

Investments and Derivative Instruments

Trends and conditions

Investments

During the fourth quarter of 2020, the U.S. Federal Reserve maintained interest rates near zero as the U.S.

economy continues to recover from the negative impact of COVID-19. The U.S. Federal Reserve’s latest forecast

indicates interest rates will remain at near zero through 2023 with long-term inflation rate expectations above 2%

for the first time since 2018. The U.S. Federal Reserve expanded its accommodative monetary policy by

implementing a new average inflation target framework, which allows for the targeted inflation rate to be higher

than 2% on a temporary basis without prompting immediate interest rate increases. During the fourth quarter of

2020, prospects of an additional fiscal stimulus package and the roll-out of COVID-19 vaccines drove global

bond yields higher and resulted in a steepening of the Treasury yield curve, with the two-year Treasury yield

remaining unchanged and the 10-year and 30-year Treasury yields increasing compared to the third quarter of

2020.

2020.

The U.S. economy continued to show signs of recovery from COVID-19 but remained in recessionary

conditions evident by the full year 2020 GDP contraction. Monthly economic indicators improved from the lows

of the first half of 2020 as evidenced by a decrease in the unemployment rate, indicative of a partial recovery of

jobs lost at the height of the pandemic and expansion in both the manufacturing and services industries. Efforts

by the U.S. federal government through fiscal stimulus packages helped contribute to this recovery. The change

in control of the White House and Congress could contribute to additional stimulus in 2021 and provide further

support in the recovery of the economy.

Credit markets further recovered in the fourth quarter of 2020 with credit spreads tightening, approaching

pre-COVID-19 levels and offsetting the increase in long-term Treasury yields. Credit markets continued to show

resiliency supported by lending programs by the U.S. Federal Reserve, strong investor inflows, asset/liability

management measures, minimal negative credit rating migration and improving corporate balance sheets and

liquidity positions. The broad market recovery accelerated after the U.S. Presidential election and prospect of the

roll-out of COVID-19 vaccines, with equity markets in the United States reaching record highs at the end of

2020 compared to 2019

Revenues

Account value as of December 31, 2020 increased compared to December 31, 2019 mainly attributable to

higher deposits from issuing funding agreements for asset-liability management and yield enhancement, partially

offset by surrenders and benefit payments in 2020.

Corporate and Other Activities

Results of operations

periods indicated:

(Amounts in millions)

Revenues:

The following table sets forth the results of operations relating to Corporate and Other activities for the

Years ended December 31,

Increase (decrease) and

percentage change

2020

2019

2018

2020 vs. 2019

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

$ (1)

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . ..

Acquisition and operating expenses, net of deferrals . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . ..

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . .

7

7

5

(2)

17

4

40

1

172

217

8

9

2

(31)

(12)

3

46

3

214

266

8

6

10

(3)

21

5

68

1

231

305

Loss from continuing operations before income taxes . . . . . . . . .

Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(200)

(23)

(278)

(53)

(284)

(56)

Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .

(177)

(225)

(228)

Adjustments to loss from continuing operations:

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Gains) losses on early extinguishment of debt . . . . . . . . . . . . . .

(5)

31

5 —

Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . . ..

2

Fees associated with bond consent solicitation . . . . . . . . . . . . . . —

1

—

(10)

—

2

6

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1)

(7) —

(2)

36

(4)

29

1

(6)

(2)

(42)

(49)

78

30

48

(36)

5

1

6

—

(13)%

(22)%

116%

(200)%

NM(1)

33%

(13)%

(67)%

(20)%

(18)%

28%

57%

21%

(116)%

NM(1)

100%

— %

86%

Adjusted operating loss available to Genworth Financial Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(176) $(200) $(230)

$ 24

12%

(1) We define “NM” as not meaningful for increases or decreases greater than 200%.

2020 compared to 2019

Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders

The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders decreased

primarily related to lower interest expense and lower operating costs, partially offset by a lower benefit for

income taxes in 2020.

The change to net investment gains in 2020 from net investment losses in 2019 was predominantly related to

higher gains from the sale of investments securities and lower derivative losses in 2020.

The decrease in policy fees and other income was primarily related to losses from non-functional currency

remeasurement transactions in 2020 compared to gains in 2019.

Benefits and expenses

Acquisition and operating expenses, net of deferrals, decreased mainly driven by lower operating expenses

and a $4 million gain related to the repurchase of Genworth Holdings’ senior notes with 2021 maturity dates,
partially offset by a make-whole premium of $9 million related to the early redemption of Genworth Holdings’
senior notes originally scheduled to mature in June 2020 and higher employee-related expenses in 2020.

Interest expense decreased largely driven by the early redemption of Genworth Holdings’ senior notes
originally scheduled to mature in June 2020, a lower floating rate of interest on our junior subordinated notes and
the repurchase of Genworth Holdings’ senior notes with 2021 maturity dates in 2020.

The decrease in the benefit for income taxes was primarily attribute to a lower pre-tax loss in relation to

higher tax expense on foreign operations and prior year tax adjustments in 2020.

Investments and Derivative Instruments

Trends and conditions

Investments

During the fourth quarter of 2020, the U.S. Federal Reserve maintained interest rates near zero as the U.S.

economy continues to recover from the negative impact of COVID-19. The U.S. Federal Reserve’s latest forecast
indicates interest rates will remain at near zero through 2023 with long-term inflation rate expectations above 2%
for the first time since 2018. The U.S. Federal Reserve expanded its accommodative monetary policy by
implementing a new average inflation target framework, which allows for the targeted inflation rate to be higher
than 2% on a temporary basis without prompting immediate interest rate increases. During the fourth quarter of
2020, prospects of an additional fiscal stimulus package and the roll-out of COVID-19 vaccines drove global
bond yields higher and resulted in a steepening of the Treasury yield curve, with the two-year Treasury yield
remaining unchanged and the 10-year and 30-year Treasury yields increasing compared to the third quarter of
2020.

The U.S. economy continued to show signs of recovery from COVID-19 but remained in recessionary
conditions evident by the full year 2020 GDP contraction. Monthly economic indicators improved from the lows
of the first half of 2020 as evidenced by a decrease in the unemployment rate, indicative of a partial recovery of
jobs lost at the height of the pandemic and expansion in both the manufacturing and services industries. Efforts
by the U.S. federal government through fiscal stimulus packages helped contribute to this recovery. The change
in control of the White House and Congress could contribute to additional stimulus in 2021 and provide further
support in the recovery of the economy.

Credit markets further recovered in the fourth quarter of 2020 with credit spreads tightening, approaching

pre-COVID-19 levels and offsetting the increase in long-term Treasury yields. Credit markets continued to show
resiliency supported by lending programs by the U.S. Federal Reserve, strong investor inflows, asset/liability
management measures, minimal negative credit rating migration and improving corporate balance sheets and
liquidity positions. The broad market recovery accelerated after the U.S. Presidential election and prospect of the
roll-out of COVID-19 vaccines, with equity markets in the United States reaching record highs at the end of
2020.

150

151

based hedge could be relatively less effective. We currently track both LIBOR and SOFR changes and analyze

each in comparison to Treasury rate movements. We have discovered that the difference between the two

comparisons is de minimis. Therefore, we do not believe a move to SOFR will have a material impact on our

derivatives portfolio. Although we expect a minimal impact from this conversion, we remain actively engaged

with the broader financial services community on the topic of SOFR, including conversations with peers,

derivatives clearinghouses, bilateral dealers and external legal counsel. With regard to derivatives, we expect the

process for implementing SOFR as a replacement rate to be relatively seamless. The International Swap and

Derivatives Association (“ISDA”) has developed a contractual supplement to derivatives trading documentation

that includes triggers and fallbacks for determining the replacement for a benchmark rate. The supplement may

be agreed to between counterparties or through an ISDA protocol. In addition, ISDA has drafted an amendment

to the 2006 Interbank Offered Rate definitions and a related protocol for legacy transactions.

For our other instruments and contracts, including investments, debt and reinsurance contracts, there is a

wide variety in replacement language ranging from a rate freeze to silence on the matter. With respect to

instruments that include a rate replacement, we will comply with the process prescribed by each instrument. For

investments that do not contain such a replacement, we will generally endeavor to agree upon a replacement rate

with our counterparties well in advance of LIBOR’s transition. In some cases, such as our long-term junior

subordinated notes that mature in 2066 and are linked to three-month LIBOR, we may decide not to replace

LIBOR which would lock-in the last published rate. We understand that the investment community is inclined to

adopt SOFR as a substitute rate. Therefore, the adoption of SOFR will add certainty to the process of replacing

LIBOR as the reference rate for many instruments. We do acknowledge the complications in calculating the

credit spread necessary to equate SOFR to LIBOR and will monitor the potential risk.

We are at different stages of assessing operational readiness for LIBOR cessation related to our various

instruments. These stages range from derivatives, where we are fully operationally ready, to other products and

instruments, as well as tax impacts, where we have just begun our assessment process. Our Working Group will

continue to monitor the process of elimination and replacement of LIBOR. Since the initial announcement, we

have terminated a portion of our LIBOR-based swaps and entered into alternative rate swaps. In anticipation of

the elimination of LIBOR, we plan to continue to convert our remaining LIBOR-based derivatives in a similar

manner. In addition, our non-recourse funding obligations with interest rates based on one-month LIBOR were

redeemed in January 2020. We expect to implement additional measures that we believe will ease the transition

from LIBOR. Even though we have begun to take these actions, as described above, it is too early to determine

the ultimate impact the elimination of LIBOR will have on our results of operations or financial condition.

As of December 31, 2020, we did not have any modifications or extensions of commercial mortgage loans

that were considered troubled debt restructurings. Modified loans represented 5% of our total loan portfolio as of
December 31, 2020, as borrowers have sought additional relief related to COVID-19. We are working with
individual borrowers impacted by COVID-19 to provide alternative forms of relief for a specified period of time.
The modified loan population continues to decrease as modification terms expire and properties stabilize. Most
of our borrowers are current on payments and we do not anticipate a significant impact from troubled debt
restructurings in 2021.

As of December 31, 2020, our fixed maturity securities portfolio, which was 95% investment grade,

comprised 82% of our total invested assets and cash.

Derivatives

Several of our master swap agreements previously contained credit downgrade provisions that allowed

either party to assign or terminate the derivative transaction if the other party’s long-term unsecured credit or
financial strength rating was below the limit defined in the applicable agreement. We renegotiated with many of
our counterparties to remove the credit downgrade provisions from the master swap agreements entirely or
replace them with a provision that allows the counterparty to terminate the derivative transaction if the RBC ratio
of the applicable insurance company goes below a certain threshold. As of December 31, 2020, the RBC ratios of
the respective insurance companies were above the thresholds negotiated in the applicable master swap
agreements and therefore, no counterparty had rights to take action against us under the RBC threshold
provisions.

As of December 31, 2020, $6.1 billion notional of our derivatives portfolio was cleared through the CME.
The customer swap agreements that govern our cleared derivatives contain provisions that enable our clearing
agents to request initial margin in excess of CME requirements. As of December 31, 2020, we posted initial
margin of $110 million to our clearing agents, which represented approximately $33 million more than was
otherwise required by the clearinghouse. Because our clearing agents serve as guarantors of our obligations to the
CME, the customer agreements contain broad termination provisions that are not specifically dependent on
ratings. As of December 31, 2020, $11.8 billion notional of our derivatives portfolio was in bilateral OTC
derivative transactions pursuant to which we have posted aggregate independent amounts of $463 million and are
holding collateral from counterparties in the amount of $410 million.

In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away

from LIBOR, with its full elimination to occur after 2021. The announcement indicates that LIBOR may not
continue to be available on the current basis (or at all) after 2021. The last committed publication date for LIBOR
is December 31, 2021. The Alternate Reference Rate Committee, convened by the Board of Governors of the
Federal Reserve System and the New York Federal Reserve Bank, has endorsed the SOFR as its preferred
replacement benchmark for U.S. dollar LIBOR. SOFR is calculated and published by the New York Federal
Reserve Bank and reflects the combination of three overnight U.S. Treasury Repo Rates. The rate is different
from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and
currently is available primarily as an overnight rate rather than a 1-, 3- or 6-month rate available for LIBOR.
Upon the announcement, we formed a working group comprised of finance, investments, derivative, and tax
professionals, as well as lawyers (the “Working Group”) to evaluate contracts and perform analysis of our
LIBOR-based derivative instrument and investment exposure, as well as debt (including subordinated debt and
Federal Home Loan Bank loans), reinsurance agreements and institutional products within the Runoff segment,
as a result of the elimination of LIBOR. The Working Group took inventory of all investments with LIBOR
exposure and identified nearly 400 instruments.

We employ derivatives primarily for the purpose of hedging interest rate risk. The more closely a rate
hedging instrument aligns with Treasury rate movements, the more effective it is. As a result, to the extent
changes in SOFR in relation to Treasury movements were to differ meaningfully from those of LIBOR, a SOFR-

152

153

based hedge could be relatively less effective. We currently track both LIBOR and SOFR changes and analyze
each in comparison to Treasury rate movements. We have discovered that the difference between the two
comparisons is de minimis. Therefore, we do not believe a move to SOFR will have a material impact on our
derivatives portfolio. Although we expect a minimal impact from this conversion, we remain actively engaged
with the broader financial services community on the topic of SOFR, including conversations with peers,
derivatives clearinghouses, bilateral dealers and external legal counsel. With regard to derivatives, we expect the
process for implementing SOFR as a replacement rate to be relatively seamless. The International Swap and
Derivatives Association (“ISDA”) has developed a contractual supplement to derivatives trading documentation
that includes triggers and fallbacks for determining the replacement for a benchmark rate. The supplement may
be agreed to between counterparties or through an ISDA protocol. In addition, ISDA has drafted an amendment
to the 2006 Interbank Offered Rate definitions and a related protocol for legacy transactions.

For our other instruments and contracts, including investments, debt and reinsurance contracts, there is a

wide variety in replacement language ranging from a rate freeze to silence on the matter. With respect to
instruments that include a rate replacement, we will comply with the process prescribed by each instrument. For
investments that do not contain such a replacement, we will generally endeavor to agree upon a replacement rate
with our counterparties well in advance of LIBOR’s transition. In some cases, such as our long-term junior
subordinated notes that mature in 2066 and are linked to three-month LIBOR, we may decide not to replace
LIBOR which would lock-in the last published rate. We understand that the investment community is inclined to
adopt SOFR as a substitute rate. Therefore, the adoption of SOFR will add certainty to the process of replacing
LIBOR as the reference rate for many instruments. We do acknowledge the complications in calculating the
credit spread necessary to equate SOFR to LIBOR and will monitor the potential risk.

We are at different stages of assessing operational readiness for LIBOR cessation related to our various
instruments. These stages range from derivatives, where we are fully operationally ready, to other products and
instruments, as well as tax impacts, where we have just begun our assessment process. Our Working Group will
continue to monitor the process of elimination and replacement of LIBOR. Since the initial announcement, we
have terminated a portion of our LIBOR-based swaps and entered into alternative rate swaps. In anticipation of
the elimination of LIBOR, we plan to continue to convert our remaining LIBOR-based derivatives in a similar
manner. In addition, our non-recourse funding obligations with interest rates based on one-month LIBOR were
redeemed in January 2020. We expect to implement additional measures that we believe will ease the transition
from LIBOR. Even though we have begun to take these actions, as described above, it is too early to determine
the ultimate impact the elimination of LIBOR will have on our results of operations or financial condition.

As of December 31, 2020, we did not have any modifications or extensions of commercial mortgage loans

that were considered troubled debt restructurings. Modified loans represented 5% of our total loan portfolio as of

December 31, 2020, as borrowers have sought additional relief related to COVID-19. We are working with

individual borrowers impacted by COVID-19 to provide alternative forms of relief for a specified period of time.

The modified loan population continues to decrease as modification terms expire and properties stabilize. Most

of our borrowers are current on payments and we do not anticipate a significant impact from troubled debt

restructurings in 2021.

As of December 31, 2020, our fixed maturity securities portfolio, which was 95% investment grade,

comprised 82% of our total invested assets and cash.

Derivatives

Several of our master swap agreements previously contained credit downgrade provisions that allowed

either party to assign or terminate the derivative transaction if the other party’s long-term unsecured credit or

financial strength rating was below the limit defined in the applicable agreement. We renegotiated with many of

our counterparties to remove the credit downgrade provisions from the master swap agreements entirely or

replace them with a provision that allows the counterparty to terminate the derivative transaction if the RBC ratio

of the applicable insurance company goes below a certain threshold. As of December 31, 2020, the RBC ratios of

the respective insurance companies were above the thresholds negotiated in the applicable master swap

agreements and therefore, no counterparty had rights to take action against us under the RBC threshold

provisions.

As of December 31, 2020, $6.1 billion notional of our derivatives portfolio was cleared through the CME.

The customer swap agreements that govern our cleared derivatives contain provisions that enable our clearing

agents to request initial margin in excess of CME requirements. As of December 31, 2020, we posted initial

margin of $110 million to our clearing agents, which represented approximately $33 million more than was

otherwise required by the clearinghouse. Because our clearing agents serve as guarantors of our obligations to the

CME, the customer agreements contain broad termination provisions that are not specifically dependent on

ratings. As of December 31, 2020, $11.8 billion notional of our derivatives portfolio was in bilateral OTC

derivative transactions pursuant to which we have posted aggregate independent amounts of $463 million and are

holding collateral from counterparties in the amount of $410 million.

In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away

from LIBOR, with its full elimination to occur after 2021. The announcement indicates that LIBOR may not

continue to be available on the current basis (or at all) after 2021. The last committed publication date for LIBOR

is December 31, 2021. The Alternate Reference Rate Committee, convened by the Board of Governors of the

Federal Reserve System and the New York Federal Reserve Bank, has endorsed the SOFR as its preferred

replacement benchmark for U.S. dollar LIBOR. SOFR is calculated and published by the New York Federal

Reserve Bank and reflects the combination of three overnight U.S. Treasury Repo Rates. The rate is different

from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and

currently is available primarily as an overnight rate rather than a 1-, 3- or 6-month rate available for LIBOR.

Upon the announcement, we formed a working group comprised of finance, investments, derivative, and tax

professionals, as well as lawyers (the “Working Group”) to evaluate contracts and perform analysis of our

LIBOR-based derivative instrument and investment exposure, as well as debt (including subordinated debt and

Federal Home Loan Bank loans), reinsurance agreements and institutional products within the Runoff segment,

as a result of the elimination of LIBOR. The Working Group took inventory of all investments with LIBOR

exposure and identified nearly 400 instruments.

We employ derivatives primarily for the purpose of hedging interest rate risk. The more closely a rate

hedging instrument aligns with Treasury rate movements, the more effective it is. As a result, to the extent

changes in SOFR in relation to Treasury movements were to differ meaningfully from those of LIBOR, a SOFR-

152

153

Investment results

The following table sets forth net investment gains (losses) for the years ended December 31:

The following table sets forth information about our investment income, excluding net investment gains

(losses), for each component of our investment portfolio for the years ended December 31:

(Amounts in millions)

Yield

Amount

Yield

Amount Yield

Amount

Yield

Amount

2020

2019

2018

2020 vs. 2019

Increase
(decrease)

Fixed maturity securities—taxable . . . . . .
4.5% $ 2,480
Fixed maturity securities—non-taxable . .
4.3%
6
Equity securities . . . . . . . . . . . . . . . . . . . .
13
3.7%
345
Commercial mortgage loans . . . . . . . . . . .
5.0%
199
9.5%
Policy loans . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets (1) . . . . . . . . . . . . . . . 24.7%
295
Cash, cash equivalents, restricted cash and
short-term investments . . . . . . . . . . . . .

0.6%

17

4.6% $ 2,494
(0.1)% $ (14)
4.6% $ 2,456
8
6.1%
(2)
(1.8)%
11
4.0%
16
6.3%
(3)
20
6.3%
(2.6)%
(3)
327 — %
348
5.0%
5.0%
19
0.6%
169
9.2%
180
8.9%
61
(2.9)%
181
234 37.2%
27.6%

1.7%

39

1.7%

48

(1.1)%

(22)

Gross investment income before

expenses and fees . . . . . . . . . . . . .
Expenses and fees . . . . . . . . . . . . . . . . . . .

4.9% 3,355
(95)
(0.1)%

5.0% 3,319
(99)
(0.1)%

4.9% 3,212
(0.1)%

(0.1)%
(91) — %

Net investment income . . . . . . . . . . .

4.8% $ 3,260

4.9% $ 3,220

4.8% $ 3,121

(0.1)% $

36
4

40

Average invested assets and cash . . . . . . .

$68,225

$66,280

$65,527

$1,945

(1)

Investment income for other invested assets includes amortization of terminated cash flow hedges, which
have no corresponding book value within the yield calculation and includes limited partnership investments,
which are primarily equity-based and do not have fixed returns by period.

Yields are based on net investment income as reported under U.S. GAAP and are consistent with how we
measure our investment performance for management purposes. Yields are annualized, for interim periods, and
are calculated as net investment income as a percentage of average quarterly asset carrying values except for
fixed maturity securities, derivatives and derivative counterparty collateral, which exclude unrealized fair value
adjustments and securities lending activity, which is included in other invested assets and is calculated net of the
corresponding securities lending liability.

Annualized weighted-average investment yields decreased in 2020 compared to 2019 primarily driven by

lower yields on higher average invested assets. Net investment income included $38 million of higher bond calls
and prepayments and $28 million of higher limited partnership income, partially offset by $5 million of lower
income related to inflation-driven volatility on U.S. Government Treasury Inflation Protected Securities (“TIPS”)
in 2020.

154

155

(Amounts in millions)

Available-for-sale fixed maturity securities:

2020

2019

2018

Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$512

$107

$ 162

Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(34)

(39)

(137)

Net realized gains (losses) on available-for-sale fixed maturity securities . . . . . . . . . .

478

68

25

Impairments:

Total other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(1) —

Portion of other-than-temporary impairments included in other comprehensive

income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

—

Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(1) —

Net change in allowance for credit losses on available-for-sale fixed maturity securities . .

Write-down of available-for-sale fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . .

Net realized gains (losses) on equity securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized gains (losses) on equity securities still held . . . . . . . . . . . . . . . . . . . . . . . . .

Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) —

(4) —

9

14

29

(1)

2

112

(2)

(17)

(5)

(2) —

(72)

(22)

5 —

Net investment gains (losses)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$558

$ 50

$

(9)

—

—

—

11

(34)

11

2020 compared to 2019

• We recorded net gains related to the sale of available-for-sale fixed maturity securities of $478 million

in 2020 driven primarily from the sale of U.S. government securities due to portfolio rebalancing and

asset exposure management as a result of the prolonged low interest rate environment. We recorded net

gains related to the sale of available-for-sale fixed maturity securities of $68 million in 2019 driven

mostly by cash tenders from merger and acquisition activity.

• Net investment losses related to derivatives of $17 million in 2020 were primarily associated with

embedded derivatives related to our fixed indexed annuity and runoff variable annuity products,

partially offset by gains from our foreign currency hedging programs that support our Australia

Mortgage Insurance segment.

Net investment losses related to derivatives of $72 million in 2019 were primarily associated with

hedging programs that support our runoff variable annuity products, losses related to hedging programs

for our fixed indexed annuity products and decreases in the values of investments used to protect

statutory surplus from equity market fluctuations. These losses were partially offset by gains from

hedging programs related to our indexed universal life insurance products.

• We had $83 million of higher net gains on limited partnership investments in 2020 primarily driven by

higher unrealized gains from favorable performance of private equity investments.

The following table sets forth information about our investment income, excluding net investment gains

(losses), for each component of our investment portfolio for the years ended December 31:

Increase

(decrease)

(Amounts in millions)

Yield

Amount

Yield

Amount Yield

Amount

Yield

Amount

Fixed maturity securities—taxable . . . . . .

4.5% $ 2,480

4.6% $ 2,494

4.6% $ 2,456

(0.1)% $ (14)

2020

2019

2018

2020 vs. 2019

Fixed maturity securities—non-taxable . .

Equity securities . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . . .

4.3%

3.7%

5.0%

9.5%

6.1%

6.3%

5.0%

8.9%

8

16

348

180

4.0%

6.3%

5.0%

9.2%

6

13

345

199

295

11

20

(1.8)%

(2.6)%

327 — %

169

181

0.6%

(2.9)%

Other invested assets (1) . . . . . . . . . . . . . . . 24.7%

27.6%

234 37.2%

Cash, cash equivalents, restricted cash and

short-term investments . . . . . . . . . . . . .

0.6%

17

1.7%

39

1.7%

48

(1.1)%

(22)

Gross investment income before

expenses and fees . . . . . . . . . . . . .

4.9% 3,355

5.0% 3,319

4.9% 3,212

(0.1)%

Expenses and fees . . . . . . . . . . . . . . . . . . .

(0.1)%

(95)

(0.1)%

(99)

(0.1)%

(91) — %

Net investment income . . . . . . . . . . .

4.8% $ 3,260

4.9% $ 3,220

4.8% $ 3,121

(0.1)% $

(2)

(3)

(3)

19

61

36

4

40

Average invested assets and cash . . . . . . .

$68,225

$66,280

$65,527

$1,945

(1)

Investment income for other invested assets includes amortization of terminated cash flow hedges, which

have no corresponding book value within the yield calculation and includes limited partnership investments,

which are primarily equity-based and do not have fixed returns by period.

Yields are based on net investment income as reported under U.S. GAAP and are consistent with how we

measure our investment performance for management purposes. Yields are annualized, for interim periods, and

are calculated as net investment income as a percentage of average quarterly asset carrying values except for

fixed maturity securities, derivatives and derivative counterparty collateral, which exclude unrealized fair value

adjustments and securities lending activity, which is included in other invested assets and is calculated net of the

corresponding securities lending liability.

Annualized weighted-average investment yields decreased in 2020 compared to 2019 primarily driven by

lower yields on higher average invested assets. Net investment income included $38 million of higher bond calls

and prepayments and $28 million of higher limited partnership income, partially offset by $5 million of lower

income related to inflation-driven volatility on U.S. Government Treasury Inflation Protected Securities (“TIPS”)

in 2020.

Investment results

The following table sets forth net investment gains (losses) for the years ended December 31:

(Amounts in millions)

Available-for-sale fixed maturity securities:

2020

2019

2018

Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$512
(34)

$107
(39)

$ 162
(137)

Net realized gains (losses) on available-for-sale fixed maturity securities . . . . . . . . . .

478

68

25

Impairments:

Total other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Portion of other-than-temporary impairments included in other comprehensive

(1) —

income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

—

—

Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(1) —

Net change in allowance for credit losses on available-for-sale fixed maturity securities . .
Write-down of available-for-sale fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains (losses) on equity securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on equity securities still held . . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

—
—
11
(34)
11

(5) —
(4) —
(1)
2
112
(2)
(17)
(5)

9
14
29
(2) —
(72)

5 —

(22)

Net investment gains (losses)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$558

$ 50

$

(9)

2020 compared to 2019

• We recorded net gains related to the sale of available-for-sale fixed maturity securities of $478 million
in 2020 driven primarily from the sale of U.S. government securities due to portfolio rebalancing and
asset exposure management as a result of the prolonged low interest rate environment. We recorded net
gains related to the sale of available-for-sale fixed maturity securities of $68 million in 2019 driven
mostly by cash tenders from merger and acquisition activity.

• Net investment losses related to derivatives of $17 million in 2020 were primarily associated with
embedded derivatives related to our fixed indexed annuity and runoff variable annuity products,
partially offset by gains from our foreign currency hedging programs that support our Australia
Mortgage Insurance segment.

Net investment losses related to derivatives of $72 million in 2019 were primarily associated with
hedging programs that support our runoff variable annuity products, losses related to hedging programs
for our fixed indexed annuity products and decreases in the values of investments used to protect
statutory surplus from equity market fluctuations. These losses were partially offset by gains from
hedging programs related to our indexed universal life insurance products.

• We had $83 million of higher net gains on limited partnership investments in 2020 primarily driven by

higher unrealized gains from favorable performance of private equity investments.

154

155

Investment portfolio

Fixed maturity securities

The following table sets forth our cash, cash equivalents, restricted cash and invested assets as of

December 31:

As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit

losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:

(Amounts in millions)

Carrying value % of total Carrying value % of total

2020

2019

Fixed maturity securities, available-for-sale:

Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans, net
. . . . . . . . . . . . . . . . . . . . . .
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash . . . . . . . . . . . . . . .

Total cash, cash equivalents, restricted cash and

$45,823
19,967
476
6,743
1,978
2,253
2,656

57%
25
1
9
2
3
3

$42,162
18,177
239
6,963
2,058
1,632
3,341

57%
24
—

9
3
2
5

invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$79,896

100%

$74,572

100%

For a discussion of the change in cash, cash equivalents, restricted cash and invested assets, see the
comparison for this line item under “—Consolidated Balance Sheets.” See note 4 to our consolidated financial
statements under “Item 8—Financial Statements and Supplementary Data” for additional information related to
our investment portfolio.

We hold fixed maturity and equity securities, derivatives, embedded derivatives, securities held as collateral

and certain other financial instruments, which are carried at fair value. Fair value is the price that would be
received to sell an asset in an orderly transaction between market participants at the measurement date. As of
December 31, 2020, approximately 6% of our investment holdings recorded at fair value was based on
significant inputs that were not market observable and were classified as Level 3 measurements. See note 16 to
our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for
additional information related to fair value.

(Amounts in millions)

Fixed maturity securities:

U.S. government, agencies and government-

sponsored enterprises . . . . . . . . . . . . . . . . . . . . . .

$ 3,401

$ 1,404

$—

$—

$ 4,805

Amortized

Gross

unrealized

unrealized

gains

Gross

losses

Allowance

for credit

losses

cost or

cost

Fair

value

State and political subdivisions . . . . . . . . . . . . . . . .

Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .

2,627

1,420

4,244

2,549

7,843

5,147

3,207

1,375

2,466

1,722

1,200

395

899

1,190

2,470

712

1,082

970

549

356

520

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . .

30,148

5,989

(23)

1,307

1,324

544

144

970

367

620

232

535

285

304

45

84

209

357

113

229

159

68

41

90

246

211

231

56

(1)

(5)

(2)

(16)

(2)

(1)

—

—

—

—

—

(2)

—

(1)

(6)

(1)

—

—

(1)

(1)

(1)

—

(11)

—

(13)

(4)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(1)

(1)

—

—

(3)

3,170

1,559

5,212

2,900

9,148

6,470

3,827

1,607

3,001

2,007

1,502

440

36,114

983

1,398

2,820

824

1,311

1,129

616

396

609

1,828

11,914

1,909

2,974

3,345

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,582

Total non-U.S. corporate . . . . . . . . . . . . . . . . .

10,330

1,596

Residential mortgage-backed (1) . . . . . . . . . . . . . . . .

Commercial mortgage-backed . . . . . . . . . . . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . .

1,698

2,759

3,293

Total available-for-sale fixed maturity

securities . . . . . . . . . . . . . . . . . . . . . . . .

$55,676

$10,175

$ (57)

$ (4)

$65,790

(1)

Fair value included $8 million collateralized by Alt-A residential mortgage loans.

156

157

Investment portfolio

December 31:

The following table sets forth our cash, cash equivalents, restricted cash and invested assets as of

2020

2019

(Amounts in millions)

Carrying value % of total Carrying value % of total

Fixed maturity securities, available-for-sale:

Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$45,823

19,967

57%

25

$42,162

18,177

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans, net

. . . . . . . . . . . . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash . . . . . . . . . . . . . . .

476

6,743

1,978

2,253

2,656

1

9

2

3

3

239

6,963

2,058

1,632

3,341

57%

24

—

9

3

2

5

Total cash, cash equivalents, restricted cash and

invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$79,896

100%

$74,572

100%

For a discussion of the change in cash, cash equivalents, restricted cash and invested assets, see the

comparison for this line item under “—Consolidated Balance Sheets.” See note 4 to our consolidated financial

statements under “Item 8—Financial Statements and Supplementary Data” for additional information related to

our investment portfolio.

We hold fixed maturity and equity securities, derivatives, embedded derivatives, securities held as collateral

and certain other financial instruments, which are carried at fair value. Fair value is the price that would be

received to sell an asset in an orderly transaction between market participants at the measurement date. As of

December 31, 2020, approximately 6% of our investment holdings recorded at fair value was based on

significant inputs that were not market observable and were classified as Level 3 measurements. See note 16 to

our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for

additional information related to fair value.

Fixed maturity securities

As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit

losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:

(Amounts in millions)

Fixed maturity securities:

Amortized
cost or
cost

Gross
unrealized
gains

Gross
unrealized
losses

Allowance
for credit
losses

Fair
value

U.S. government, agencies and government-

sponsored enterprises . . . . . . . . . . . . . . . . . . . . . .
State and political subdivisions . . . . . . . . . . . . . . . .
Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . .
U.S. corporate:

$ 3,401
2,627
1,420

$ 1,404
544
144

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Consumer—non-cyclical
Technology and communications . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,244
2,549
7,843
5,147
3,207
1,375
2,466
1,722
1,200
395

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . .

30,148

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Consumer—non-cyclical
Technology and communications . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

899
1,190
2,470
712
1,082
970
549
356
520
1,582

970
367
1,307
1,324
620
232
535
285
304
45

5,989

84
209
357
113
229
159
68
41
90
246

Total non-U.S. corporate . . . . . . . . . . . . . . . . .

10,330

1,596

Residential mortgage-backed (1) . . . . . . . . . . . . . . . .
Commercial mortgage-backed . . . . . . . . . . . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . .

1,698
2,759
3,293

211
231
56

Total available-for-sale fixed maturity

$—

(1)
(5)

(2)
(16)
(2)
(1)

—
—
—
—

(2)

—

(23)

—

(1)
(6)
(1)

—
—

(1)
(1)
(1)

—

(11)

—
(13)
(4)

$—
—
—

$ 4,805
3,170
1,559

—
—
—
—
—
—
—
—
—
—

—

—
—

(1)

—
—
—
—
—
—
—

(1)

—

(3)

—

5,212
2,900
9,148
6,470
3,827
1,607
3,001
2,007
1,502
440

36,114

983
1,398
2,820
824
1,311
1,129
616
396
609
1,828

11,914

1,909
2,974
3,345

securities . . . . . . . . . . . . . . . . . . . . . . . .

$55,676

$10,175

$ (57)

$ (4)

$65,790

(1)

Fair value included $8 million collateralized by Alt-A residential mortgage loans.

156

157

As of December 31, 2019, the amortized cost or cost, gross unrealized gains (losses) and fair value of our

Other invested assets

fixed maturity securities classified as available-for-sale were as follows:

(Amounts in millions)

Fixed maturity securities:

Gross unrealized gains

Gross unrealized losses

Amortized
cost or
cost

Not other-than-
temporarily
impaired

Other-than-
temporarily
impaired

Not other-than-
temporarily
impaired

Other-than-
temporarily
impaired

Fair
value

U.S. government, agencies and

government-sponsored enterprises . . . $ 4,073
2,394
1,235

State and political subdivisions . . . . . . .
Non-U.S. government . . . . . . . . . . . . . . .
U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . .
Consumer—non-cyclical
. . . . . . . .
Technology and

communications . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . .

4,322
2,404
6,977
4,909

2,883
1,271
2,345
1,590
1,320
292

675
303
798
796

363
125
367
172
187
30

Total U.S. corporate . . . . . . . . . . . .

28,313

3,816

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . .
. . . . . . . .
Consumer—non-cyclical
Technology and

communications . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . .

Total non-U.S. corporate . . . . . . . .

Residential mortgage-backed (1) . . . . . . .
Commercial mortgage-backed . . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . . .

Total available-for-sale fixed

779
1,140
2,087
631

1,010
896
565
373
557
1,431

9,469

2,057
2,897
3,262

50
179
232
55

128
92
40
24
73
188

1,061

199
137
30

$ 952
355
117

$—
—
—

$—

(2)
(2)

$—
—
—

$ 5,025
2,747
1,350

—
—
—
—

—
—
—
—
—
—

—

—
—
—
—

—
—
—
—
—
—

—

15
—
—

—

(8)
(1)
(4)

(1)

—

(1)
(2)
(1)

—

(18)

—
—
—

(2)

—
—
—
—

(1)
(2)

(5)

(1)
(8)
(7)

—
—
—
—

—
—
—
—
—
—

—

—
—
—
—

—
—
—
—
—
—

—

—
—
—

4,997
2,699
7,774
5,701

3,245
1,396
2,711
1,760
1,506
322

32,111

829
1,319
2,319
684

1,138
988
605
397
629
1,617

10,525

2,270
3,026
3,285

maturity securities . . . . . . . . $53,700

$6,667

$ 15

$ (43)

$—

$60,339

(1)

Fair value included $9 million collateralized by Alt-A residential mortgage loans and $24 million
collateralized by sub-prime residential mortgage loans.

Fixed maturity securities increased $5.5 billion principally from an increase in net unrealized gains related

to a decrease in interest rates, as well as purchases exceeding sales, maturities and repayments in 2020.

158

159

The following table sets forth the carrying values of our other invested assets as of December 31:

2020

2019

(Amounts in millions)

Carrying value % of total

Carrying value % of total

Limited partnerships . . . . . . . . . . . . . . . . . . . .

$1,049

47%

$ 634

39%

Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bank loan investments . . . . . . . . . . . . . . . . . .

Short-term investments . . . . . . . . . . . . . . . . . .

Securities lending collateral . . . . . . . . . . . . . .

Other investments . . . . . . . . . . . . . . . . . . . . . .

587

344

183

67

23

26

15

8

3

1

290

383

260

51

14

18

23

16

3

1

Total other invested assets . . . . . . . . . . .

$2,253

100%

$1,632

100%

Limited partnerships increased primarily from additional capital investments and net unrealized gains,

partially offset by return of capital in 2020. Derivatives increased largely from a decrease in interest rates in

2020.

Derivatives

indicated:

(Notional in millions)

Derivatives designated as hedges

Cash flow hedges:

The activity associated with derivative instruments can generally be measured by the change in notional

value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded

derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the

number of policies. The following tables represent activity associated with derivative instruments as of the dates

Measurement

2019

Additions

December 31,

Maturities/

terminations

December 31,

2020

Interest rate swaps . . . . . . . . . . . . . . . . . .

Foreign currency swaps . . . . . . . . . . . . . .

Notional

Notional

Total cash flow hedges . . . . . . . . . . . . . . .

Total derivatives designated as hedges . .

Derivatives not designated as hedges

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . .

Equity index options . . . . . . . . . . . . . . . . . . . . .

Financial futures . . . . . . . . . . . . . . . . . . . . . . . .

Other foreign currency contracts . . . . . . . . . . .

Notional

Notional

Notional

Notional

$ 8,968

$ 1,844

$ (2,634)

$ 8,178

110

9,078

9,078

4,674

2,451

1,182

628

17

1,861

1,861

—

2,053

5,516

7,080

—

(2,634)

(2,634)

—

(2,504)

(5,594)

(5,937)

127

8,305

8,305

4,674

2,000

1,104

1,771

Total derivatives not designated as

hedges . . . . . . . . . . . . . . . . . . . . . . . . . .

8,935

14,649

(14,035)

9,549

Total derivatives . . . . . . . . . . . . . . . . . . . .

$18,013

$16,510

$(16,669)

$17,854

(Number of policies)

Derivatives not designated as hedges

Measurement

2019

Additions

December 31,

Maturities/

terminations

December 31,

2020

GMWB embedded derivatives . . . . . . . . . . . . .

Fixed index annuity embedded derivatives . . .

Policies

Policies

25,623

15,441

(1,910)

(2,663)

23,713

12,778

Indexed universal life embedded

derivatives . . . . . . . . . . . . . . . . . . . . . . . . . .

Policies

884

(42)

842

—

—

—

As of December 31, 2019, the amortized cost or cost, gross unrealized gains (losses) and fair value of our

Other invested assets

The following table sets forth the carrying values of our other invested assets as of December 31:

2020

2019

(Amounts in millions)

Carrying value % of total

Carrying value % of total

Limited partnerships . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank loan investments . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . .
Securities lending collateral . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . .

Total other invested assets . . . . . . . . . . .

$1,049
587
344
183
67
23

$2,253

47%
26
15
8
3
1

100%

$ 634
290
383
260
51
14

$1,632

39%
18
23
16
3
1

100%

Limited partnerships increased primarily from additional capital investments and net unrealized gains,
partially offset by return of capital in 2020. Derivatives increased largely from a decrease in interest rates in
2020.

Derivatives

The activity associated with derivative instruments can generally be measured by the change in notional
value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded
derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the
number of policies. The following tables represent activity associated with derivative instruments as of the dates
indicated:

(Notional in millions)

Derivatives designated as hedges
Cash flow hedges:

Measurement

December 31,
2019

Additions

Maturities/
terminations

December 31,
2020

fixed maturity securities classified as available-for-sale were as follows:

Gross unrealized gains

Gross unrealized losses

Amortized

Not other-than-

cost or

cost

temporarily

impaired

Other-than-

temporarily

impaired

Not other-than-

temporarily

impaired

Other-than-

temporarily

impaired

Fair

value

(Amounts in millions)

Fixed maturity securities:

U.S. government, agencies and

government-sponsored enterprises . . . $ 4,073

$ 952

Total U.S. corporate . . . . . . . . . . . .

28,313

3,816

Non-U.S. corporate:

State and political subdivisions . . . . . . .

Non-U.S. government . . . . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . .

Technology and

communications . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . .

Utilities . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . .

Technology and

Industrial . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . .

Total non-U.S. corporate . . . . . . . .

Residential mortgage-backed (1) . . . . . . .

Commercial mortgage-backed . . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . . .

Total available-for-sale fixed

2,394

1,235

4,322

2,404

6,977

4,909

2,883

1,271

2,345

1,590

1,320

292

779

1,140

2,087

631

896

565

373

557

1,431

9,469

2,057

2,897

3,262

communications . . . . . . . . . . . . .

1,010

355

117

675

303

798

796

363

125

367

172

187

30

50

179

232

55

128

92

40

24

73

188

1,061

199

137

30

$—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

15

$—

—

(2)

(2)

(8)

(1)

(4)

(1)

(1)

(2)

(1)

—

—

(18)

—

—

—

—

—

—

—

(2)

(1)

(2)

(5)

(1)

(8)

(7)

$—

—

—

$ 5,025

2,747

1,350

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

4,997

2,699

7,774

5,701

3,245

1,396

2,711

1,760

1,506

322

32,111

829

1,319

2,319

684

1,138

988

605

397

629

1,617

10,525

2,270

3,026

3,285

maturity securities . . . . . . . . $53,700

$6,667

$ 15

$ (43)

$—

$60,339

(1)

Fair value included $9 million collateralized by Alt-A residential mortgage loans and $24 million

collateralized by sub-prime residential mortgage loans.

Fixed maturity securities increased $5.5 billion principally from an increase in net unrealized gains related

to a decrease in interest rates, as well as purchases exceeding sales, maturities and repayments in 2020.

Total cash flow hedges . . . . . . . . . . . . . . .

Total derivatives designated as hedges . .

Derivatives not designated as hedges
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . .
Equity index options . . . . . . . . . . . . . . . . . . . . .
Financial futures . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign currency contracts . . . . . . . . . . .

Notional
Notional
Notional
Notional

Total derivatives not designated as

hedges . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,634)

—

(2,634)

(2,634)

—
(2,504)
(5,594)
(5,937)

$ 8,178
127

8,305

8,305

4,674
2,000
1,104
1,771

Interest rate swaps . . . . . . . . . . . . . . . . . .
Foreign currency swaps . . . . . . . . . . . . . .

Notional
Notional

$ 8,968
110

$ 1,844
17

9,078

9,078

4,674
2,451
1,182
628

1,861

1,861

—
2,053
5,516
7,080

Total derivatives . . . . . . . . . . . . . . . . . . . .

$18,013

$16,510

$(16,669)

$17,854

Measurement

December 31,
2019

Additions

Maturities/
terminations

December 31,
2020

8,935

14,649

(14,035)

9,549

(Number of policies)

Derivatives not designated as hedges
GMWB embedded derivatives . . . . . . . . . . . . .
Fixed index annuity embedded derivatives . . .
Indexed universal life embedded

Policies
Policies

25,623
15,441

—
—

—

(1,910)
(2,663)

23,713
12,778

(42)

842

158

159

derivatives . . . . . . . . . . . . . . . . . . . . . . . . . .

Policies

884

The decrease in the notional value of derivatives was primarily attributable to terminations of interest rate
swaps that support our long-term care insurance business and terminations of equity index options that support
our fixed indexed annuity products, mostly offset by an increase in foreign currency derivatives entered into to
hedge payments to AXA under the promissory note denominated in a foreign currency.

The number of policies related to our embedded derivatives decreased as these products are no longer being

offered and continue to runoff.

Consolidated Balance Sheets

Total assets. Total assets increased $4,405 million from $101,342 million as of December 31, 2019 to

$105,747 million as of December 31, 2020.

• Cash, cash equivalents, restricted cash and total investments increased $5,324 million primarily from
increases of $5,451 million and $621 million in fixed maturity securities and other invested assets,
respectively. The increase in fixed maturity securities was predominantly related to higher unrealized
gains mostly associated with a decrease in interest rates and from net purchases in 2020. The increase
in other invested assets was principally from additional capital investments in limited partnerships in
2020 and higher derivative assets driven mostly by lower interest rates. These increases were partially
offset by a decrease in cash, cash equivalents and restricted cash of $685 million largely related to the
redemption of Genworth Holdings’ senior notes due in June 2020, the early repayment of Rivermont
I’s non-recourse funding obligations originally due in 2050, net purchases of fixed maturity securities,
payments of $269 million to AXA and the repurchase of $84 million principal amount of Genworth
Holdings’ senior notes with 2021 maturity dates. These decreases to cash were partially offset by
proceeds received from the issuance of GMHI’s 2025 Senior Notes.

• DAC decreased $307 million principally associated with higher amortization largely driven by an

increase in lapses in our large 20-year term life insurance block as it entered its post-level premium period
and amortization outpacing deferrals reflecting the low sales in our long-term care insurance business in
2020. Additionally, our universal and term universal life insurance products decreased mostly attributable
to an impairment of $63 million recorded in connection with recoverability testing and an unfavorable
unlocking adjustment of $48 million related to our annual review of assumptions in 2020.

• Reinsurance recoverable decreased $284 million mainly attributable to the runoff of our structured
settlement products ceded to UFLIC, an affiliate of our former parent, GE. We also recorded
$45 million of expected credit losses in 2020 associated with adopting the new accounting guidance.

• Deferred tax asset decreased $318 million largely due to the utilization of net operating losses and

foreign tax credits and from higher unrealized gains on derivatives and investments, partially offset by
a deferred tax asset recorded in connection with the AXA settlement agreement.

Total liabilities. Total liabilities increased $3,217 million from $86,710 million as of December 31, 2019 to

$89,927 million as of December 31, 2020.

•

Future policy benefits increased $2,311 million primarily driven by shadow accounting adjustments
associated with the recognition of higher unrealized gains. The shadow accounting adjustments
increased future policy benefits by approximately $1,889 million, mostly in our long-term care
insurance business, with an offsetting amount recorded in other comprehensive income (loss). The
increase was also attributable to aging of our long-term care insurance in-force block and higher
incremental reserves of $302 million recorded in connection with an accrual for profits followed by
losses in 2020. These increases were partially offset by our fixed annuities business principally from
net outflows driven by surrenders and benefits in 2020 and from the runoff of our term life insurance
products, along with higher lapses in 2020.

•

Policyholder account balances decreased $714 million largely attributable to surrenders and benefits in
our fixed annuities business and our corporate-owned life insurance products and from a favorable

needs.

160

161

unlocking adjustment of $118 million in our term universal and universal life insurance products

related to our annual review of assumptions in 2020.

• Liability for policy and contract claims increased $859 million largely related to our U.S. mortgage

insurance business primarily attributable to a significant increase in the number of new delinquencies

driven largely by borrower forbearance resulting from COVID-19. In addition, existing reserves were

strengthened by $65 million in 2020 primarily driven by deterioration of early cure emergence patterns

impacting claim frequency and severity. The increase was also attributable to our long-term care

insurance business primarily attributable to higher new claims and claim severity as a result of the

aging of the in-force block. Given our assumption that COVID-19 has temporarily decreased the

number of new claims submitted, IBNR reserves were strengthened by $108 million, partially

offsetting the favorable development on IBNR claims. Additionally, we recorded a $91 million

increase to claim reserves, reflecting our assumption that COVID-19 has accelerated mortality

experience on the most vulnerable claimants, leaving the remaining claim population less likely to

terminate compared to the pre-pandemic average population. These increases were partially offset by

higher claim terminations driven mostly by higher mortality and a $38 million net favorable impact

from changes in assumptions and methodologies associated with our annual claim reserve review

completed in the fourth quarter of 2020. Our Australia mortgage insurance business increased its loss

reserves by $123 million, including its IBNR reserves, due principally to a refinement in methodology

to better align with historical delinquency behavior, as well as to reflect delayed impacts from higher

expected delinquencies and the pressured economic conditions caused by COVID-19.

• Other liabilities increased $332 million principally due to higher counterparty collateral driven mostly

by lower interest rates increasing derivative valuations and an increase in accrued expenses, including

contract fee accruals in our Australia mortgage insurance business.

• Non-recourse funding obligations decreased $311 million due to the early redemption of Rivermont I’s

outstanding non-recourse funding obligations originally due in 2050.

• Long-term borrowings increased $271 million mainly attributable to $750 million of senior notes

issued by GMHI, partially offset by the redemption of Genworth Holdings’ 7.70% senior notes due in

June 2020 and the repurchase of $84 million principal amount of senior notes with 2021 maturity dates

in 2020.

• Liabilities related to discontinued operations increased $421 million predominantly from a promissory

note issued in July 2020 associated with the settlement agreement reached with AXA. See note 23 in

our consolidated financial statements under “Item 8 —Financial Statements and Supplementary Data”

for additional details.

Total equity. Total equity increased $1,188 million from $14,632 million as of December 31, 2019 to

$15,820 million as of December 31, 2020.

• We reported net income available to Genworth Financial, Inc.’s common stockholders of $178 million

for the year ended December 31, 2020. We also adopted new accounting guidance on January 1, 2020

related to estimating expected credit losses that was applied on a modified retrospective basis, resulting

in a $55 million decrease to retained earnings in 2020.

• Unrealized gains on investments and derivatives qualifying as hedges increased $758 million and

$209 million, respectively, primarily from a decrease in interest rates in 2020.

Liquidity and Capital Resources

Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows

from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth

The decrease in the notional value of derivatives was primarily attributable to terminations of interest rate

swaps that support our long-term care insurance business and terminations of equity index options that support

our fixed indexed annuity products, mostly offset by an increase in foreign currency derivatives entered into to

hedge payments to AXA under the promissory note denominated in a foreign currency.

The number of policies related to our embedded derivatives decreased as these products are no longer being

offered and continue to runoff.

Consolidated Balance Sheets

Total assets. Total assets increased $4,405 million from $101,342 million as of December 31, 2019 to

$105,747 million as of December 31, 2020.

• Cash, cash equivalents, restricted cash and total investments increased $5,324 million primarily from

increases of $5,451 million and $621 million in fixed maturity securities and other invested assets,

respectively. The increase in fixed maturity securities was predominantly related to higher unrealized

gains mostly associated with a decrease in interest rates and from net purchases in 2020. The increase

in other invested assets was principally from additional capital investments in limited partnerships in

2020 and higher derivative assets driven mostly by lower interest rates. These increases were partially

offset by a decrease in cash, cash equivalents and restricted cash of $685 million largely related to the

redemption of Genworth Holdings’ senior notes due in June 2020, the early repayment of Rivermont

I’s non-recourse funding obligations originally due in 2050, net purchases of fixed maturity securities,

payments of $269 million to AXA and the repurchase of $84 million principal amount of Genworth

Holdings’ senior notes with 2021 maturity dates. These decreases to cash were partially offset by

proceeds received from the issuance of GMHI’s 2025 Senior Notes.

• DAC decreased $307 million principally associated with higher amortization largely driven by an

increase in lapses in our large 20-year term life insurance block as it entered its post-level premium period

and amortization outpacing deferrals reflecting the low sales in our long-term care insurance business in

2020. Additionally, our universal and term universal life insurance products decreased mostly attributable

to an impairment of $63 million recorded in connection with recoverability testing and an unfavorable

unlocking adjustment of $48 million related to our annual review of assumptions in 2020.

• Reinsurance recoverable decreased $284 million mainly attributable to the runoff of our structured

settlement products ceded to UFLIC, an affiliate of our former parent, GE. We also recorded

$45 million of expected credit losses in 2020 associated with adopting the new accounting guidance.

• Deferred tax asset decreased $318 million largely due to the utilization of net operating losses and

foreign tax credits and from higher unrealized gains on derivatives and investments, partially offset by

a deferred tax asset recorded in connection with the AXA settlement agreement.

Total liabilities. Total liabilities increased $3,217 million from $86,710 million as of December 31, 2019 to

$89,927 million as of December 31, 2020.

•

Future policy benefits increased $2,311 million primarily driven by shadow accounting adjustments

associated with the recognition of higher unrealized gains. The shadow accounting adjustments

increased future policy benefits by approximately $1,889 million, mostly in our long-term care

insurance business, with an offsetting amount recorded in other comprehensive income (loss). The

increase was also attributable to aging of our long-term care insurance in-force block and higher

incremental reserves of $302 million recorded in connection with an accrual for profits followed by

losses in 2020. These increases were partially offset by our fixed annuities business principally from

net outflows driven by surrenders and benefits in 2020 and from the runoff of our term life insurance

products, along with higher lapses in 2020.

•

Policyholder account balances decreased $714 million largely attributable to surrenders and benefits in

our fixed annuities business and our corporate-owned life insurance products and from a favorable

unlocking adjustment of $118 million in our term universal and universal life insurance products
related to our annual review of assumptions in 2020.

• Liability for policy and contract claims increased $859 million largely related to our U.S. mortgage

insurance business primarily attributable to a significant increase in the number of new delinquencies
driven largely by borrower forbearance resulting from COVID-19. In addition, existing reserves were
strengthened by $65 million in 2020 primarily driven by deterioration of early cure emergence patterns
impacting claim frequency and severity. The increase was also attributable to our long-term care
insurance business primarily attributable to higher new claims and claim severity as a result of the
aging of the in-force block. Given our assumption that COVID-19 has temporarily decreased the
number of new claims submitted, IBNR reserves were strengthened by $108 million, partially
offsetting the favorable development on IBNR claims. Additionally, we recorded a $91 million
increase to claim reserves, reflecting our assumption that COVID-19 has accelerated mortality
experience on the most vulnerable claimants, leaving the remaining claim population less likely to
terminate compared to the pre-pandemic average population. These increases were partially offset by
higher claim terminations driven mostly by higher mortality and a $38 million net favorable impact
from changes in assumptions and methodologies associated with our annual claim reserve review
completed in the fourth quarter of 2020. Our Australia mortgage insurance business increased its loss
reserves by $123 million, including its IBNR reserves, due principally to a refinement in methodology
to better align with historical delinquency behavior, as well as to reflect delayed impacts from higher
expected delinquencies and the pressured economic conditions caused by COVID-19.

• Other liabilities increased $332 million principally due to higher counterparty collateral driven mostly
by lower interest rates increasing derivative valuations and an increase in accrued expenses, including
contract fee accruals in our Australia mortgage insurance business.

• Non-recourse funding obligations decreased $311 million due to the early redemption of Rivermont I’s

outstanding non-recourse funding obligations originally due in 2050.

• Long-term borrowings increased $271 million mainly attributable to $750 million of senior notes

issued by GMHI, partially offset by the redemption of Genworth Holdings’ 7.70% senior notes due in
June 2020 and the repurchase of $84 million principal amount of senior notes with 2021 maturity dates
in 2020.

• Liabilities related to discontinued operations increased $421 million predominantly from a promissory
note issued in July 2020 associated with the settlement agreement reached with AXA. See note 23 in
our consolidated financial statements under “Item 8 —Financial Statements and Supplementary Data”
for additional details.

Total equity. Total equity increased $1,188 million from $14,632 million as of December 31, 2019 to

$15,820 million as of December 31, 2020.

• We reported net income available to Genworth Financial, Inc.’s common stockholders of $178 million
for the year ended December 31, 2020. We also adopted new accounting guidance on January 1, 2020
related to estimating expected credit losses that was applied on a modified retrospective basis, resulting
in a $55 million decrease to retained earnings in 2020.

• Unrealized gains on investments and derivatives qualifying as hedges increased $758 million and

$209 million, respectively, primarily from a decrease in interest rates in 2020.

Liquidity and Capital Resources

Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows

from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth
needs.

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The following table sets forth our condensed consolidated cash flows for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash from (used by) investing activities . . . . . . . . . . . . . . . . . . . .
Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,960
(1,153)
(1,507)

$ 2,079
1,301
(2,217)

$ 1,633
(622)
(1,621)

Net increase (decrease) in cash before foreign exchange effect

. . . . .

$ (700)

$ 1,163

$ (610)

Our principal sources of cash include sales of our products and services, income from our investment
portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash
flows from operating activities, as premiums collected from our insurance products and income received from
our investments typically exceed policy acquisition costs, benefits paid, redemptions and operating expenses. Our
cash flows from operating activities are affected by the timing of premiums, fees and investment income received
and benefits and expenses paid. Positive cash flows from operating activities are then invested to support the
obligations of our insurance and investment products and required capital supporting these products. In analyzing
our cash flow, we focus on the change in the amount of cash available and used in investing activities. Changes
in cash from financing activities primarily relate to the issuance of, and redemptions and benefit payments on,
universal life insurance and investment contracts; deposits from FHLBs; the issuance and acquisition of debt and
equity securities; the issuance and repayment or repurchase of borrowings and non-recourse funding obligations;
and other capital transactions.

We had lower cash inflows from operating activities in 2020 mainly attributable to payments of

$269 million to AXA, discussed further below, partially offset by higher collateral received from counterparties
related to our derivative positions in 2020.

We had cash outflows from investing activities in 2020 mainly from net purchases of fixed maturity and

equity securities and net capital calls on limited partnerships, partially offset by commercial mortgage loan
repayments outpacing originations and policy loan repayments. We had cash inflows from investing activities in
2019 primarily driven by net proceeds from the sale of Genworth Canada in December 2019 and net sales of
fixed maturity securities, partially offset by net purchases of short-term investments and commercial mortgage
loan originations outpacing repayments.

We had lower cash outflows from financing activities in 2020 principally from $738 million of net proceeds

from the issuance of GMHI’s 2025 Senior Notes and lower net withdrawals from our investment contracts,
partially offset by higher repayment and repurchase of long-term debt. In 2020, Genworth Holdings redeemed
$397 million of its senior notes due in June 2020, Rivermont I early redeemed $315 million of its non-recourse
funding obligations originally due in 2050 and Genworth Holdings repurchased $84 million principal amount of
its senior notes with 2021 maturity dates. In 2019, Genworth Holdings repaid its $443 million Term Loan.

We engage in certain securities lending transactions for the purpose of enhancing the yield on our

investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue
to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently
indemnified against counterparty credit risk by the intermediary. See note 12 in our consolidated financial
statements under “Item 8—Financial Statements and Supplementary Data” for additional information related to
our securities lending program.

Genworth—holding company

Genworth Financial and Genworth Holdings each act as a holding company for their respective subsidiaries

and do not have any significant operations of their own. Dividends from their respective subsidiaries, payments

to them under tax sharing and expense reimbursement arrangements with their subsidiaries and proceeds from

borrowings or securities issuances are their principal sources of cash to meet their obligations. Insurance laws

and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth

Holdings by their insurance subsidiaries. We expect dividends paid by the insurance subsidiaries will vary

depending on strategic objectives, regulatory requirements and business performance, including the expected

continued adverse impacts from COVID-19.

The primary uses of funds at Genworth Financial and Genworth Holdings include payment of holding

company general operating expenses (including taxes), payment of principal, interest and other expenses on

current and any future borrowings or other obligations (including payments to AXA under a secured promissory

note reported as discontinued operations), payments under current and any future guarantees (including

guarantees of certain subsidiary obligations), payment of amounts owed to GE under the Tax Matters Agreement,

payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing

agreements, contributions to subsidiaries, repurchases of debt securities and, in the case of Genworth Holdings,

loans, dividends or other distributions to Genworth Financial. In deploying future capital, important current

priorities include focusing on our U.S. mortgage insurance business so it remains appropriately capitalized and

reducing overall indebtedness of Genworth Holdings. We may from time to time seek to repurchase or redeem

outstanding notes for cash (with cash on hand, proceeds from the issuance of new debt and/or the proceeds from

asset or stock sales) in open market purchases, tender offers, privately negotiated transactions or otherwise. We

currently seek to address our indebtedness over time through repurchases, redemptions and/or repayments at

maturity.

Directors.

Our Board of Directors has suspended the payment of stockholder dividends on our Genworth Financial

common stock indefinitely. The declaration and payment of future dividends to holders of our common stock

will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of

dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements

of our subsidiaries, legal requirements, regulatory constraints, our debt obligations, our credit and financial

strength ratings and such other factors as the Board of Directors deems relevant. In addition, our Board of

Directors has suspended repurchases of our Genworth Financial common stock under our stock repurchase

program indefinitely. The resumption of our stock repurchase program will be at the discretion of our Board of

Genworth Holdings had $1,078 million and $1,461 million of cash, cash equivalents and restricted cash as

of December 31, 2020 and 2019, respectively, which included $46 million of restricted cash equivalents as of

December 31, 2020. Genworth Holdings also held $25 million and $70 million in U.S. government securities as

of December 31, 2020 and 2019, respectively, which included approximately $25 million and $48 million,

respectively, of restricted assets. The decrease in Genworth Holdings’ cash, cash equivalents and restricted cash

was principally driven by the repayment of long-term debt and intercompany notes and payments to AXA of

$269 million, partially offset by dividends of $437 million received from our U.S. mortgage insurance business

and intercompany tax payments received from our subsidiaries generated from realized investment gains in 2020.

On July 20, 2020, we reached a settlement agreement with AXA regarding a dispute over payment protection

insurance mis-selling claims sold by our former lifestyle protection insurance business that was acquired by

AXA in December 2015. Prior to reaching the settlement agreement, in January 2020, we made an interim

litigation payment of £100 million ($134 million) to AXA. On July 21, 2020 we paid an initial amount under the

settlement agreement of £100 million ($125 million) and have also paid approximately $10 million in interest

payments attributable to the promissory note. For additional details on the decrease in cash, cash equivalents and

restricted cash, see below under “—Capital resources and financing activities.”

During the years ended December 31, 2020, 2019 and 2018, Genworth Holdings received cash dividends

from its international subsidiaries of $11 million, $1,486 million and $182 million, respectively. Our

international subsidiaries had to preserve capital due to the adverse impacts caused by COVID-19 and

accordingly reduced the amount of dividends paid to Genworth Holdings during 2020. Dividends received by

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Genworth and subsidiaries

The following table sets forth our condensed consolidated cash flows for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,960

$ 2,079

$ 1,633

Net cash from (used by) investing activities . . . . . . . . . . . . . . . . . . . .

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,153)

(1,507)

1,301

(2,217)

(622)

(1,621)

Net increase (decrease) in cash before foreign exchange effect

. . . . .

$ (700)

$ 1,163

$ (610)

Our principal sources of cash include sales of our products and services, income from our investment

portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash

flows from operating activities, as premiums collected from our insurance products and income received from

our investments typically exceed policy acquisition costs, benefits paid, redemptions and operating expenses. Our

cash flows from operating activities are affected by the timing of premiums, fees and investment income received

and benefits and expenses paid. Positive cash flows from operating activities are then invested to support the

obligations of our insurance and investment products and required capital supporting these products. In analyzing

our cash flow, we focus on the change in the amount of cash available and used in investing activities. Changes

in cash from financing activities primarily relate to the issuance of, and redemptions and benefit payments on,

universal life insurance and investment contracts; deposits from FHLBs; the issuance and acquisition of debt and

equity securities; the issuance and repayment or repurchase of borrowings and non-recourse funding obligations;

and other capital transactions.

We had lower cash inflows from operating activities in 2020 mainly attributable to payments of

$269 million to AXA, discussed further below, partially offset by higher collateral received from counterparties

related to our derivative positions in 2020.

We had cash outflows from investing activities in 2020 mainly from net purchases of fixed maturity and

equity securities and net capital calls on limited partnerships, partially offset by commercial mortgage loan

repayments outpacing originations and policy loan repayments. We had cash inflows from investing activities in

2019 primarily driven by net proceeds from the sale of Genworth Canada in December 2019 and net sales of

fixed maturity securities, partially offset by net purchases of short-term investments and commercial mortgage

loan originations outpacing repayments.

We had lower cash outflows from financing activities in 2020 principally from $738 million of net proceeds

from the issuance of GMHI’s 2025 Senior Notes and lower net withdrawals from our investment contracts,

partially offset by higher repayment and repurchase of long-term debt. In 2020, Genworth Holdings redeemed

$397 million of its senior notes due in June 2020, Rivermont I early redeemed $315 million of its non-recourse

funding obligations originally due in 2050 and Genworth Holdings repurchased $84 million principal amount of

its senior notes with 2021 maturity dates. In 2019, Genworth Holdings repaid its $443 million Term Loan.

We engage in certain securities lending transactions for the purpose of enhancing the yield on our

investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue

to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently

indemnified against counterparty credit risk by the intermediary. See note 12 in our consolidated financial

statements under “Item 8—Financial Statements and Supplementary Data” for additional information related to

our securities lending program.

Genworth—holding company

Genworth Financial and Genworth Holdings each act as a holding company for their respective subsidiaries

and do not have any significant operations of their own. Dividends from their respective subsidiaries, payments

to them under tax sharing and expense reimbursement arrangements with their subsidiaries and proceeds from
borrowings or securities issuances are their principal sources of cash to meet their obligations. Insurance laws
and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth
Holdings by their insurance subsidiaries. We expect dividends paid by the insurance subsidiaries will vary
depending on strategic objectives, regulatory requirements and business performance, including the expected
continued adverse impacts from COVID-19.

The primary uses of funds at Genworth Financial and Genworth Holdings include payment of holding
company general operating expenses (including taxes), payment of principal, interest and other expenses on
current and any future borrowings or other obligations (including payments to AXA under a secured promissory
note reported as discontinued operations), payments under current and any future guarantees (including
guarantees of certain subsidiary obligations), payment of amounts owed to GE under the Tax Matters Agreement,
payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing
agreements, contributions to subsidiaries, repurchases of debt securities and, in the case of Genworth Holdings,
loans, dividends or other distributions to Genworth Financial. In deploying future capital, important current
priorities include focusing on our U.S. mortgage insurance business so it remains appropriately capitalized and
reducing overall indebtedness of Genworth Holdings. We may from time to time seek to repurchase or redeem
outstanding notes for cash (with cash on hand, proceeds from the issuance of new debt and/or the proceeds from
asset or stock sales) in open market purchases, tender offers, privately negotiated transactions or otherwise. We
currently seek to address our indebtedness over time through repurchases, redemptions and/or repayments at
maturity.

Our Board of Directors has suspended the payment of stockholder dividends on our Genworth Financial
common stock indefinitely. The declaration and payment of future dividends to holders of our common stock
will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of
dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements
of our subsidiaries, legal requirements, regulatory constraints, our debt obligations, our credit and financial
strength ratings and such other factors as the Board of Directors deems relevant. In addition, our Board of
Directors has suspended repurchases of our Genworth Financial common stock under our stock repurchase
program indefinitely. The resumption of our stock repurchase program will be at the discretion of our Board of
Directors.

Genworth Holdings had $1,078 million and $1,461 million of cash, cash equivalents and restricted cash as

of December 31, 2020 and 2019, respectively, which included $46 million of restricted cash equivalents as of
December 31, 2020. Genworth Holdings also held $25 million and $70 million in U.S. government securities as
of December 31, 2020 and 2019, respectively, which included approximately $25 million and $48 million,
respectively, of restricted assets. The decrease in Genworth Holdings’ cash, cash equivalents and restricted cash
was principally driven by the repayment of long-term debt and intercompany notes and payments to AXA of
$269 million, partially offset by dividends of $437 million received from our U.S. mortgage insurance business
and intercompany tax payments received from our subsidiaries generated from realized investment gains in 2020.
On July 20, 2020, we reached a settlement agreement with AXA regarding a dispute over payment protection
insurance mis-selling claims sold by our former lifestyle protection insurance business that was acquired by
AXA in December 2015. Prior to reaching the settlement agreement, in January 2020, we made an interim
litigation payment of £100 million ($134 million) to AXA. On July 21, 2020 we paid an initial amount under the
settlement agreement of £100 million ($125 million) and have also paid approximately $10 million in interest
payments attributable to the promissory note. For additional details on the decrease in cash, cash equivalents and
restricted cash, see below under “—Capital resources and financing activities.”

During the years ended December 31, 2020, 2019 and 2018, Genworth Holdings received cash dividends

from its international subsidiaries of $11 million, $1,486 million and $182 million, respectively. Our
international subsidiaries had to preserve capital due to the adverse impacts caused by COVID-19 and
accordingly reduced the amount of dividends paid to Genworth Holdings during 2020. Dividends received by

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Genworth Holdings in 2019 included $1,235 million of net proceeds related to the sale of Genworth Canada.
Dividends received by Genworth Holdings in 2019 and 2018 also included $23 million and $57 million,
respectively, from our participation in the share buy-back programs in Genworth Australia, as discussed below.

During 2020, our U.S. mortgage insurance business paid dividends of $437 million from the net proceeds
received from GMHI’s issuance of its 2025 Senior Notes. During 2019 and 2018, Genworth Financial received
cash dividends of $250 million and $50 million, respectively, from our U.S. mortgage insurance business. We
regularly evaluate business conditions, the macro-economic environment, regulatory requirements, PMIERs
sufficiency and business needs, among other things, to determine the amount and timing of future dividends in
our U.S. mortgage insurance business. Future dividends and the timing of their distribution will also depend on
the economic recovery from COVID-19 and prepayment obligations under the secured promissory note issued in
connection with the AXA settlement agreement, among other factors.

There were no dividends paid to Genworth Holdings by its domestic life insurance subsidiaries during the
years ended December 31, 2020, 2019 or 2018. We do not expect our U.S. life insurance businesses to provide
dividends to our holding companies in the foreseeable future.

Guarantees and other commitments

Genworth Holdings provides capital support of up to $175 million, subject to adjustments, to one of its
insurance subsidiaries to fund claims to support its mortgage insurance business in Mexico. We believe this
insurance subsidiary has adequate reserves to cover its underlying obligations.

Genworth Holdings provided an unlimited guarantee for the benefit of policyholders for the payment of
valid claims by our European mortgage insurance subsidiary prior to its sale in May 2016. Following the sale of
this United Kingdom subsidiary to AmTrust Financial Services, Inc., the guarantee was limited to the payment of
valid claims on policies in-force prior to the sale date and those written approximately 90 days subsequent to the
date of the sale, and AmTrust Financial Services, Inc. has agreed to provide us with a limited indemnification in
the event there is any exposure under the guarantee. As of December 31, 2020, the risk in-force of active policies
was approximately $1.3 billion.

Genworth Holdings has a Tax Matters Agreement with GE, our former parent company, which represents an

obligation of Genworth Holdings to GE. The balance of the fixed portion of the obligation was $41 million as of
December 31, 2020. Genworth Financial and Genworth Holdings have joint and several guarantees associated
with this Tax Matters Agreement.

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’
outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured
unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of,
premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and
outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth
Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes.
See note 12 in our consolidated financial statements under “Item 8—Financial Statements and Supplementary
Data” for additional information.

We also provided guarantees to third parties for the performance of certain obligations of our subsidiaries.

We estimate that our potential obligations under such guarantees were $4 million and $5 million as of
December 31, 2020 and 2019, respectively.

Regulated insurance subsidiaries

and Supplementary Data” for additional information regarding the payment of dividends. In general, dividends in

excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. Based on

estimated statutory results as of December 31, 2020, in accordance with applicable dividend restrictions, our

subsidiaries could pay dividends of approximately $190 million to us in 2021. However, our insurance

subsidiaries may not pay dividends to us in 2021 at this level if they need to retain capital for regulatory

purposes, including as a result of COVID-19, and retain capital for future growth or to meet capital requirements.

In addition, the receipt of dividends and sale proceeds above certain thresholds from our mortgage insurance

businesses, including the applicable insurance subsidiaries, are also subject to mandatory prepayment conditions

under the settlement agreement with AXA. See note 23 in our consolidated financial statements under “Item 8—

Financial Statements and Supplementary Data” for additional details on the terms of the settlement with AXA.

The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities

associated with their various insurance and investment products, operating costs and expenses, the payment of

dividends to us, contributions to their subsidiaries, payment of principal and interest on their outstanding debt

obligations and income taxes. Liabilities arising from insurance and investment products include the payment of

benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and

obligations to redeem funding agreements.

Our insurance subsidiaries have used cash flows from operations and investment activities to fund their

liquidity requirements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived

from premiums, annuity deposits and insurance and investment product fees and other income, including

commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment

management fees and dividends and distributions from their subsidiaries. The principal cash inflows from

investment activities result from repayments of principal, investment income and, as necessary, sales of invested

assets.

Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits

without forced sales of investments. Products having liabilities with longer durations, such as certain life

insurance and long-term care insurance policies, are matched with investments having similar duration such as

long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are matched with

fixed maturity securities that have short- and medium-term fixed maturities. In addition, our insurance

subsidiaries hold highly liquid, high quality short-term investment securities and other liquid investment grade

fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of December 31,

2020, our total cash, cash equivalents, restricted cash and invested assets were $79.9 billion. Our investments in

privately placed fixed maturity securities, commercial mortgage loans, policy loans, limited partnership

investments and select mortgage-backed and asset-backed securities are relatively illiquid. These asset classes

represented approximately 37% of the carrying value of our total cash, cash equivalents, restricted cash and

invested assets as of December 31, 2020.

As of December 31, 2020, 2019 and 2018, our U.S. mortgage insurance business was compliant with the

PMIERs capital requirements. On October 22, 2020, our U.S. mortgage insurance business obtained $350 million

of excess of loss reinsurance coverage from Triangle Re 2020 on a portfolio of existing mortgage insurance

policies written from January 2020 through August 2020. See note 8 in our consolidated financial statements

under “Item 8—Financial Statements and Supplementary Data” for additional information on this transaction.

Credit risk transfer transactions provided an aggregate of approximately $936 million of PMIERs capital credit

as of December 31, 2020. Our U.S. mortgage insurance business may execute future credit risk transfer

transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in

response to potential changes in performance and PMIERs requirements over time. We believe that future credit

risk transfer transactions may be more difficult to execute, if possible at all, and may have a higher cost during

and following COVID-19.

Insurance laws and regulations regulate the payment of dividends and other distributions to us by our
insurance subsidiaries. See note 17 in our consolidated financial statements under “Item 8—Financial Statements

In February 2019, Genworth Australia announced its intention to commence an on-market share buy-back

program for shares up to a maximum aggregate amount of AUD$100 million. Pursuant to the program, Genworth

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Genworth Holdings in 2019 included $1,235 million of net proceeds related to the sale of Genworth Canada.

Dividends received by Genworth Holdings in 2019 and 2018 also included $23 million and $57 million,

respectively, from our participation in the share buy-back programs in Genworth Australia, as discussed below.

During 2020, our U.S. mortgage insurance business paid dividends of $437 million from the net proceeds

received from GMHI’s issuance of its 2025 Senior Notes. During 2019 and 2018, Genworth Financial received

cash dividends of $250 million and $50 million, respectively, from our U.S. mortgage insurance business. We

regularly evaluate business conditions, the macro-economic environment, regulatory requirements, PMIERs

sufficiency and business needs, among other things, to determine the amount and timing of future dividends in

our U.S. mortgage insurance business. Future dividends and the timing of their distribution will also depend on

the economic recovery from COVID-19 and prepayment obligations under the secured promissory note issued in

connection with the AXA settlement agreement, among other factors.

There were no dividends paid to Genworth Holdings by its domestic life insurance subsidiaries during the

years ended December 31, 2020, 2019 or 2018. We do not expect our U.S. life insurance businesses to provide

dividends to our holding companies in the foreseeable future.

Guarantees and other commitments

Genworth Holdings provides capital support of up to $175 million, subject to adjustments, to one of its

insurance subsidiaries to fund claims to support its mortgage insurance business in Mexico. We believe this

insurance subsidiary has adequate reserves to cover its underlying obligations.

Genworth Holdings provided an unlimited guarantee for the benefit of policyholders for the payment of

valid claims by our European mortgage insurance subsidiary prior to its sale in May 2016. Following the sale of

this United Kingdom subsidiary to AmTrust Financial Services, Inc., the guarantee was limited to the payment of

valid claims on policies in-force prior to the sale date and those written approximately 90 days subsequent to the

date of the sale, and AmTrust Financial Services, Inc. has agreed to provide us with a limited indemnification in

the event there is any exposure under the guarantee. As of December 31, 2020, the risk in-force of active policies

was approximately $1.3 billion.

Genworth Holdings has a Tax Matters Agreement with GE, our former parent company, which represents an

obligation of Genworth Holdings to GE. The balance of the fixed portion of the obligation was $41 million as of

December 31, 2020. Genworth Financial and Genworth Holdings have joint and several guarantees associated

with this Tax Matters Agreement.

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’

outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured

unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of,

premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and

outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth

Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes.

See note 12 in our consolidated financial statements under “Item 8—Financial Statements and Supplementary

Data” for additional information.

We also provided guarantees to third parties for the performance of certain obligations of our subsidiaries.

We estimate that our potential obligations under such guarantees were $4 million and $5 million as of

December 31, 2020 and 2019, respectively.

Regulated insurance subsidiaries

and Supplementary Data” for additional information regarding the payment of dividends. In general, dividends in
excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. Based on
estimated statutory results as of December 31, 2020, in accordance with applicable dividend restrictions, our
subsidiaries could pay dividends of approximately $190 million to us in 2021. However, our insurance
subsidiaries may not pay dividends to us in 2021 at this level if they need to retain capital for regulatory
purposes, including as a result of COVID-19, and retain capital for future growth or to meet capital requirements.
In addition, the receipt of dividends and sale proceeds above certain thresholds from our mortgage insurance
businesses, including the applicable insurance subsidiaries, are also subject to mandatory prepayment conditions
under the settlement agreement with AXA. See note 23 in our consolidated financial statements under “Item 8—
Financial Statements and Supplementary Data” for additional details on the terms of the settlement with AXA.

The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities
associated with their various insurance and investment products, operating costs and expenses, the payment of
dividends to us, contributions to their subsidiaries, payment of principal and interest on their outstanding debt
obligations and income taxes. Liabilities arising from insurance and investment products include the payment of
benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and
obligations to redeem funding agreements.

Our insurance subsidiaries have used cash flows from operations and investment activities to fund their

liquidity requirements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived
from premiums, annuity deposits and insurance and investment product fees and other income, including
commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment
management fees and dividends and distributions from their subsidiaries. The principal cash inflows from
investment activities result from repayments of principal, investment income and, as necessary, sales of invested
assets.

Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits

without forced sales of investments. Products having liabilities with longer durations, such as certain life
insurance and long-term care insurance policies, are matched with investments having similar duration such as
long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are matched with
fixed maturity securities that have short- and medium-term fixed maturities. In addition, our insurance
subsidiaries hold highly liquid, high quality short-term investment securities and other liquid investment grade
fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of December 31,
2020, our total cash, cash equivalents, restricted cash and invested assets were $79.9 billion. Our investments in
privately placed fixed maturity securities, commercial mortgage loans, policy loans, limited partnership
investments and select mortgage-backed and asset-backed securities are relatively illiquid. These asset classes
represented approximately 37% of the carrying value of our total cash, cash equivalents, restricted cash and
invested assets as of December 31, 2020.

As of December 31, 2020, 2019 and 2018, our U.S. mortgage insurance business was compliant with the
PMIERs capital requirements. On October 22, 2020, our U.S. mortgage insurance business obtained $350 million
of excess of loss reinsurance coverage from Triangle Re 2020 on a portfolio of existing mortgage insurance
policies written from January 2020 through August 2020. See note 8 in our consolidated financial statements
under “Item 8—Financial Statements and Supplementary Data” for additional information on this transaction.
Credit risk transfer transactions provided an aggregate of approximately $936 million of PMIERs capital credit
as of December 31, 2020. Our U.S. mortgage insurance business may execute future credit risk transfer
transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in
response to potential changes in performance and PMIERs requirements over time. We believe that future credit
risk transfer transactions may be more difficult to execute, if possible at all, and may have a higher cost during
and following COVID-19.

Insurance laws and regulations regulate the payment of dividends and other distributions to us by our

insurance subsidiaries. See note 17 in our consolidated financial statements under “Item 8—Financial Statements

In February 2019, Genworth Australia announced its intention to commence an on-market share buy-back
program for shares up to a maximum aggregate amount of AUD$100 million. Pursuant to the program, Genworth

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Australia repurchased approximately 25 million of its shares for AUD$64 million. As the majority shareholder,
we participated in on-market sales transactions during the buy-back period to maintain our ownership position of
approximately 52.0% and received $23 million in cash, which was paid as dividends to Genworth Holdings. In
lieu of continuing with further share buy-backs under this program, Genworth Australia paid an unfranked
special dividend of AUD$0.219 per share in the third quarter of 2019, part of which constituted the remaining
AUD$36 million of the buy-back program. As a result, a dividend of $30 million was paid to Genworth
Holdings. In November 2019, Genworth Australia completed a further capital management initiative via an
unfranked special dividend of AUD$0.242 per share, which represented an aggregate distribution of
approximately AUD$100 million. As a result, a dividend of $34 million was paid to Genworth Holdings in
December 2019.

As of December 31, 2020, each of our life insurance subsidiaries exceeded the minimum required RBC
levels in their respective domiciliary state. The consolidated RBC ratio of our U.S. domiciled life insurance
subsidiaries was approximately 229% as of December 31, 2020, an increase compared to December 31, 2019,
mostly from statutory income as a result of benefits in our long-term care insurance business from higher
terminations and lower claim incidence, partially offset by increases in statutory reserves related to Actuarial
Guideline 38 and cash flow testing in GLICNY.

Capital resources and financing activities

On August 21, 2020, GMHI issued $750 million of its 6.50% senior notes due in 2025. Interest on the notes

is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15,
2021. These notes mature on August 15, 2025. GMHI may redeem the notes, in whole or in part, at any time
prior to February 15, 2025 at its option, by paying a make-whole premium, plus accrued and unpaid interest. At
any time on or after February 15, 2025, GMHI may redeem the notes, in whole or in part, at its option, at 100%
of the principal amount, plus accrued and unpaid interest. The notes contain customary events of default, which
subject to certain notice and cure conditions, can result in the acceleration of the principal and accrued interest on
the outstanding notes if GMHI breaches the terms of the indenture.

On July 3, 2020, GFMIPL, our majority-owned subsidiary, issued AUD$147 million floating rate

subordinated notes due in July 2030 in exchange for AUD$147 million of its floating rate subordinated notes due
in July 2025 and issued an additional AUD$43 million floating rate subordinated notes due in July 2030. These
notes will pay interest quarterly at a floating rate equal to the three-month Bank Bill Swap reference rate plus a
margin of 5.0% per annum. GFMIPL has an option to redeem the notes at face value on July 3, 2025 and every
interest payment date thereafter up to and excluding the maturity date, and for certain tax and regulatory events
(in each case subject to APRA’s prior written approval). GFMIPL redeemed AUD$5 million of its floating rate
subordinated notes due in July 2025 on August 24, 2020 and redeemed the remaining AUD$48 million of its
floating rate subordinated notes due in July 2025 on October 6, 2020 and paid accrued interest thereon.

Genworth Holdings paid its 7.20% senior notes with a principal balance of $338 million at maturity on
February 16, 2021. During 2020, Genworth Holdings also repurchased $84 million principal amount of its senior
notes with 2021 maturity dates for a pre-tax gain of $4 million. In March 2020, Genworth Holdings repaid a
$200 million intercompany note due to GLIC with a maturity date of March 31, 2020.

On January 21, 2020, Genworth Holdings early redeemed $397 million of its 7.70% senior notes originally

scheduled to mature in June 2020 using cash proceeds received from the sale of Genworth Canada. The senior
notes were fully redeemed with a cash payment of $409 million, comprised of the outstanding principal balance,
accrued interest and a make-whole premium of $9 million.

In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina,
Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance subsidiary, redeemed all
of its $315 million of outstanding non-recourse funding obligations due in 2050. The early redemption resulted in
a pre-tax loss of $4 million from the write-off of deferred borrowing costs.

On December 12, 2019, Genworth Holdings repaid its Term Loan, which was originally closed on March 7,

2018 and was scheduled to mature in March 2023. Prior to the repayment, GFIH provided a limited recourse

guarantee to the lenders of Genworth Holdings’ outstanding Term Loan, which was secured by GFIH’s

ownership interest in Genworth Canada’s outstanding common shares. Due to the sale of the underlying

collateral, the Term Loan was required to be repaid upon the sale of Genworth Canada. A cash payment of

$445 million was used to fully repay the outstanding principal and accrued interest of the Term Loan.

On May 22, 2018, Genworth Holdings redeemed $597 million of its 6.52% senior notes that were issued in

May 2008 and matured in May 2018. A cash payment of $616 million comprising net proceeds of $441 million

from the Term Loan and $175 million of existing cash on hand was used to fully redeem the principal and

accrued interest balance of the May 2018 senior notes.

For further information about our borrowings, refer to note 12 in our consolidated financial statements under

“Item 8—Financial Statements and Supplementary Data.”

In addition to the initial settlement payment of £100 million ($125 million) paid to AXA on July 21, 2020,

we also issued a secured promissory note to AXA that is due in two installment payments in 2022. Under the

settlement, certain cash flows to Genworth Holdings, including dividends and capital raises, above defined

thresholds must be paid to AXA until the promissory note is fully repaid. In addition, to date in 2021 and over the

next year, we expect to pay AXA approximately $53 million consisting of interest on the promissory note,

assuming we do not make any pre-payments, and a one-time payment on an unrelated liability associated with

underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business.

Our evaluation of our ability to meet our obligations includes the following contractual obligations due

within one year from the issue date of our consolidated financial statements, along with other certain conditions

and events:

• Genworth Holdings had $338 million of its 7.20% senior notes that matured in February 2021 and

$659 million of its 7.625% senior notes that will mature in September 2021, excluding deferred costs;

•

•

•

•

interest payments on our senior notes are forecasted to be $165 million for the next twelve months;

in 2021, until the secured promissory note to AXA is paid, dividends above $50 million from our U.S.

mortgage insurance subsidiaries are subject to mandatory prepayment conditions;

the receipt of dividends and sale proceeds above certain thresholds from our Australian mortgage

insurance business are also subject to mandatory prepayment conditions; and

due to the uncertainty around the completion and timing of the remaining steps required to close the

China Oceanwide transaction, on January 4, 2021, Genworth and China Oceanwide agreed that an

extension of the then current December 31, 2020 merger agreement end date would not be sought. The

consummation of this transaction is dependent on steps outside of our control; accordingly, the

associated post-closing capital contributions from China Oceanwide have not been included in this

evaluation.

In connection with repaying our senior notes maturing in September 2021, Genworth Holdings expects to

have a cash shortfall of approximately $15 million which raises doubt about our ability to meet our financial

obligations within the next year. While conditions and events occurring and expected to occur raise doubt about

our ability to meet our financial obligations, management’s plans alleviate this doubt.

To address this shortfall and longer-term obligations, as well as build cash buffers, we are actively taking

additional steps toward raising capital by preparing for a possible partial public offering of our U.S. mortgage

insurance business, subject to market conditions. In addition to a partial sale of our U.S. mortgage insurance

business through a public offering, we are also evaluating the possibility of the issuance of convertible,

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167

Australia repurchased approximately 25 million of its shares for AUD$64 million. As the majority shareholder,

we participated in on-market sales transactions during the buy-back period to maintain our ownership position of

approximately 52.0% and received $23 million in cash, which was paid as dividends to Genworth Holdings. In

lieu of continuing with further share buy-backs under this program, Genworth Australia paid an unfranked

special dividend of AUD$0.219 per share in the third quarter of 2019, part of which constituted the remaining

AUD$36 million of the buy-back program. As a result, a dividend of $30 million was paid to Genworth

Holdings. In November 2019, Genworth Australia completed a further capital management initiative via an

unfranked special dividend of AUD$0.242 per share, which represented an aggregate distribution of

approximately AUD$100 million. As a result, a dividend of $34 million was paid to Genworth Holdings in

December 2019.

As of December 31, 2020, each of our life insurance subsidiaries exceeded the minimum required RBC

levels in their respective domiciliary state. The consolidated RBC ratio of our U.S. domiciled life insurance

subsidiaries was approximately 229% as of December 31, 2020, an increase compared to December 31, 2019,

mostly from statutory income as a result of benefits in our long-term care insurance business from higher

terminations and lower claim incidence, partially offset by increases in statutory reserves related to Actuarial

Guideline 38 and cash flow testing in GLICNY.

Capital resources and financing activities

On August 21, 2020, GMHI issued $750 million of its 6.50% senior notes due in 2025. Interest on the notes

is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15,

2021. These notes mature on August 15, 2025. GMHI may redeem the notes, in whole or in part, at any time

prior to February 15, 2025 at its option, by paying a make-whole premium, plus accrued and unpaid interest. At

any time on or after February 15, 2025, GMHI may redeem the notes, in whole or in part, at its option, at 100%

of the principal amount, plus accrued and unpaid interest. The notes contain customary events of default, which

subject to certain notice and cure conditions, can result in the acceleration of the principal and accrued interest on

the outstanding notes if GMHI breaches the terms of the indenture.

On July 3, 2020, GFMIPL, our majority-owned subsidiary, issued AUD$147 million floating rate

subordinated notes due in July 2030 in exchange for AUD$147 million of its floating rate subordinated notes due

in July 2025 and issued an additional AUD$43 million floating rate subordinated notes due in July 2030. These

notes will pay interest quarterly at a floating rate equal to the three-month Bank Bill Swap reference rate plus a

margin of 5.0% per annum. GFMIPL has an option to redeem the notes at face value on July 3, 2025 and every

interest payment date thereafter up to and excluding the maturity date, and for certain tax and regulatory events

(in each case subject to APRA’s prior written approval). GFMIPL redeemed AUD$5 million of its floating rate

subordinated notes due in July 2025 on August 24, 2020 and redeemed the remaining AUD$48 million of its

floating rate subordinated notes due in July 2025 on October 6, 2020 and paid accrued interest thereon.

Genworth Holdings paid its 7.20% senior notes with a principal balance of $338 million at maturity on

February 16, 2021. During 2020, Genworth Holdings also repurchased $84 million principal amount of its senior

notes with 2021 maturity dates for a pre-tax gain of $4 million. In March 2020, Genworth Holdings repaid a

$200 million intercompany note due to GLIC with a maturity date of March 31, 2020.

On January 21, 2020, Genworth Holdings early redeemed $397 million of its 7.70% senior notes originally

scheduled to mature in June 2020 using cash proceeds received from the sale of Genworth Canada. The senior

notes were fully redeemed with a cash payment of $409 million, comprised of the outstanding principal balance,

accrued interest and a make-whole premium of $9 million.

In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina,

Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance subsidiary, redeemed all

of its $315 million of outstanding non-recourse funding obligations due in 2050. The early redemption resulted in

a pre-tax loss of $4 million from the write-off of deferred borrowing costs.

On December 12, 2019, Genworth Holdings repaid its Term Loan, which was originally closed on March 7,

2018 and was scheduled to mature in March 2023. Prior to the repayment, GFIH provided a limited recourse
guarantee to the lenders of Genworth Holdings’ outstanding Term Loan, which was secured by GFIH’s
ownership interest in Genworth Canada’s outstanding common shares. Due to the sale of the underlying
collateral, the Term Loan was required to be repaid upon the sale of Genworth Canada. A cash payment of
$445 million was used to fully repay the outstanding principal and accrued interest of the Term Loan.

On May 22, 2018, Genworth Holdings redeemed $597 million of its 6.52% senior notes that were issued in
May 2008 and matured in May 2018. A cash payment of $616 million comprising net proceeds of $441 million
from the Term Loan and $175 million of existing cash on hand was used to fully redeem the principal and
accrued interest balance of the May 2018 senior notes.

For further information about our borrowings, refer to note 12 in our consolidated financial statements under

“Item 8—Financial Statements and Supplementary Data.”

In addition to the initial settlement payment of £100 million ($125 million) paid to AXA on July 21, 2020,

we also issued a secured promissory note to AXA that is due in two installment payments in 2022. Under the
settlement, certain cash flows to Genworth Holdings, including dividends and capital raises, above defined
thresholds must be paid to AXA until the promissory note is fully repaid. In addition, to date in 2021 and over the
next year, we expect to pay AXA approximately $53 million consisting of interest on the promissory note,
assuming we do not make any pre-payments, and a one-time payment on an unrelated liability associated with
underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business.

Our evaluation of our ability to meet our obligations includes the following contractual obligations due
within one year from the issue date of our consolidated financial statements, along with other certain conditions
and events:

• Genworth Holdings had $338 million of its 7.20% senior notes that matured in February 2021 and

$659 million of its 7.625% senior notes that will mature in September 2021, excluding deferred costs;

•

•

•

•

interest payments on our senior notes are forecasted to be $165 million for the next twelve months;

in 2021, until the secured promissory note to AXA is paid, dividends above $50 million from our U.S.
mortgage insurance subsidiaries are subject to mandatory prepayment conditions;

the receipt of dividends and sale proceeds above certain thresholds from our Australian mortgage
insurance business are also subject to mandatory prepayment conditions; and

due to the uncertainty around the completion and timing of the remaining steps required to close the
China Oceanwide transaction, on January 4, 2021, Genworth and China Oceanwide agreed that an
extension of the then current December 31, 2020 merger agreement end date would not be sought. The
consummation of this transaction is dependent on steps outside of our control; accordingly, the
associated post-closing capital contributions from China Oceanwide have not been included in this
evaluation.

In connection with repaying our senior notes maturing in September 2021, Genworth Holdings expects to

have a cash shortfall of approximately $15 million which raises doubt about our ability to meet our financial
obligations within the next year. While conditions and events occurring and expected to occur raise doubt about
our ability to meet our financial obligations, management’s plans alleviate this doubt.

To address this shortfall and longer-term obligations, as well as build cash buffers, we are actively taking
additional steps toward raising capital by preparing for a possible partial public offering of our U.S. mortgage
insurance business, subject to market conditions. In addition to a partial sale of our U.S. mortgage insurance
business through a public offering, we are also evaluating the possibility of the issuance of convertible,

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equity-linked securities or another transaction, prior to our senior notes maturing in September 2021. We believe
an equity transaction involving our U.S. mortgage insurance business, or another transaction, if needed, is
probable of being effectively executed. Support for our assessment includes the relatively small amount of the
shortfall, the value of the U.S. and Australia mortgage insurance businesses, the healthy conditions of the
relevant markets, investor interest, views from our financial advisors, and our successful history of similar
transactions, among other factors.

In addition to existing cash held at Genworth Holdings and management’s plans, we believe additional
sources of cash coming from future cash tax payments under tax sharing agreements and expense reimbursement
arrangements with subsidiaries, and if necessary, sales of assets, will further provide us with sufficient capital
flexibility and liquidity to meet our projected future operating and financing requirements. Until the secured
promissory note issued to AXA is repaid, certain prepayment obligations thereunder place significant constraints
on our ability to repay debt (other than the 2021 debt maturities) with the proceeds of new debt financing, equity
offerings, asset sales or dividends from subsidiaries. We actively monitor our liquidity position, liquidity
generation options and the credit markets given changing market conditions. Our cash management target is to
maintain a cash buffer of two times expected annual external debt interest payments. We may move below or
above our targeted cash buffer during any given quarter due to the timing of cash outflows and inflows or from
future actions. We continue to evaluate our target level of liquidity as circumstances warrant. Additionally, we
will continue to evaluate market influences on the valuation of our senior debt and may consider additional
opportunities to repurchase our debt over time. We cannot predict with certainty the impact to us from future
disruptions in the credit markets or the recent or any further future downgrades by one or more of the rating
agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our
holding company debt. The availability of additional funding, including an equity transaction through our U.S.
mortgage insurance business or the issuance of debt, convertible or equity-linked securities, will depend on a
variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit
ratings and the performance of and outlook for our U.S. mortgage insurance business. For a discussion of certain
risks associated with our liquidity, see “Item 1A—Risk Factors—Our internal sources of liquidity may be
insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we
may seek additional capital but may be unable to obtain it.” These risks may be exacerbated by the economic
impact of COVID-19. No references herein to any potential equity transaction constitutes an offering of
securities.

Contractual obligations and commercial commitments

We enter into obligations with third parties in the ordinary course of our operations. These obligations as of

December 31, 2020, are set forth in the table below. However, we do not believe that our cash flow requirements

can be assessed based upon this analysis of these obligations as the funding of these future cash obligations will

be from future cash flows from premiums, deposits, fees and investment income that are not reflected in the

following table. Future cash outflows, whether they are contractual obligations or not, also will vary based upon

our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed

obligations include our obligations to pay principal and interest on fixed rate borrowings. Examples of

obligations that will vary include obligations to pay interest on variable rate borrowings and insurance liabilities

that depend on future interest rates and market performance. Many of our obligations are linked to cash-

generating contracts. These obligations include payments to contractholders that assume those contractholders

will continue to make deposits in accordance with the terms of their contracts. In addition, our operations involve

significant expenditures that are not based upon “commitments.”

Payments due by period

Total

2021

2022-2023

2024-2025

2026 and

thereafter

(Amounts in millions)

Borrowings and interest (1)

. . . . . . . . . . . . . . . . . . . . . . . . .

$

5,133

$1,196

$ 676

$1,357

$

1,904

Operating lease obligations (2)

. . . . . . . . . . . . . . . . . . . . . .

Other purchase liabilities (3)

. . . . . . . . . . . . . . . . . . . . . . . .

Securities lending (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loan commitments (5) . . . . . . . . . . .

Bank loan investment commitments (5)

. . . . . . . . . . . . . . .

Limited partnership commitments (5)

. . . . . . . . . . . . . . . . .

1,090

Private placement commitments (5)

. . . . . . . . . . . . . . . . . .

Tax matters agreement (7) . . . . . . . . . . . . . . . . . . . . . . . . . .

Unrecognized tax benefits (8)

. . . . . . . . . . . . . . . . . . . . . . .

74

34

67

32

32

85

45

62

11

20

67

32

32

271

85

14

—

18

12

—

—

—

455

—

31

—

12

2

—

—

—

297

—

—

—

33

—

—

—

—

67

—

—

62

Insurance liabilities (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114,630

2,610

5,752

5,288

100,980

Total contractual obligations . . . . . . . . . . . . . . . . . . .

$121,284

$4,338

$6,944

$6,956

$103,046

(1)

Includes payments of principal and interest on our long-term borrowings. The total amount for borrowings

and interest in this table does not equal the amounts on our consolidated balance sheet as it excludes debt

issuance costs, premiums and discounts and includes interest that is expected to be payable in future years.

See note 12 to our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data” for information related to the timing of payments and the maturity dates of these

borrowings. In addition, we have contractual amounts due to AXA related to the promissory note issued

under a settlement agreement. This amount is reported as discontinued operations and is excluded from this

table.

(2)

Includes the undiscounted lease payments required under our operating lease obligations. The related

operating lease liability is recorded on our consolidated balance sheet net of imputed interest of $21 million.

See note 2 to our consolidated financial statements under “Item 8—Financial Statements and Supplementary

Data” for additional information related to operating leases.

Includes contractual purchase commitments for goods and services entered into in the ordinary course of

business and includes obligations under our pension liabilities.

The timing for the return of the collateral associated with our securities lending program is generally

overnight and continuous; therefore, the return of collateral is reflected as being due in 2021. See note 12 to

our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for

additional information.

Includes amounts we are committed to fund for U.S. commercial mortgage loans, bank loan investments,

interests in limited partnerships and private placement investments.

The obligations in this table have not been discounted at present value. In contrast to this table, our

obligations reported in our consolidated balance sheet are recorded in accordance with U.S. GAAP where

(3)

(4)

(5)

(6)

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equity-linked securities or another transaction, prior to our senior notes maturing in September 2021. We believe

an equity transaction involving our U.S. mortgage insurance business, or another transaction, if needed, is

probable of being effectively executed. Support for our assessment includes the relatively small amount of the

shortfall, the value of the U.S. and Australia mortgage insurance businesses, the healthy conditions of the

relevant markets, investor interest, views from our financial advisors, and our successful history of similar

transactions, among other factors.

In addition to existing cash held at Genworth Holdings and management’s plans, we believe additional

sources of cash coming from future cash tax payments under tax sharing agreements and expense reimbursement

arrangements with subsidiaries, and if necessary, sales of assets, will further provide us with sufficient capital

flexibility and liquidity to meet our projected future operating and financing requirements. Until the secured

promissory note issued to AXA is repaid, certain prepayment obligations thereunder place significant constraints

on our ability to repay debt (other than the 2021 debt maturities) with the proceeds of new debt financing, equity

offerings, asset sales or dividends from subsidiaries. We actively monitor our liquidity position, liquidity

generation options and the credit markets given changing market conditions. Our cash management target is to

maintain a cash buffer of two times expected annual external debt interest payments. We may move below or

above our targeted cash buffer during any given quarter due to the timing of cash outflows and inflows or from

future actions. We continue to evaluate our target level of liquidity as circumstances warrant. Additionally, we

will continue to evaluate market influences on the valuation of our senior debt and may consider additional

opportunities to repurchase our debt over time. We cannot predict with certainty the impact to us from future

disruptions in the credit markets or the recent or any further future downgrades by one or more of the rating

agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our

holding company debt. The availability of additional funding, including an equity transaction through our U.S.

mortgage insurance business or the issuance of debt, convertible or equity-linked securities, will depend on a

variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit

ratings and the performance of and outlook for our U.S. mortgage insurance business. For a discussion of certain

risks associated with our liquidity, see “Item 1A—Risk Factors—Our internal sources of liquidity may be

insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we

may seek additional capital but may be unable to obtain it.” These risks may be exacerbated by the economic

impact of COVID-19. No references herein to any potential equity transaction constitutes an offering of

securities.

Contractual obligations and commercial commitments

We enter into obligations with third parties in the ordinary course of our operations. These obligations as of
December 31, 2020, are set forth in the table below. However, we do not believe that our cash flow requirements
can be assessed based upon this analysis of these obligations as the funding of these future cash obligations will
be from future cash flows from premiums, deposits, fees and investment income that are not reflected in the
following table. Future cash outflows, whether they are contractual obligations or not, also will vary based upon
our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed
obligations include our obligations to pay principal and interest on fixed rate borrowings. Examples of
obligations that will vary include obligations to pay interest on variable rate borrowings and insurance liabilities
that depend on future interest rates and market performance. Many of our obligations are linked to cash-
generating contracts. These obligations include payments to contractholders that assume those contractholders
will continue to make deposits in accordance with the terms of their contracts. In addition, our operations involve
significant expenditures that are not based upon “commitments.”

Payments due by period

(Amounts in millions)

Total

2021

2022-2023

2024-2025

. . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings and interest (1)
. . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations (2)
Other purchase liabilities (3)
. . . . . . . . . . . . . . . . . . . . . . . .
Securities lending (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loan commitments (5) . . . . . . . . . . .
. . . . . . . . . . . . . . .
Bank loan investment commitments (5)
. . . . . . . . . . . . . . . . .
Limited partnership commitments (5)
Private placement commitments (5)
. . . . . . . . . . . . . . . . . .
Insurance liabilities (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax matters agreement (7) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefits (8)

$

5,133
74
34
67
32
32
1,090
85
114,630
45
62

$1,196
11
20
67
32
32
271
85
2,610
14
—

$ 676
18
12
—
—
—
455
—
5,752
31
—

$1,357
12
2

—
—
—
297
—
5,288
—
—

2026 and
thereafter

$

1,904
33
—
—
—
—
67
—
100,980
—
62

Total contractual obligations . . . . . . . . . . . . . . . . . . .

$121,284

$4,338

$6,944

$6,956

$103,046

(1)

(2)

(3)

(4)

(5)

(6)

Includes payments of principal and interest on our long-term borrowings. The total amount for borrowings
and interest in this table does not equal the amounts on our consolidated balance sheet as it excludes debt
issuance costs, premiums and discounts and includes interest that is expected to be payable in future years.
See note 12 to our consolidated financial statements under “Item 8—Financial Statements and
Supplementary Data” for information related to the timing of payments and the maturity dates of these
borrowings. In addition, we have contractual amounts due to AXA related to the promissory note issued
under a settlement agreement. This amount is reported as discontinued operations and is excluded from this
table.
Includes the undiscounted lease payments required under our operating lease obligations. The related
operating lease liability is recorded on our consolidated balance sheet net of imputed interest of $21 million.
See note 2 to our consolidated financial statements under “Item 8—Financial Statements and Supplementary
Data” for additional information related to operating leases.
Includes contractual purchase commitments for goods and services entered into in the ordinary course of
business and includes obligations under our pension liabilities.
The timing for the return of the collateral associated with our securities lending program is generally
overnight and continuous; therefore, the return of collateral is reflected as being due in 2021. See note 12 to
our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for
additional information.
Includes amounts we are committed to fund for U.S. commercial mortgage loans, bank loan investments,
interests in limited partnerships and private placement investments.
The obligations in this table have not been discounted at present value. In contrast to this table, our
obligations reported in our consolidated balance sheet are recorded in accordance with U.S. GAAP where

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169

the liabilities are discounted consistent with the present value concept under accounting guidance related to
accounting and reporting by insurance enterprises, as applicable. Therefore, the estimated obligations for
insurance liabilities presented in this table significantly exceed the liabilities recorded in reserves for future
policy benefits and the liability for policy and contract claims. These amounts also include estimated claims
and benefits, policy surrender and commission obligations calculated consistent with U.S. GAAP on
in-force long-duration insurance policies and investment contracts. Also includes amounts established for
recourse and indemnification related to our U.S. mortgage insurance contract underwriting business.
Estimated claim and benefit obligations are based on mortality, morbidity, lapse and other assumptions. Due
to the significance of the assumptions used, the amounts presented could materially differ from actual
results. We have not included separate account obligations as these obligations are legally insulated from
general account obligations and will be fully funded by cash flows from separate account assets. We expect
to fully fund the obligations for insurance liabilities from cash flows from general account investments and
future deposits and premiums.

(7) Because their future cash outflows are uncertain, the following non-current liabilities are excluded from this
table: deferred taxes (except the fixed payments related to the Tax Matters Agreement, which is included, as
described in note 13 to our consolidated financial statements under “Item 8—Financial Statements and
Supplementary Data”), derivatives, unearned premiums and certain other items.
Includes the settlement of uncertain tax positions, with related interest, based on the estimated timing of the
resolution of income tax examinations in multiple jurisdictions. See notes 2 and 13 to our consolidated
financial statements under “Item 8—Financial Statements and Supplementary Data” for a discussion of
uncertain tax positions.

(8)

Off-Balance Sheet Transactions

We have used off-balance sheet securitization transactions to mitigate and diversify our asset risk position
and to adjust the asset class mix in our investment portfolio by reinvesting securitization proceeds in accordance
with our approved investment guidelines. The transactions we have used involved securitizations of some of our
receivables and investments that were secured by commercial mortgage loans, fixed maturity securities or other
receivables, consisting primarily of policy loans. Total securitized assets remaining as of December 31, 2020 and
2019 were $38 million and $47 million, respectively, which were also securitized assets required to be
consolidated. Securitization transactions typically result in gains or losses that are included in net investment
gains (losses) in our consolidated financial statements. There were no off-balance sheet securitization
transactions executed in 2020, 2019 or 2018. See note 2 to our consolidated financial statements under “Item 8—
Financial Statements and Supplementary Data” for additional information.

Seasonality

In general, our business as a whole is not seasonal in nature. However, in our U.S. mortgage insurance
business, the level of delinquencies, which increases the likelihood of losses, generally tends to decrease in
mid-first quarter and continue through second quarter while increasing in the third and fourth quarters of the
calendar year. Therefore, we typically experience lower levels of losses resulting from delinquencies in the first
and second quarters, as compared with those in the third and fourth quarters. In 2020, due largely to COVID-19,
our U.S. mortgage insurance business experienced elevated delinquencies mainly attributable to borrowers
entering a forbearance plan. These COVID-19 related delinquencies are inconsistent with seasonal norms,
therefore, we may continue to see varying levels of delinquencies and cures during 2021 or until the economy
recovers from the pandemic. See “—U.S. Mortgage Insurance segment—Trends and conditions” for additional
information related to our U.S. mortgage insurance business.

There is also modest delinquency seasonality in our mortgage insurance business in Australia where we

generally experience higher new delinquencies and lower cure rates in the first and second quarters of each
calendar year. However, during 2020, COVID-19 caused varying levels of delinquencies as compared to historic
norms mainly due to a change in traditional delinquency development and progression patterns. We could

continue to experience delayed delinquencies and associated progression patterns until payment deferral

programs are no longer permitted. Conversely, if borrowers are no longer allowed payment deferrals due to a

COVID-19 hardship we could experience sharp increases in delinquencies in 2021. See “—Australia Mortgage

Insurance segment—Trends and conditions” for additional information related to our Australia mortgage

insurance business.

Our U.S. life insurance business has not historically experienced significant seasonal patterns within its

products. However, due largely to COVID-19, our U.S. life insurance business has seen elevated mortality across

all its products. Although we do not track the cause of death in our long-term care insurance business, we believe

elevated mortality drove higher claim terminations during 2020 as compared to previous years. In addition, due

in large part to stay at home orders and other safety measures, claim incidence has been lower throughout 2020 in

our long-term care insurance business. We believe the higher claim terminations and lower claim incidence are

temporary in nature and will return to historic norms once we recover from the pandemic. See “U.S. Life

Insurance segment—Trends and conditions” for additional information related to our U.S. life insurance

business.

Inflation

We do not believe that inflation has had a material effect on our results of operations, except insofar as

inflation may affect interest rates or foreign exchange rates. In addition, inflation can impact healthcare costs and

the cost of care in our long-term care insurance business. Our long-term care insurance business has experienced

higher claim severity in recent years due in part to the rising costs of healthcare.

New Accounting Standards

For a discussion of recently adopted and not yet adopted accounting standards, see note 2 in our

consolidated financial statements under “Item 8—Financial Statements and Supplementary Data.”

Supplemental Condensed Consolidating Financial Information

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’

outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured

unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of,

premium, if any, and interest on, and all other amounts payable under, each outstanding series of senior notes and

outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth

Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes.

The following supplemental condensed consolidating financial information of Genworth Financial and its

direct and indirect subsidiaries has been prepared pursuant to rules regarding the preparation of consolidating

financial information of Regulation S-X, as amended by the SEC on March 2, 2020. In 2020, we early applied

new rules issued by the SEC by removing certain comparative prior year condensed consolidating financial

information herein and presenting the supplemental condensed consolidating financial information outside the

footnotes of our consolidated financial statements. We continue to provide prior year annual period condensed

consolidating financial information in accordance with the new amended rules.

The supplemental condensed consolidating financial information presents the condensed consolidating

balance sheet information as of December 31, 2020 and 2019 and the condensed consolidating income statement

information, condensed consolidating comprehensive income statement information and condensed consolidating

cash flow statement information for the years ended December 31, 2020 and 2019.

The supplemental condensed consolidating financial information reflects Genworth Financial (“Parent

Guarantor”), Genworth Holdings (“Issuer”) and each of Genworth Financial’s other direct and indirect

subsidiaries (the “All Other Subsidiaries”) on a combined basis, none of which guarantee the senior notes or

170

171

the liabilities are discounted consistent with the present value concept under accounting guidance related to

accounting and reporting by insurance enterprises, as applicable. Therefore, the estimated obligations for

insurance liabilities presented in this table significantly exceed the liabilities recorded in reserves for future

policy benefits and the liability for policy and contract claims. These amounts also include estimated claims

and benefits, policy surrender and commission obligations calculated consistent with U.S. GAAP on

in-force long-duration insurance policies and investment contracts. Also includes amounts established for

recourse and indemnification related to our U.S. mortgage insurance contract underwriting business.

Estimated claim and benefit obligations are based on mortality, morbidity, lapse and other assumptions. Due

to the significance of the assumptions used, the amounts presented could materially differ from actual

results. We have not included separate account obligations as these obligations are legally insulated from

general account obligations and will be fully funded by cash flows from separate account assets. We expect

to fully fund the obligations for insurance liabilities from cash flows from general account investments and

future deposits and premiums.

(7) Because their future cash outflows are uncertain, the following non-current liabilities are excluded from this

table: deferred taxes (except the fixed payments related to the Tax Matters Agreement, which is included, as

described in note 13 to our consolidated financial statements under “Item 8—Financial Statements and

Supplementary Data”), derivatives, unearned premiums and certain other items.

(8)

Includes the settlement of uncertain tax positions, with related interest, based on the estimated timing of the

resolution of income tax examinations in multiple jurisdictions. See notes 2 and 13 to our consolidated

financial statements under “Item 8—Financial Statements and Supplementary Data” for a discussion of

uncertain tax positions.

Off-Balance Sheet Transactions

We have used off-balance sheet securitization transactions to mitigate and diversify our asset risk position

and to adjust the asset class mix in our investment portfolio by reinvesting securitization proceeds in accordance

with our approved investment guidelines. The transactions we have used involved securitizations of some of our

receivables and investments that were secured by commercial mortgage loans, fixed maturity securities or other

receivables, consisting primarily of policy loans. Total securitized assets remaining as of December 31, 2020 and

2019 were $38 million and $47 million, respectively, which were also securitized assets required to be

consolidated. Securitization transactions typically result in gains or losses that are included in net investment

gains (losses) in our consolidated financial statements. There were no off-balance sheet securitization

transactions executed in 2020, 2019 or 2018. See note 2 to our consolidated financial statements under “Item 8—

Financial Statements and Supplementary Data” for additional information.

Seasonality

In general, our business as a whole is not seasonal in nature. However, in our U.S. mortgage insurance

business, the level of delinquencies, which increases the likelihood of losses, generally tends to decrease in

mid-first quarter and continue through second quarter while increasing in the third and fourth quarters of the

calendar year. Therefore, we typically experience lower levels of losses resulting from delinquencies in the first

and second quarters, as compared with those in the third and fourth quarters. In 2020, due largely to COVID-19,

our U.S. mortgage insurance business experienced elevated delinquencies mainly attributable to borrowers

entering a forbearance plan. These COVID-19 related delinquencies are inconsistent with seasonal norms,

therefore, we may continue to see varying levels of delinquencies and cures during 2021 or until the economy

recovers from the pandemic. See “—U.S. Mortgage Insurance segment—Trends and conditions” for additional

information related to our U.S. mortgage insurance business.

There is also modest delinquency seasonality in our mortgage insurance business in Australia where we

generally experience higher new delinquencies and lower cure rates in the first and second quarters of each

calendar year. However, during 2020, COVID-19 caused varying levels of delinquencies as compared to historic

norms mainly due to a change in traditional delinquency development and progression patterns. We could

continue to experience delayed delinquencies and associated progression patterns until payment deferral
programs are no longer permitted. Conversely, if borrowers are no longer allowed payment deferrals due to a
COVID-19 hardship we could experience sharp increases in delinquencies in 2021. See “—Australia Mortgage
Insurance segment—Trends and conditions” for additional information related to our Australia mortgage
insurance business.

Our U.S. life insurance business has not historically experienced significant seasonal patterns within its
products. However, due largely to COVID-19, our U.S. life insurance business has seen elevated mortality across
all its products. Although we do not track the cause of death in our long-term care insurance business, we believe
elevated mortality drove higher claim terminations during 2020 as compared to previous years. In addition, due
in large part to stay at home orders and other safety measures, claim incidence has been lower throughout 2020 in
our long-term care insurance business. We believe the higher claim terminations and lower claim incidence are
temporary in nature and will return to historic norms once we recover from the pandemic. See “U.S. Life
Insurance segment—Trends and conditions” for additional information related to our U.S. life insurance
business.

Inflation

We do not believe that inflation has had a material effect on our results of operations, except insofar as
inflation may affect interest rates or foreign exchange rates. In addition, inflation can impact healthcare costs and
the cost of care in our long-term care insurance business. Our long-term care insurance business has experienced
higher claim severity in recent years due in part to the rising costs of healthcare.

New Accounting Standards

For a discussion of recently adopted and not yet adopted accounting standards, see note 2 in our

consolidated financial statements under “Item 8—Financial Statements and Supplementary Data.”

Supplemental Condensed Consolidating Financial Information

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’
outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured
unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of,
premium, if any, and interest on, and all other amounts payable under, each outstanding series of senior notes and
outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth
Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes.

The following supplemental condensed consolidating financial information of Genworth Financial and its

direct and indirect subsidiaries has been prepared pursuant to rules regarding the preparation of consolidating
financial information of Regulation S-X, as amended by the SEC on March 2, 2020. In 2020, we early applied
new rules issued by the SEC by removing certain comparative prior year condensed consolidating financial
information herein and presenting the supplemental condensed consolidating financial information outside the
footnotes of our consolidated financial statements. We continue to provide prior year annual period condensed
consolidating financial information in accordance with the new amended rules.

The supplemental condensed consolidating financial information presents the condensed consolidating
balance sheet information as of December 31, 2020 and 2019 and the condensed consolidating income statement
information, condensed consolidating comprehensive income statement information and condensed consolidating
cash flow statement information for the years ended December 31, 2020 and 2019.

The supplemental condensed consolidating financial information reflects Genworth Financial (“Parent

Guarantor”), Genworth Holdings (“Issuer”) and each of Genworth Financial’s other direct and indirect
subsidiaries (the “All Other Subsidiaries”) on a combined basis, none of which guarantee the senior notes or

170

171

subordinated notes, as well as the eliminations necessary to present Genworth Financial’s financial information
on a consolidated basis and total consolidated amounts.

The accompanying supplemental condensed consolidating financial information is presented based on the

equity method of accounting for all periods presented. Under this method, investments in subsidiaries are
recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and
distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for
investments in subsidiaries and intercompany activity.

The following table presents the condensed consolidating balance sheet information as of December 31,

2020:

(Amounts in millions)

Assets

Investments:

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

Fixed maturity securities available-for-sale, at fair value (amortized

cost of $55,676 and allowance for credit losses of $4) . . . . . . . . . .
Equity securities, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans (net of unamortized balance of loan

origination fees and costs of $4)

. . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans, net . . . . . . . . . . . . . . . . . . . . . . .
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . .
Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets and goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $ 65,790
476
—

—

$ —
—

$ 65,790
476

—
—

—
—
—
15,358

15,358
—
—
—
—
—
—

—

2

—

13
—

—
—

—
—

67
16,673

16,740
1,078
—
—
—
—
—

—
146
19
767
—

6,774
(31)

6,743
1,978
2,186
—

77,173
1,578
671
1,529
200
16,864
(45)

16,819
296
—
(673)
6,081

—
—

—
—
—
(32,031)

(32,031)
—
—
—
—
—
—

—
—
(19)
—
—

6,774
(31)

6,743
1,978
2,253
—

77,240
2,656
671
1,529
200
16,864
(45)

16,819
444
—
107
6,081

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$18,750

$103,674

$(32,050)

$105,747

Liabilities and equity

Liabilities:

Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policyholder account balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability for policy and contract claims . . . . . . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separate account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities related to discontinued operations . . . . . . . . . . . . . . . . . . .

—
—
—

$ — $ — $ 42,695
21,503
—
11,817
—
1,968
—
1,507
156
19
—
883
2,665
6,081
—
16
581

55
—
—
—
—

$ —
—
—
—
—
(19)
—
—
—

$ 42,695
21,503
11,817
1,968
1,718
—
3,548
6,081
597

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

3,402

86,489

(19)

89,927

Equity:

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Genworth Financial, Inc.’s stockholders’ equity . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
12,008
4,425
1,584
(2,700)

15,318
—

15,318

—
12,890
4,426
(1,968)
—

15,348
—

15,348

3
18,562
4,499
(6,681)
—

16,383
802

17,185

(3)
(31,452)
(8,925)
8,649
—

(31,731)
(300)

(32,031)

1
12,008
4,425
1,584
(2,700)

15,318
502

15,820

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$18,750

$103,674

$(32,050)

$105,747

172

173

The following table presents the condensed consolidating balance sheet information as of December 31,

Parent

Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

Fixed maturity securities

available-for-sale, at fair value . . . . . .

$ — $ — $60,539

$

(200)

—

$ 60,339

239

2019:

(Amounts in millions)

Assets

Investments:

Equity securities, at fair value . . . . . . . . .

Commercial mortgage loans ($47 are

restricted related to a securitization

entity) . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . .

Investments in subsidiaries . . . . . . . . . . .

Total investments . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash . . .

Accrued investment income . . . . . . . . . . . . . .

Deferred acquisition costs . . . . . . . . . . . . . . . .

Intangible assets and goodwill . . . . . . . . . . . . .

Reinsurance recoverable . . . . . . . . . . . . . . . . .

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes receivable . . . . . . . . . . . .

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . .

Separate account assets . . . . . . . . . . . . . . . . . .

Liabilities and equity

Liabilities:

Future policy benefits . . . . . . . . . . . . . . .

Policyholder account balances . . . . . . . .

Liability for policy and contract

claims . . . . . . . . . . . . . . . . . . . . . . . . . .

Unearned premiums . . . . . . . . . . . . . . . . .

Other liabilities . . . . . . . . . . . . . . . . . . . .

Intercompany notes payable . . . . . . . . . .

Non-recourse funding obligations . . . . . .

Long-term borrowings . . . . . . . . . . . . . . .

Separate account liabilities . . . . . . . . . . .

Liabilities related to discontinued

operations . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . .

Common stock . . . . . . . . . . . . . . . . . . . . .

Additional paid-in capital

. . . . . . . . . . . .

Accumulated other comprehensive

income (loss) . . . . . . . . . . . . . . . . . . . .

Retained earnings . . . . . . . . . . . . . . . . . .

Treasury stock, at cost . . . . . . . . . . . . . . .

Total Genworth Financial, Inc.’s

Equity:

14,079

14,079

15,090

15,161

1,461

—

—

—

—

—

—

—

—

—

4

119

13

—

30

—

—

—

—

—

—

—

—

30

1

239

6,963

2,058

1,561

—

71,360

1,880

657

1,836

201

17,103

239

—

(409)

6,108

22,217

10,958

1,893

1,243

132

311

140

6,108

42

83,428

—

—

—

71

—

—

—

—

201

132

821

—

—

—

—

118

319

—

3,137

—

134

3,708

—

(29,169)

(29,369)

(3)

(1)

(251)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(5)

(451)

(6,907)

9,234

—

(28,868)

(300)

(29,168)

6,963

2,058

1,632

—

71,231

3,341

654

1,836

201

17,103

443

—

425

6,108

10,958

1,893

1,386

—

311

3,277

6,108

176

1

11,990

3,433

1,461

(2,700)

14,185

447

14,632

(456)

86,710

11,990

12,761

18,431

(31,192)

3

(3)

3,433

1,461

(2,700)

3,433

(2,126)

—

3,474

(7,108)

—

stockholders’ equity . . . . . . . . . . .

14,185

14,068

Noncontrolling interests . . . . . . . . . . . . .

—

—

Total equity . . . . . . . . . . . . . . . . . . .

14,185

14,068

14,800

747

15,547

Total liabilities and equity . . . . . . . .

$14,215

$17,776

$98,975

$(29,624)

$101,342

Total assets . . . . . . . . . . . . . . . . . . .

$14,215

$17,776

$98,975

$(29,624)

$101,342

$ — $ — $40,384

$ —

$ 40,384

22,217

subordinated notes, as well as the eliminations necessary to present Genworth Financial’s financial information

The following table presents the condensed consolidating balance sheet information as of December 31,

on a consolidated basis and total consolidated amounts.

The accompanying supplemental condensed consolidating financial information is presented based on the

equity method of accounting for all periods presented. Under this method, investments in subsidiaries are

recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and

distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for

investments in subsidiaries and intercompany activity.

The following table presents the condensed consolidating balance sheet information as of December 31,

Fixed maturity securities available-for-sale, at fair value (amortized

cost of $55,676 and allowance for credit losses of $4) . . . . . . . . . .

$ — $ — $ 65,790

$ —

2020:

(Amounts in millions)

Assets

Investments:

Equity securities, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans (net of unamortized balance of loan

origination fees and costs of $4)

. . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans, net . . . . . . . . . . . . . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . .

Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets and goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities and equity

Liabilities:

Policyholder account balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liability for policy and contract claims . . . . . . . . . . . . . . . . . . . . . . . .

Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities related to discontinued operations . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Parent

All Other

Guarantor

Issuer

Subsidiaries Eliminations Consolidated

15,358

15,358

67

16,673

16,740

1,078

(32,031)

(32,031)

—

—

—

—

—

—

—

—

—

—

—

—

—

2

—

13

—

55

—

—

—

—

—

—

—

55

1

—

—

—

—

—

—

—

—

—

—

—

146

19

767

—

—

—

—

156

—

2,665

—

581

3,402

—

12,890

4,426

(1,968)

—

—

476

6,774

(31)

6,743

1,978

2,186

—

77,173

1,578

671

1,529

200

16,864

(45)

16,819

296

—

(673)

6,081

21,503

11,817

1,968

1,507

19

883

6,081

16

86,489

3

18,562

4,499

(6,681)

—

16,383

802

17,185

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(19)

—

—

—

—

—

—

—

(19)

(19)

(3)

(31,452)

(8,925)

8,649

—

(31,731)

(300)

(32,031)

$ 65,790

476

6,774

(31)

6,743

1,978

2,253

—

77,240

2,656

671

1,529

200

16,864

(45)

16,819

444

—

107

6,081

21,503

11,817

1,968

1,718

—

3,548

6,081

597

89,927

1

12,008

4,425

1,584

(2,700)

15,318

502

15,820

Equity:

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . .

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,008

4,425

1,584

(2,700)

Total Genworth Financial, Inc.’s stockholders’ equity . . . . . .

15,318

15,348

Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,318

15,348

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$18,750

$103,674

$(32,050)

$105,747

Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $ 42,695

$ —

$ 42,695

2019:

(Amounts in millions)
Assets

Investments:

Fixed maturity securities

available-for-sale, at fair value . . . . . .
Equity securities, at fair value . . . . . . . . .
Commercial mortgage loans ($47 are
restricted related to a securitization
entity) . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy loans . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . .
Investments in subsidiaries . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash . . .
Accrued investment income . . . . . . . . . . . . . .
Deferred acquisition costs . . . . . . . . . . . . . . . .
Intangible assets and goodwill . . . . . . . . . . . . .
Reinsurance recoverable . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . .
Separate account assets . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . .

Liabilities and equity
Liabilities:

Future policy benefits . . . . . . . . . . . . . . .
Policyholder account balances . . . . . . . .
Liability for policy and contract

claims . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . .
Intercompany notes payable . . . . . . . . . .
Non-recourse funding obligations . . . . . .
Long-term borrowings . . . . . . . . . . . . . . .
Separate account liabilities . . . . . . . . . . .
Liabilities related to discontinued

operations . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . .

Equity:

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

$ — $ — $60,539
239

—

—

—
—
—
14,079
14,079
—
—
—
—
—

4
119
13

—

$14,215

—
—
71
15,090
15,161
1,461
—
—
—
—
201
132
821
—
$17,776

6,963
2,058
1,561
—
71,360
1,880
657
1,836
201
17,103
239
—
(409)
6,108
$98,975

$ — $ — $40,384
22,217

—

—

$

(200)
—

$ 60,339
239

—
—
—
(29,169)
(29,369)
—

(3)

—
—
—

(1)
(251)
—
—

$(29,624)

6,963
2,058
1,632
—
71,231
3,341
654
1,836
201
17,103
443
—
425
6,108
$101,342

$ —
—

$ 40,384
22,217

—
—

30
—
—
—
—

—
30

—
—
118
319
—
3,137
—

134
3,708

10,958
1,893
1,243
132
311
140
6,108

42
83,428

—
—

(5)
(451)
—
—
—

—
(456)

Common stock . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . .
Accumulated other comprehensive

income (loss) . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . .
Total Genworth Financial, Inc.’s

stockholders’ equity . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . .

1
11,990

—
12,761

3
18,431

(3)
(31,192)

3,433
1,461
(2,700)

3,433
(2,126)
—

3,474
(7,108)
—

14,185
—
14,185

14,068
—
14,068

14,800
747
15,547

(6,907)
9,234
—

(28,868)
(300)
(29,168)

10,958
1,893
1,386
—
311
3,277
6,108

176
86,710

1
11,990

3,433
1,461
(2,700)

14,185
447
14,632

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$18,750

$103,674

$(32,050)

$105,747

Total liabilities and equity . . . . . . . .

$14,215

$17,776

$98,975

$(29,624)

$101,342

172

173

The following table presents the condensed consolidating income statement information for the year ended

The following table presents the condensed consolidating income statement information for the year ended

December 31, 2020:

(Amounts in millions)

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes and equity in income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . .
Equity in income of subsidiaries . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . . . .

Net income available to Genworth Financial, Inc.’s

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

Parent

All Other

Guarantor

Issuer

Subsidiaries Eliminations Consolidated

$—

$ —

(3)

—
—

(3)

—
—

31

—
—

1

32

(35)
(2)
210

177

1

178

—

—

5
6
3

14

—
—

6

—
—
175

181

(167)
(41)
912

786

(573)

213

—

—

$4,110
3,261
552
731

8,654

5,391
549

951

492
5
33

7,421

1,233
313
—

920

23

943

34

—

$ —

(3)

—

(4)

(7)

—
—

—

—
—

(7)

(7)

—
—
(1,122)

(1,122)

—

(1,122)

—

—

$4,110
3,260
558
730

8,658

5,391
549

988

492
5
202

7,627

1,031
270
—

761

(549)

212

34

—

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—

$ —

December 31, 2019:

(Amounts in millions)

Revenues:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes and equity in income of

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision (benefit) for income taxes . . . . . . . . . . . . . .

Equity in income of subsidiaries . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . .

Income (loss) from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . . . .

Net income (loss) available to Genworth Financial,

(3)

—

—

(3)

—

—

20

—

3

23

(26)

(3)

366

343

—

343

—

—

$4,037

3,228

55

792

8,112

5,163

577

942

441

25

7,148

964

243

—

721

151

872

64

123

10

(5)

2

7

—

—

—

—

231

231

(224)

(45)

177

(2)

(140)

(142)

—

—

$ —

(15)

—

(5)

(20)

—

—

—

—

(20)

(20)

—

—

(543)

(543)

—

(543)

—

—

$4,037

3,220

50

789

8,096

5,163

577

962

441

239

7,382

714

195

—

519

11

530

64

123

Inc.’s common stockholders . . . . . . . . . . . . . . . . . .

$343

$(142)

$ 685

$(543)

$ 343

common stockholders . . . . . . . . . . . . . . . . . . . . . . .

$178

$ 213

$ 909

$(1,122)

$ 178

174

175

The following table presents the condensed consolidating income statement information for the year ended

The following table presents the condensed consolidating income statement information for the year ended

December 31, 2020:

(Amounts in millions)

Revenues:

Parent

All Other

Guarantor

Issuer

Subsidiaries Eliminations Consolidated

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—

$ —

$ —

Net investment income . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . .

(3)

—

—

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

14

8,654

$4,110

3,261

552

731

5

6

3

—

(3)

(4)

(7)

$4,110

3,260

558

730

8,658

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill impairment

. . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes and equity in income of

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision (benefit) for income taxes . . . . . . . . . . . . . .

Equity in income of subsidiaries . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . .

Income (loss) from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . . . .

Net income available to Genworth Financial, Inc.’s

—

—

31

—

—

1

32

(35)

(2)

210

177

1

178

—

—

—

—

6

—

—

175

181

(167)

(41)

912

786

(573)

213

—

—

5,391

549

951

492

5

33

7,421

1,233

313

—

920

23

943

34

—

(7)

(7)

—

—

—

—

—

—

—

—

—

—

(1,122)

(1,122)

(1,122)

5,391

549

988

492

5

202

7,627

1,031

270

—

761

(549)

212

34

—

common stockholders . . . . . . . . . . . . . . . . . . . . . . .

$178

$ 213

$ 909

$(1,122)

$ 178

December 31, 2019:

(Amounts in millions)

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes and equity in income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . .
Equity in income of subsidiaries . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . .
Income (loss) from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss)
Less: net income from continuing operations

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

attributable to noncontrolling interests . . . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . . . .

Net income (loss) available to Genworth Financial,

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

$—

$ —

(3)

—
—

(3)

—
—

20

—

3

23

(26)
(3)
366

343

—

343

—

—

10
(5)
2

7

—
—

—

—
231

231

(224)
(45)
177

(2)

(140)

(142)

—

—

$4,037
3,228
55
792

8,112

5,163
577

942

441
25

7,148

964
243
—

721

151

872

64

123

$ —

(15)
—

(5)

(20)

—
—

—

—
(20)

(20)

—
—
(543)

(543)

—

(543)

—

—

$4,037
3,220
50
789

8,096

5,163
577

962

441
239

7,382

714
195
—

519

11

530

64

123

Inc.’s common stockholders . . . . . . . . . . . . . . . . . .

$343

$(142)

$ 685

$(543)

$ 343

174

175

The following table presents the condensed consolidating comprehensive income statement information for

The following table presents the condensed consolidating cash flow statement information for the year

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

$ 178

$ 213

$ 943

$(1,122)

$ 212

ended December 31, 2020:

(Amounts in millions)

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178

$ 213

$

943

$(1,122)

$

212

Less (income) loss from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1)

573

(23)

Parent

All Other

Guarantor

Issuer

Subsidiaries Eliminations Consolidated

the year ended December 31, 2020:

(Amounts in millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities

without an allowance for credit losses . . . . . .
Net unrealized gains (losses) on securities with
an allowance for credit losses . . . . . . . . . . . .
Derivatives qualifying as hedges . . . . . . . . . . . .
Foreign currency translation and other

adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive income (loss) . . . . .

764

765

765

(1,530)

(6)
209

25

992

(6)
209

25

993

(6)
241

55

1,055

1,998

12
(450)

(50)

(2,018)

(3,140)

Total comprehensive income . . . . . . . . . . . . . . . . . . .
Less: comprehensive income attributable to

1,170

1,206

noncontrolling interests . . . . . . . . . . . . . . . . . . . . .

—

—

64

—

Total comprehensive income available to
Genworth Financial, Inc.’s common
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,170

$1,206

$1,934

$(3,140)

$1,170

The following table presents the condensed consolidating comprehensive income statement information for

the year ended December 31, 2019:

(Amounts in millions)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities not

other-than-temporarily impaired . . . . . . . . . .

Net unrealized gains (losses) on other-than-

temporarily impaired securities . . . . . . . . . . .
Derivatives qualifying as hedges . . . . . . . . . . . .
Foreign currency translation and other

adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive income (loss) . . . . .

Total comprehensive income . . . . . . . . . . . . . . . . . . .
Less: comprehensive income attributable to

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

$ 343

$ (142)

$ 872

$ (543)

$ 530

859

2
221

307

1,389

1,732

842

2
221

224

1,289

1,147

846

2
247

486

1,581

2,453

(1,701)

(4)
(468)

(530)

(2,703)

(3,246)

764

(6)
209

55

1,022

1,234

64

846

2
221

487

1,556

2,086

354

Adjustments to reconcile net income to net cash from

operating activities:

Equity in income from subsidiaries . . . . . . . . . . . . . . . . . .

Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . .

Amortization of fixed maturity securities discounts and

premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . .

Charges assessed to policyholders . . . . . . . . . . . . . . . . . . .

Acquisition costs deferred . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative instruments and limited partnerships . . . . . . . .

Stock-based compensation expense . . . . . . . . . . . . . . . . . .

Accrued investment income and other assets . . . . . . . . . .

Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other liabilities, policy and contract claims and other

policy-related balances . . . . . . . . . . . . . . . . . . . . . . . . .

Cash used by operating activities—discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from (used by) investing activities:

Proceeds from maturities and repayments of investments:

Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from sales of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . .

Purchases and originations of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-term investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . .

Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . .

Net cash from (used by) investing activities . . . . . . . . . . . . . . .

Cash flows used by financing activities:

Deposits to universal life and investment contracts . . . . . . . . .

Withdrawals from universal life and investment contracts . . . .

Redemption and repurchase of non-recourse funding

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from the issuance of long-term debt . . . . . . . . . . . . . .

Repayment and repurchase of long-term debt . . . . . . . . . . . . . .

Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . .

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on cash, cash equivalents and

restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net change in cash, cash equivalents and restricted cash . . . . .

Cash, cash equivalents and restricted cash at beginning of period . .

Cash, cash equivalents and restricted cash at end of period . . . . . . .

Less cash, cash equivalents and restricted cash of discontinued

operations at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash of continuing operations

at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(210)

—

—

—

—

—

—

—

(1)

—

39

2

—

(1)

11

—

17

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(10)

(2)

(12)

(5)

(5)

(912)

448

6

(6)

—

—

—

—

212

(70)

—

16

—

41

30

(269)

282

—

—

—

—

—

—

—

45

—

(16)

—

29

—

—

—

—

(490)

(190)

—

(14)

(694)

—

(383)

1,461

1,078

—

—

(448)

(144)

(552)

(646)

(15)

492

5

57

(17)

1

(155)

1,217

(50)

996

—

1,661

3,800

744

182

4,234

(9,386)

(547)

(449)

34

190

200

2

(996)

862

(2,282)

(315)

766

(37)

16

(9)

17

(982)

15

(302)

1,880

1,578

—

1,122

(5)

5

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(174)

(174)

—

—

—

—

—

174

—

—

174

—

—

—

—

—

549

—

—

(138)

(558)

(646)

(15)

492

5

268

(87)

40

(142)

1,217

(10)

1,042

(269)

1,960

3,800

744

182

4,234

(9,386)

(547)

(449)

79

190

—

—

(1,153)

862

(2,282)

(315)

766

(527)

—

(9)

(2)

(1,507)

15

(685)

3,341

2,656

—

$ —

$1,078

$ 1,578

$ —

$ 2,656

noncontrolling interests . . . . . . . . . . . . . . . . . . . . .

—

—

354

—

Total comprehensive income available to
Genworth Financial, Inc.’s common
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,732

$1,147

$2,099

$(3,246)

$1,732

176

177

The following table presents the condensed consolidating comprehensive income statement information for

The following table presents the condensed consolidating cash flow statement information for the year

the year ended December 31, 2020:

(Amounts in millions)

Parent

All Other

Guarantor

Issuer

Subsidiaries Eliminations Consolidated

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178

$ 213

$ 943

$(1,122)

$ 212

without an allowance for credit losses . . . . . .

764

765

765

(1,530)

Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities

Net unrealized gains (losses) on securities with

an allowance for credit losses . . . . . . . . . . . .

Derivatives qualifying as hedges . . . . . . . . . . . .

Foreign currency translation and other

adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive income (loss) . . . . .

(6)

209

25

992

(6)

209

25

993

(6)

241

55

1,055

1,998

12

(450)

(50)

(2,018)

(3,140)

Total comprehensive income . . . . . . . . . . . . . . . . . . .

1,170

1,206

Less: comprehensive income attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . .

—

—

64

—

Total comprehensive income available to

Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,170

$1,206

$1,934

$(3,140)

$1,170

The following table presents the condensed consolidating comprehensive income statement information for

the year ended December 31, 2019:

(Amounts in millions)

Parent

All Other

Guarantor

Issuer

Subsidiaries Eliminations Consolidated

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 343

$ (142)

$ 872

$ (543)

$ 530

Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities not

other-than-temporarily impaired . . . . . . . . . .

Net unrealized gains (losses) on other-than-

temporarily impaired securities . . . . . . . . . . .

Derivatives qualifying as hedges . . . . . . . . . . . .

Foreign currency translation and other

adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive income (loss) . . . . .

Total comprehensive income . . . . . . . . . . . . . . . . . . .

Less: comprehensive income attributable to

Total comprehensive income available to

Genworth Financial, Inc.’s common

859

2

221

307

1,389

1,732

842

2

221

224

1,289

1,147

846

2

247

486

1,581

2,453

(1,701)

(4)

(468)

(530)

(2,703)

(3,246)

noncontrolling interests . . . . . . . . . . . . . . . . . . . . .

—

—

354

—

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,732

$1,147

$2,099

$(3,246)

$1,732

764

(6)

209

55

1,022

1,234

64

846

2

221

487

1,556

2,086

354

ended December 31, 2020:

(Amounts in millions)

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less (income) loss from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustments to reconcile net income to net cash from

operating activities:

Equity in income from subsidiaries . . . . . . . . . . . . . . . . . .
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Amortization of fixed maturity securities discounts and

premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . .
Charges assessed to policyholders . . . . . . . . . . . . . . . . . . .
Acquisition costs deferred . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments and limited partnerships . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . .
Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities, policy and contract claims and other

policy-related balances . . . . . . . . . . . . . . . . . . . . . . . . .

Cash used by operating activities—discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from (used by) investing activities:

Proceeds from maturities and repayments of investments:

Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from sales of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . .

Purchases and originations of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . .

Net cash from (used by) investing activities . . . . . . . . . . . . . . .

Cash flows used by financing activities:

Deposits to universal life and investment contracts . . . . . . . . .
Withdrawals from universal life and investment contracts . . . .
Redemption and repurchase of non-recourse funding

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the issuance of long-term debt . . . . . . . . . . . . . .
Repayment and repurchase of long-term debt . . . . . . . . . . . . . .
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on cash, cash equivalents and

restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net change in cash, cash equivalents and restricted cash . . . . .
Cash, cash equivalents and restricted cash at beginning of period . .

Cash, cash equivalents and restricted cash at end of period . . . . . . .
Less cash, cash equivalents and restricted cash of discontinued

operations at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash of continuing operations
at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Parent
Guarantor

All Other

Issuer

Subsidiaries Eliminations Consolidated

$ 178

$ 213

$

943

$(1,122)

$

212

(1)

573

(23)

—

(210)
—

(912)
448

—
—
—
—

—
—

(1)

—
39

2
—

(1)

11

—

17

—
—
—

—

—
—
—
—
—
(10)
(2)

(12)

—
—

—
—
—
—
—

(5)

(5)

—

—
—

—

—

6
(6)

—
—

—
—
212
(70)
—

16
—

41

30

(269)

282

—
—
—

—

—
—
—

45
—
(16)
—

29

—
—

—
—
(490)
(190)
—
(14)

(694)

—

(383)
1,461

1,078

—

—
(448)

(144)
(552)
(646)
(15)

492
5
57
(17)
1

(155)
1,217
(50)

996

—

1,661

3,800
744
182

4,234

(9,386)
(547)
(449)
34
190
200
2

(996)

862
(2,282)

(315)
766
(37)
16
(9)
17

(982)

15

(302)
1,880

1,578

—

1,122
—

—
—
—
—

—
—
—
—
—

(5)

—
—

5

—

—

—
—
—

—

—
—
—
—
—
(174)
—

(174)

—
—

—
—
—
174
—
—

174

—

—
—

—

—

549

—
—

(138)
(558)
(646)
(15)

492
5
268
(87)
40

(142)
1,217
(10)

1,042

(269)

1,960

3,800
744
182

4,234

(9,386)
(547)
(449)
79
190
—
—

(1,153)

862
(2,282)

(315)
766
(527)
—

(9)
(2)

(1,507)

15

(685)
3,341

2,656

—

$ —

$1,078

$ 1,578

$ —

$ 2,656

176

177

The following table presents the condensed consolidating cash flow statement information for the year

ended December 31, 2019:

(Amounts in millions)

Cash flows from operating activities:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less (income) loss from discontinued operations, net of taxes . . . . . . .
Adjustments to reconcile net income (loss) to net cash from operating

activities:

Equity in income from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of fixed maturity securities discounts and

premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges assessed to policyholders . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments and limited partnerships . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . . . . . . . . .
Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities, policy and contract claims and other policy-

related balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash from operating activities-discontinued operations . . . . . . . .

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from (used by) investing activities:

Proceeds from maturities and repayments of investments:

Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted commercial mortgage loans related to a securitization

entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from sales of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . .

Purchases and originations of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of business, net of cash transferred . . . . . . . . . . . . .
Cash from investing activities-discontinued operations . . . . . . . . . . . .

—
—
—
—
—
1
—
26

—
—
16

(17)
—

253

—
—

—

—

—
—
—
—
(119)
(5)

—
—

Net cash from (used by) investing activities . . . . . . . . . . . . . . . . . . . . .

(124)

Cash flows used by financing activities:

Deposits to universal life and investment contracts . . . . . . . . . . . . . . . .
Withdrawals from universal life and investment contracts . . . . . . . . . .
Repayment and repurchase of long-term debt . . . . . . . . . . . . . . . . . . . .
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of subsidiary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used by financing activities-discontinued operations . . . . . . . . . .

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on cash, cash equivalents and restricted

cash (includes $6 related to discontinued operations) . . . . . . . . . . . . . . . .

Net change in cash, cash equivalents and restricted cash . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . . . . . . . .

Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . .
Less cash, cash equivalents and restricted cash of discontinued operations

at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash of continuing operations at end

—
—
—
(122)
—
—

(7)

—

(129)

—

—
—

—

—

Parent

All Other

Guarantor Issuer

Subsidiaries Eliminations Consolidated

$ 343
—

$ (142)
140

$

872
(151)

$(543)
—

$

530
(11)

(366)
250

(177)
1,352

—
(1,602)

543
—

8
5
—
—
—
132
(35)
—

7
—
(43)

(44)
134

1,337

—
—

—

—

—
—

5

—
48

—
—
—

53

—
—
(446)
112
—
—
(24)
—

(358)

—

1,032
429

1,461

—

(126)
(55)
(699)
(27)
441
6
(63)
1

(365)
1,259
53

668
275

487

3,436
582

15

3,883

(6,899)
(813)
(392)
62
6
5
1,398
26

1,309

824
(2,319)
—
75
(22)
(87)
(4)
(132)

(1,665)

1

132
1,748

1,880

—

—
—
—
—
—
—
—
—

—
—
—

2
—

2

—
—

—

—

—
—

(2)

—
65

—
—
—

63

—
—
—
(65)
—
—
—
—

(65)

—

—
—

—

—

—
—

(118)
(50)
(699)
(27)
441
139
(98)
27

(358)
1,259
26

609
409

2,079

3,436
582

15

3,883

(6,899)
(813)
(389)
62

—
—
1,398
26

1,301

824
(2,319)
(446)
—
(22)
(87)
(35)
(132)

(2,217)

1

1,164
2,177

3,341

—

of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

$1,461

$ 1,880

$ —

$ 3,341

178

179

As of December 31, 2020, Genworth Financial’s and Genworth Holdings’ subsidiaries had restricted net

assets of $15.2 billion and $16.5 billion, respectively. There are no regulatory restrictions on the ability of

Genworth Financial to pay dividends. Our Board of Directors has suspended the payment of dividends on our

common stock indefinitely. The declaration and payment of future dividends to holders of our common stock

will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of

dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements

of our subsidiaries, legal requirements, regulatory constraints, our debt obligations, our credit and financial

strength ratings and such other factors as the Board of Directors deems relevant.

For additional information on significant restrictions on dividends by subsidiaries of Genworth Financial

and Genworth Holdings, see note 17 in our consolidated financial statements under “Part II—Item 8—Financial

Statements and Supplementary Data.”

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices,

such as interest rates, equity prices and foreign currency exchange rates. Market risk is directly influenced by the

volatility and liquidity in the markets in which the related underlying financial instruments are traded. In

addition, COVID-19 has caused significant volatility and uncertainty in the markets in which we operate,

resulting in heightened risks. The following is a discussion of our market risk exposures and our risk

management practices. See “Item 1A—Risk Factors” for additional discussion of current and potential impacts of

COVID-19 on our business and financial performance.

While we enter into derivatives to mitigate certain market risks, our agreements with futures commission

merchants and derivative counterparties require that we provide securities for initial margin to future commission

merchants and securities as collateral to our derivative counterparties to reflect changes in the fair value of our

derivatives. We may hold more high quality securities to ensure we have sufficient collateral to post to derivative

counterparties or futures commission merchants in the event of adverse changes in the fair value of our derivative

instruments. If we do not have sufficient high quality securities to provide as collateral, we may need to sell

certain other securities to purchase assets that would be eligible for collateral posting, which could adversely

impact our future investment income.

Interest Rate Risk

We enter into market-sensitive instruments primarily for purposes other than trading. Our life insurance,

long-term care insurance and deferred annuity products have significant interest rate risk and are associated with

our U.S. life insurance subsidiaries. Our mortgage insurance businesses and immediate annuity products have

moderate interest rate risk, although when interest rates remain low or decline the risk is relatively low in our

U.S. mortgage insurance business.

The significant interest rate risk that is present in our life insurance, long-term care insurance and deferred

annuity products is a result of longer duration liabilities where a significant portion of cash flows to pay benefits

comes from investment returns. Additionally, certain of these products have implicit and explicit rate guarantees

or optionality that is significantly impacted by changes in interest rates. We seek to minimize interest rate risk by

purchasing longer duration assets to better align with the duration of the liabilities or utilizing derivatives to

mitigate interest rate risk for product lines where asset durations are not sufficient to align with the related

liability. Additionally, we also minimize certain of these risks through product design features.

Our insurance and investment products are sensitive to interest rate fluctuations and expose us to the risk

that falling interest rates or tightening credit spreads will reduce our interest rate margin (the difference between

the returns we earn on the investments that support our obligations under these products and the amounts that we

must pay to policyholders and contractholders). Because we may reduce the interest rates we credit on most of

The following table presents the condensed consolidating cash flow statement information for the year

Equity in income from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .

Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(366)

250

(177)

1,352

—

(1,602)

543

—

ended December 31, 2019:

(Amounts in millions)

Cash flows from operating activities:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less (income) loss from discontinued operations, net of taxes . . . . . . .

Adjustments to reconcile net income (loss) to net cash from operating

activities:

Amortization of fixed maturity securities discounts and

premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charges assessed to policyholders . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition costs deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . .

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative instruments and limited partnerships . . . . . . . . . . . . . .

Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . . . . . . . . .

Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other liabilities, policy and contract claims and other policy-

related balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash from operating activities-discontinued operations . . . . . . . .

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,337

Cash flows from (used by) investing activities:

Proceeds from maturities and repayments of investments:

Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted commercial mortgage loans related to a securitization

entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from sales of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . .

Purchases and originations of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from sale of business, net of cash transferred . . . . . . . . . . . . .

Cash from investing activities-discontinued operations . . . . . . . . . . . .

Net cash from (used by) investing activities . . . . . . . . . . . . . . . . . . . . .

(124)

Cash flows used by financing activities:

Deposits to universal life and investment contracts . . . . . . . . . . . . . . . .

Withdrawals from universal life and investment contracts . . . . . . . . . .

Repayment and repurchase of long-term debt . . . . . . . . . . . . . . . . . . . .

Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repurchase of subsidiary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . .

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash used by financing activities-discontinued operations . . . . . . . . . .

Effect of exchange rate changes on cash, cash equivalents and restricted

cash (includes $6 related to discontinued operations) . . . . . . . . . . . . . . . .

Net change in cash, cash equivalents and restricted cash . . . . . . . . . . .

Cash, cash equivalents and restricted cash at beginning of period . . . . . . . .

Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . .

Less cash, cash equivalents and restricted cash of discontinued operations

at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash of continuing operations at end

Parent

All Other

Guarantor Issuer

Subsidiaries Eliminations Consolidated

$ 343

—

$ (142)

$

140

872

(151)

$(543)

—

$

530

(11)

—

—

—

—

—

1

—

26

—

—

16

(17)

—

253

(119)

(5)

(122)

(7)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

8

5

—

—

—

132

(35)

—

7

—

(43)

(44)

134

—

—

—

—

—

—

5

—

48

—

—

—

53

—

—

(446)

112

—

—

(24)

—

(358)

—

1,032

429

1,461

—

(126)

(55)

(699)

(27)

441

(63)

6

1

(365)

1,259

53

668

275

487

3,436

582

15

3,883

(6,899)

(813)

(392)

62

6

5

26

1,398

1,309

824

(2,319)

—

75

(22)

(87)

(4)

(132)

1

132

1,748

1,880

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

2

2

(2)

—

65

—

—

—

63

(65)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(118)

(50)

(699)

(27)

441

139

(98)

27

(358)

1,259

26

609

409

2,079

3,436

582

15

3,883

(6,899)

(813)

(389)

62

—

—

1,398

26

1,301

824

(2,319)

(446)

—

(22)

(87)

(35)

(132)

1

1,164

2,177

3,341

—

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

(129)

(1,665)

(65)

(2,217)

of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

$1,461

$ 1,880

$ —

$ 3,341

As of December 31, 2020, Genworth Financial’s and Genworth Holdings’ subsidiaries had restricted net

assets of $15.2 billion and $16.5 billion, respectively. There are no regulatory restrictions on the ability of
Genworth Financial to pay dividends. Our Board of Directors has suspended the payment of dividends on our
common stock indefinitely. The declaration and payment of future dividends to holders of our common stock
will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of
dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements
of our subsidiaries, legal requirements, regulatory constraints, our debt obligations, our credit and financial
strength ratings and such other factors as the Board of Directors deems relevant.

For additional information on significant restrictions on dividends by subsidiaries of Genworth Financial

and Genworth Holdings, see note 17 in our consolidated financial statements under “Part II—Item 8—Financial
Statements and Supplementary Data.”

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices,
such as interest rates, equity prices and foreign currency exchange rates. Market risk is directly influenced by the
volatility and liquidity in the markets in which the related underlying financial instruments are traded. In
addition, COVID-19 has caused significant volatility and uncertainty in the markets in which we operate,
resulting in heightened risks. The following is a discussion of our market risk exposures and our risk
management practices. See “Item 1A—Risk Factors” for additional discussion of current and potential impacts of
COVID-19 on our business and financial performance.

While we enter into derivatives to mitigate certain market risks, our agreements with futures commission
merchants and derivative counterparties require that we provide securities for initial margin to future commission
merchants and securities as collateral to our derivative counterparties to reflect changes in the fair value of our
derivatives. We may hold more high quality securities to ensure we have sufficient collateral to post to derivative
counterparties or futures commission merchants in the event of adverse changes in the fair value of our derivative
instruments. If we do not have sufficient high quality securities to provide as collateral, we may need to sell
certain other securities to purchase assets that would be eligible for collateral posting, which could adversely
impact our future investment income.

Interest Rate Risk

We enter into market-sensitive instruments primarily for purposes other than trading. Our life insurance,
long-term care insurance and deferred annuity products have significant interest rate risk and are associated with
our U.S. life insurance subsidiaries. Our mortgage insurance businesses and immediate annuity products have
moderate interest rate risk, although when interest rates remain low or decline the risk is relatively low in our
U.S. mortgage insurance business.

The significant interest rate risk that is present in our life insurance, long-term care insurance and deferred
annuity products is a result of longer duration liabilities where a significant portion of cash flows to pay benefits
comes from investment returns. Additionally, certain of these products have implicit and explicit rate guarantees
or optionality that is significantly impacted by changes in interest rates. We seek to minimize interest rate risk by
purchasing longer duration assets to better align with the duration of the liabilities or utilizing derivatives to
mitigate interest rate risk for product lines where asset durations are not sufficient to align with the related
liability. Additionally, we also minimize certain of these risks through product design features.

Our insurance and investment products are sensitive to interest rate fluctuations and expose us to the risk

that falling interest rates or tightening credit spreads will reduce our interest rate margin (the difference between
the returns we earn on the investments that support our obligations under these products and the amounts that we
must pay to policyholders and contractholders). Because we may reduce the interest rates we credit on most of

178

179

these products only at limited, pre-established intervals, and because some contracts have guaranteed minimum
interest crediting rates, declines in earned investment returns can impact the profitability of these products. As of
December 31, 2020, of our $6.9 billion deferred annuity products, $0.6 billion have guaranteed minimum interest
crediting rate floors greater than or equal to 3.5%, with less than $1 million that have guaranteed minimum
interest crediting rate floors greater than 5.5%. Most of these products were sold prior to 1999. Our universal life
insurance products also have guaranteed minimum interest crediting rate floors, with no guaranteed minimum
interest crediting rate floors greater than 6.0%. Of our $8.7 billion of universal life insurance products as of
December 31, 2020, $3.9 billion have guaranteed minimum interest crediting rate floors ranging between 3%
and 4%.

During periods of increasing market interest rates, we may offer higher crediting rates on interest-sensitive

products, such as universal life insurance and fixed annuities, and we may increase crediting rates on in-force
products to keep these products competitive. In addition, rapidly rising interest rates may cause increased
unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance
policies and annuity contracts and requests for policy loans, as policyholders and contractholders shift assets into
higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an
adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-
income investments in an unrealized loss position to satisfy surrenders or withdrawals.

Our life insurance, long-term care insurance and fixed annuity products, as well as our guaranteed benefits

on variable annuities, also expose us to the risk of interest rate fluctuations. The pricing and expected future
profitability of these products are based in part on expected investment returns. Over time, life and long-term
care insurance products are expected to generally produce positive cash flows as customers pay periodic
premiums, which we invest as they are received. Low interest rates increase reinvestment risk and reduce our
ability to achieve our targeted investment margins and may adversely affect the profitability of our life insurance,
long-term care insurance and fixed annuity products and may increase hedging costs on our in-force block of
variable annuity products. The prolonged low interest rate environment has negatively impacted the margins of
our fixed immediate annuity products, which resulted in the impairment and full write-off of our DAC balance
related to these products and the establishment of additional future policy benefit reserves. See “—Critical
Accounting Estimates—Future policy benefits” for additional details. If interest rates remain at current historic
lows, the sufficiency of our margins could be negatively impacted, which may result in additional impairments or
the establishment of higher reserves on our other long-duration insurance products. In addition, certain statutory
capital requirements are based on models that consider interest rates. Therefore, prolonged periods of low interest
rates may increase our statutory reserves, as well as assets and capital needed to support them.

The carrying value of our investment portfolio as of December 31, 2020 and 2019 was $77.2 billion and
$71.2 billion, of which 85% in each period was invested in fixed maturity securities. The primary market risk to
our investment portfolio is interest rate risk associated with investments in fixed maturity securities. We attempt
to mitigate the market risk associated with our fixed maturity securities portfolio by matching the duration of our
fixed maturity securities with the duration of the liabilities that those securities are intended to support.

Interest rate fluctuations also could have an adverse effect on the results of our investment portfolio. During
periods of declining market interest rates, the interest we receive on variable interest rate investments decreases.
In addition, during those periods, we reinvest the cash we receive as interest or return of principal on our
investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable
returns. For example, during the fourth quarter of 2020, we reinvested $2.3 billion at an average rate of 2.8% as
compared to our annualized weighted-average investment yield of 4.9%. Issuers of fixed-income securities or
borrowers to our commercial mortgage loans may also decide to prepay their obligations in order to borrow at
lower market rates, which exacerbates the risk that we may have to invest the cash proceeds of these securities in
lower-yielding or lower-credit instruments. During periods of increasing interest rates, market values of lower-
yielding assets will decline. In addition, our interest rate hedges will decline, requiring us to post additional
collateral with our derivative counterparties, which could add additional strain to our short-term liquidity.

The primary market risk for our long-term borrowings is interest rate risk at the time of maturity or early

redemption, when we may be required to refinance these obligations. We continue to monitor the interest rate

environment and other market influences to evaluate refinancing and/or repurchasing our debt prior to maturity

dates. While we are exposed to interest rate risk from certain variable rate long-term borrowings, in certain

instances we invest in variable rate assets to back those obligations to mitigate the interest rate risk from the

variable interest payments.

We use derivative instruments, such as interest rate swaps, financial futures and option-based financial

instruments, as part of our risk management strategy. We use these derivatives to mitigate certain interest rate

risk by:

•

•

reducing the risk between the timing of the receipt of cash and its investment in the market; and

extending or shortening the duration of assets to better align with the duration of the liabilities.

As a matter of policy, we have not and will not engage in derivative market-making, speculative derivative

trading or other speculative derivative activities.

Equity Market Risk

Our exposure to equity market risk within our insurance companies primarily relates to variable annuities

and life insurance products and certain equity linked products. Certain variable annuity products have living

benefit guarantees that expose us to equity market risk if the performance of the underlying mutual funds in the

separate account products experience downturns and volatility for an extended period of time which could result

in more payments from general account assets than from contractholder separate account investments.

Additionally, continued equity market volatility could result in additional losses in our variable annuity products

and associated hedging program which will further challenge our ability to recover DAC on these products and

could lead to write-offs of DAC, as well as increased hedging costs. Downturns in equity markets could also lead

to an increase in liabilities associated with secondary guarantee features, such as guaranteed minimum benefits

on separate account products, where we have equity market risk exposure.

We are exposed to equity risk on our holdings of common stocks and other equities, as well as risk on

products where we have equity market risk exposure. We manage equity price risk through industry and issuer

diversification, asset allocation techniques and hedging strategies. Equity exposures associated with limited

partnership investments are excluded from this discussion as they are not considered financial instruments in

accordance with U.S. GAAP.

We use derivative instruments, such as financial futures and option-based financial instruments, as part of

our risk management strategy. We use these derivatives to mitigate equity risk by reducing our exposure to

fluctuations in equity market indices that underlie some of our products.

Foreign Currency Risk

After the sale of Genworth Canada, our exposure to foreign currency exchange risk is limited. Our

international operations, which primarily include our Australia mortgage insurance business, generate revenues

denominated in local currencies, and we invest the cash generated in non-U.S.-denominated securities. As of

December 31, 2020 and 2019, approximately 3% of our invested assets were held by our international operations

and we invest cash generated in those operations in securities denominated in the same local currencies.

Although investing in securities denominated in local currencies limits the effect of currency exchange rate

fluctuation on local operating results, we remain exposed to the impact of fluctuations in exchange rates as we

translate the operating results of our foreign operations in our consolidated financial statements. In 2020, we

settled a lawsuit with AXA pertaining to losses incurred from mis-selling complaints on policies sold from 1970

through 2004 associated with our former lifestyle protection insurance business reported as discontinued

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these products only at limited, pre-established intervals, and because some contracts have guaranteed minimum

interest crediting rates, declines in earned investment returns can impact the profitability of these products. As of

December 31, 2020, of our $6.9 billion deferred annuity products, $0.6 billion have guaranteed minimum interest

crediting rate floors greater than or equal to 3.5%, with less than $1 million that have guaranteed minimum

interest crediting rate floors greater than 5.5%. Most of these products were sold prior to 1999. Our universal life

insurance products also have guaranteed minimum interest crediting rate floors, with no guaranteed minimum

interest crediting rate floors greater than 6.0%. Of our $8.7 billion of universal life insurance products as of

December 31, 2020, $3.9 billion have guaranteed minimum interest crediting rate floors ranging between 3%

and 4%.

During periods of increasing market interest rates, we may offer higher crediting rates on interest-sensitive

products, such as universal life insurance and fixed annuities, and we may increase crediting rates on in-force

products to keep these products competitive. In addition, rapidly rising interest rates may cause increased

unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance

policies and annuity contracts and requests for policy loans, as policyholders and contractholders shift assets into

higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an

adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-

income investments in an unrealized loss position to satisfy surrenders or withdrawals.

Our life insurance, long-term care insurance and fixed annuity products, as well as our guaranteed benefits

on variable annuities, also expose us to the risk of interest rate fluctuations. The pricing and expected future

profitability of these products are based in part on expected investment returns. Over time, life and long-term

care insurance products are expected to generally produce positive cash flows as customers pay periodic

premiums, which we invest as they are received. Low interest rates increase reinvestment risk and reduce our

ability to achieve our targeted investment margins and may adversely affect the profitability of our life insurance,

long-term care insurance and fixed annuity products and may increase hedging costs on our in-force block of

variable annuity products. The prolonged low interest rate environment has negatively impacted the margins of

our fixed immediate annuity products, which resulted in the impairment and full write-off of our DAC balance

related to these products and the establishment of additional future policy benefit reserves. See “—Critical

Accounting Estimates—Future policy benefits” for additional details. If interest rates remain at current historic

lows, the sufficiency of our margins could be negatively impacted, which may result in additional impairments or

the establishment of higher reserves on our other long-duration insurance products. In addition, certain statutory

capital requirements are based on models that consider interest rates. Therefore, prolonged periods of low interest

rates may increase our statutory reserves, as well as assets and capital needed to support them.

The carrying value of our investment portfolio as of December 31, 2020 and 2019 was $77.2 billion and

$71.2 billion, of which 85% in each period was invested in fixed maturity securities. The primary market risk to

our investment portfolio is interest rate risk associated with investments in fixed maturity securities. We attempt

to mitigate the market risk associated with our fixed maturity securities portfolio by matching the duration of our

fixed maturity securities with the duration of the liabilities that those securities are intended to support.

Interest rate fluctuations also could have an adverse effect on the results of our investment portfolio. During

periods of declining market interest rates, the interest we receive on variable interest rate investments decreases.

In addition, during those periods, we reinvest the cash we receive as interest or return of principal on our

investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable

returns. For example, during the fourth quarter of 2020, we reinvested $2.3 billion at an average rate of 2.8% as

compared to our annualized weighted-average investment yield of 4.9%. Issuers of fixed-income securities or

borrowers to our commercial mortgage loans may also decide to prepay their obligations in order to borrow at

lower market rates, which exacerbates the risk that we may have to invest the cash proceeds of these securities in

lower-yielding or lower-credit instruments. During periods of increasing interest rates, market values of lower-

yielding assets will decline. In addition, our interest rate hedges will decline, requiring us to post additional

collateral with our derivative counterparties, which could add additional strain to our short-term liquidity.

The primary market risk for our long-term borrowings is interest rate risk at the time of maturity or early
redemption, when we may be required to refinance these obligations. We continue to monitor the interest rate
environment and other market influences to evaluate refinancing and/or repurchasing our debt prior to maturity
dates. While we are exposed to interest rate risk from certain variable rate long-term borrowings, in certain
instances we invest in variable rate assets to back those obligations to mitigate the interest rate risk from the
variable interest payments.

We use derivative instruments, such as interest rate swaps, financial futures and option-based financial

instruments, as part of our risk management strategy. We use these derivatives to mitigate certain interest rate
risk by:

•

•

reducing the risk between the timing of the receipt of cash and its investment in the market; and

extending or shortening the duration of assets to better align with the duration of the liabilities.

As a matter of policy, we have not and will not engage in derivative market-making, speculative derivative

trading or other speculative derivative activities.

Equity Market Risk

Our exposure to equity market risk within our insurance companies primarily relates to variable annuities

and life insurance products and certain equity linked products. Certain variable annuity products have living
benefit guarantees that expose us to equity market risk if the performance of the underlying mutual funds in the
separate account products experience downturns and volatility for an extended period of time which could result
in more payments from general account assets than from contractholder separate account investments.
Additionally, continued equity market volatility could result in additional losses in our variable annuity products
and associated hedging program which will further challenge our ability to recover DAC on these products and
could lead to write-offs of DAC, as well as increased hedging costs. Downturns in equity markets could also lead
to an increase in liabilities associated with secondary guarantee features, such as guaranteed minimum benefits
on separate account products, where we have equity market risk exposure.

We are exposed to equity risk on our holdings of common stocks and other equities, as well as risk on
products where we have equity market risk exposure. We manage equity price risk through industry and issuer
diversification, asset allocation techniques and hedging strategies. Equity exposures associated with limited
partnership investments are excluded from this discussion as they are not considered financial instruments in
accordance with U.S. GAAP.

We use derivative instruments, such as financial futures and option-based financial instruments, as part of

our risk management strategy. We use these derivatives to mitigate equity risk by reducing our exposure to
fluctuations in equity market indices that underlie some of our products.

Foreign Currency Risk

After the sale of Genworth Canada, our exposure to foreign currency exchange risk is limited. Our

international operations, which primarily include our Australia mortgage insurance business, generate revenues
denominated in local currencies, and we invest the cash generated in non-U.S.-denominated securities. As of
December 31, 2020 and 2019, approximately 3% of our invested assets were held by our international operations
and we invest cash generated in those operations in securities denominated in the same local currencies.
Although investing in securities denominated in local currencies limits the effect of currency exchange rate
fluctuation on local operating results, we remain exposed to the impact of fluctuations in exchange rates as we
translate the operating results of our foreign operations in our consolidated financial statements. In 2020, we
settled a lawsuit with AXA pertaining to losses incurred from mis-selling complaints on policies sold from 1970
through 2004 associated with our former lifestyle protection insurance business reported as discontinued

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operations. Under the settlement agreement, we issued a promissory note to AXA agreeing to pay two large
settlements in British Pounds in 2022, which exposes us to changes in foreign exchange rates. We are managing
this risk by utilizing foreign currency forward contracts to mitigate our exposure to the installment payments to
be made in British Pounds in 2022.

Sensitivity Analysis

liabilities as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, we performed a similar

sensitivity analysis and noted that a 100 basis point increase in interest rates resulted in a decrease of $12 million

and $4 million, respectively, on our fixed index annuity embedded derivatives. As of December 31, 2020 and

2019, a 100 basis point increase in interest rates would result in a decrease of $5 and $4 million, respectively, on

our indexed universal life embedded derivatives. The impact on our insurance liabilities is not included in the

sensitivities above.

Sensitivity analysis measures the impact of hypothetical changes in interest rates, foreign exchange rates

and other market rates or prices on the profitability of market-sensitive financial instruments.

The principal amount, weighted-average interest rate and fair value by maturity of our variable rate debt

were as follows as of December 31:

The following discussion about the potential effects of changes in interest rates, equity market prices and

foreign currency exchange rates is based on so-called “shock-tests,” which model the effects of interest rate,
equity market price and foreign currency exchange rate shifts on our financial condition and results of operations.
Although we believe shock-tests provide the most meaningful analysis permitted by the rules and regulations of
the SEC, they are constrained by several factors, including the necessity to conduct the analysis based on a single
point in time and by their inability to include the extraordinarily complex market reactions that normally would
arise from the market shifts modeled. Although the following results of shock-tests for changes in interest rates,
equity market prices and foreign currency exchange rates may have some limited use as benchmarks, they should
not be viewed as forecasts. These forward-looking disclosures also are selective in nature and address only the
potential impacts on our financial instruments. For the purpose of this sensitivity analysis, we excluded the
potential impacts on our insurance liabilities that are not considered financial instruments, with the exception of
those insurance liabilities that have embedded derivatives that are required to be bifurcated in accordance with
U.S. GAAP. In addition, this sensitivity analysis does not include a variety of other potential factors that could
affect our business as a result of these changes in interest rates, equity market prices and foreign currency
exchange rates.

Interest Rate Risk

One means of assessing exposure to interest rate changes is a duration-based analysis that measures the
potential changes in fair value resulting from a hypothetical change in interest rates of 100 basis points across all
maturities. This is referred to as a parallel shift in the yield curve. Note that all impacts noted below exclude any
effects of deferred taxes, DAC and PVFP unless otherwise noted.

Under this model, with all other factors constant and assuming no offsetting change in the value of our
liabilities, we estimated that such an increase in interest rates would cause the fair value of our fixed-income
securities portfolio to decrease by approximately $5.2 billion based on our securities positions as of
December 31, 2020, as compared to an estimated decrease of $4.6 billion under this model as of December 31,
2019. The increase in the impact of the parallel shift in the yield curve in 2020 was due to the increase in the fair
value of our investment portfolio.

We performed a similar sensitivity analysis on our derivatives portfolio and noted that a 100 basis point
increase in interest rates resulted in a decrease in fair value of $692 million based on our derivatives portfolio as
of December 31, 2020, as compared to an estimated decline of $641 million under this model as of December 31,
2019. The estimated decrease in fair value of our derivatives portfolio would also require us to post collateral to
certain derivative counterparties of $670 million and would require us to post cash margin related to our cleared
swaps and futures contracts of $22 million based on our derivatives portfolio as of December 31, 2020. Of the
$692 million estimated decrease in fair value of our derivatives portfolio as of December 31, 2020, $75 million
related to non-qualified derivatives used to mitigate interest rate risk associated with our GMWB embedded
derivative liabilities as of December 31, 2020. We also performed a similar sensitivity analysis on our embedded
derivatives associated with our GMWB liabilities and noted that a 100 basis point increase in interest rates
resulted in a decrease of $90 million and $88 million, respectively, based on our GMWB embedded derivative

2020

Weighted-

average

interest

rate

2019

Weighted-

average

interest

rate

Principal

amount

Fair

value (1)

Principal

amount

Fair

value (1)

(Amounts in millions)

Maturity:

Floating rate notes:

Junior subordinated notes, 2025 (2) . . . . . . . . . .

$—

— % $—

$ 140

Junior subordinated notes, 2030 (3) . . . . . . . . . .

Junior subordinated notes, 2066 (4) . . . . . . . . . .

Total floating rate notes . . . . . . . . . . . . . .

Non-recourse funding obligations:

Rivermont Insurance Company I, 2050 (5)

. . . .

Total non-recourse funding obligations . .

146

600

746

—

—

5.10%

2.86%

3.30%

150

240

390

— % —

— % —

—

600

740

311

311

Total floating rate debt . . . . . . . . . . . . . . .

$746

$390

$1,051

4.95% $142

— % —

4.41%

4.51%

358

500

3.78%

3.78%

207

207

$707

(1)

The valuation methodology used for the junior subordinated notes due in 2025 and 2030 is based on the

then-current coupon, revalued based on the Bank Bill swap reference rate and a risk premium. The junior

subordinated notes due in 2066 and the non-recourse funding obligations due in 2050, is based on the then-

current coupon, revalued based on the LIBOR set and current spread assumption based on commercially

available data. The models are floating rate coupon models using the risk premium or spread assumption to

(2) During 2020, GFMIPL, our indirect majority-owned subsidiary, redeemed all of its AUD$200 million junior

subordinated notes due in 2025, which had an interest rate of three-month Bank Bill Swap reference rate

derive the valuation.

plus a margin of 3.50%.

(3)

(4)

Subordinated floating rate notes issued by GFMIPL due in 2030 have an interest rate of three-month Bank

Bill Swap reference rate plus a margin of 5.0%.

Floating rate junior notes due in November 2066 have an annual interest rate equal to three-month LIBOR

plus 2.0025%. See note 12 in our consolidated financial statements under “Item 8—Financial Statements

and Supplementary Data” for additional information.

(5)

In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina,

Rivermont I redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050.

Equity Market Risk

One means of assessing exposure to changes in equity market prices is to estimate the potential changes in

market values on our equity investments resulting from a hypothetical broad-based decline in equity market

prices of 10%. Under this model, with all other factors constant, we estimated that such a decline in equity

market prices would cause the fair value of our equity investments to decline by approximately $39 million based

on our equity positions as of December 31, 2020, as compared to an estimated decline of $11 million under this

model for the year ended December 31, 2019.

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operations. Under the settlement agreement, we issued a promissory note to AXA agreeing to pay two large

settlements in British Pounds in 2022, which exposes us to changes in foreign exchange rates. We are managing

this risk by utilizing foreign currency forward contracts to mitigate our exposure to the installment payments to

be made in British Pounds in 2022.

Sensitivity Analysis

liabilities as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, we performed a similar
sensitivity analysis and noted that a 100 basis point increase in interest rates resulted in a decrease of $12 million
and $4 million, respectively, on our fixed index annuity embedded derivatives. As of December 31, 2020 and
2019, a 100 basis point increase in interest rates would result in a decrease of $5 and $4 million, respectively, on
our indexed universal life embedded derivatives. The impact on our insurance liabilities is not included in the
sensitivities above.

Sensitivity analysis measures the impact of hypothetical changes in interest rates, foreign exchange rates

and other market rates or prices on the profitability of market-sensitive financial instruments.

The principal amount, weighted-average interest rate and fair value by maturity of our variable rate debt

were as follows as of December 31:

(Amounts in millions)

Maturity:
Floating rate notes:

2020

Weighted-
average
interest
rate

Principal
amount

2019

Weighted-
average
interest
rate

Fair
value (1)

Fair
value (1)

Principal
amount

Junior subordinated notes, 2025 (2) . . . . . . . . . .
Junior subordinated notes, 2030 (3) . . . . . . . . . .
Junior subordinated notes, 2066 (4) . . . . . . . . . .

Total floating rate notes . . . . . . . . . . . . . .

Non-recourse funding obligations:

Rivermont Insurance Company I, 2050 (5)

. . . .

Total non-recourse funding obligations . .

$—
146
600

746

—

—

— % $—
150
5.10%
240
2.86%

$ 140
—
600

4.95% $142
— % —
358
4.41%

3.30%

390

740

4.51%

500

— % —

— % —

311

311

3.78%

3.78%

207

207

$707

Total floating rate debt . . . . . . . . . . . . . . .

$746

$390

$1,051

(1)

The valuation methodology used for the junior subordinated notes due in 2025 and 2030 is based on the
then-current coupon, revalued based on the Bank Bill swap reference rate and a risk premium. The junior
subordinated notes due in 2066 and the non-recourse funding obligations due in 2050, is based on the then-
current coupon, revalued based on the LIBOR set and current spread assumption based on commercially
available data. The models are floating rate coupon models using the risk premium or spread assumption to
derive the valuation.

(3)

(2) During 2020, GFMIPL, our indirect majority-owned subsidiary, redeemed all of its AUD$200 million junior
subordinated notes due in 2025, which had an interest rate of three-month Bank Bill Swap reference rate
plus a margin of 3.50%.
Subordinated floating rate notes issued by GFMIPL due in 2030 have an interest rate of three-month Bank
Bill Swap reference rate plus a margin of 5.0%.
Floating rate junior notes due in November 2066 have an annual interest rate equal to three-month LIBOR
plus 2.0025%. See note 12 in our consolidated financial statements under “Item 8—Financial Statements
and Supplementary Data” for additional information.
In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina,
Rivermont I redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050.

(4)

(5)

Equity Market Risk

One means of assessing exposure to changes in equity market prices is to estimate the potential changes in

market values on our equity investments resulting from a hypothetical broad-based decline in equity market
prices of 10%. Under this model, with all other factors constant, we estimated that such a decline in equity
market prices would cause the fair value of our equity investments to decline by approximately $39 million based
on our equity positions as of December 31, 2020, as compared to an estimated decline of $11 million under this
model for the year ended December 31, 2019.

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183

The following discussion about the potential effects of changes in interest rates, equity market prices and

foreign currency exchange rates is based on so-called “shock-tests,” which model the effects of interest rate,

equity market price and foreign currency exchange rate shifts on our financial condition and results of operations.

Although we believe shock-tests provide the most meaningful analysis permitted by the rules and regulations of

the SEC, they are constrained by several factors, including the necessity to conduct the analysis based on a single

point in time and by their inability to include the extraordinarily complex market reactions that normally would

arise from the market shifts modeled. Although the following results of shock-tests for changes in interest rates,

equity market prices and foreign currency exchange rates may have some limited use as benchmarks, they should

not be viewed as forecasts. These forward-looking disclosures also are selective in nature and address only the

potential impacts on our financial instruments. For the purpose of this sensitivity analysis, we excluded the

potential impacts on our insurance liabilities that are not considered financial instruments, with the exception of

those insurance liabilities that have embedded derivatives that are required to be bifurcated in accordance with

U.S. GAAP. In addition, this sensitivity analysis does not include a variety of other potential factors that could

affect our business as a result of these changes in interest rates, equity market prices and foreign currency

exchange rates.

Interest Rate Risk

One means of assessing exposure to interest rate changes is a duration-based analysis that measures the

potential changes in fair value resulting from a hypothetical change in interest rates of 100 basis points across all

maturities. This is referred to as a parallel shift in the yield curve. Note that all impacts noted below exclude any

effects of deferred taxes, DAC and PVFP unless otherwise noted.

Under this model, with all other factors constant and assuming no offsetting change in the value of our

liabilities, we estimated that such an increase in interest rates would cause the fair value of our fixed-income

securities portfolio to decrease by approximately $5.2 billion based on our securities positions as of

December 31, 2020, as compared to an estimated decrease of $4.6 billion under this model as of December 31,

2019. The increase in the impact of the parallel shift in the yield curve in 2020 was due to the increase in the fair

value of our investment portfolio.

We performed a similar sensitivity analysis on our derivatives portfolio and noted that a 100 basis point

increase in interest rates resulted in a decrease in fair value of $692 million based on our derivatives portfolio as

of December 31, 2020, as compared to an estimated decline of $641 million under this model as of December 31,

2019. The estimated decrease in fair value of our derivatives portfolio would also require us to post collateral to

certain derivative counterparties of $670 million and would require us to post cash margin related to our cleared

swaps and futures contracts of $22 million based on our derivatives portfolio as of December 31, 2020. Of the

$692 million estimated decrease in fair value of our derivatives portfolio as of December 31, 2020, $75 million

related to non-qualified derivatives used to mitigate interest rate risk associated with our GMWB embedded

derivative liabilities as of December 31, 2020. We also performed a similar sensitivity analysis on our embedded

derivatives associated with our GMWB liabilities and noted that a 100 basis point increase in interest rates

resulted in a decrease of $90 million and $88 million, respectively, based on our GMWB embedded derivative

We performed a similar sensitivity analysis on our equity market derivatives and noted that a 10% decline in

equity market prices would result in an increase in fair value of $35 million and a decrease of $14 million,
respectively, based on our equity market derivatives as of December 31, 2020 and 2019. The estimated increase
in fair value primarily relates to non-qualified derivatives used to mitigate equity market risk associated with our
GMWB and fixed index annuity embedded derivative liabilities. We also performed a similar sensitivity analysis
on our embedded derivatives associated with our GMWB liabilities and noted that a 10% decline in equity
market prices would result in an estimated increase in fair value of $41 million and $42 million based on our
GMWB embedded derivative liabilities as of December 31, 2020 and 2019, respectively. As of December 31,
2020, we performed a similar sensitivity analysis on our fixed index annuity and indexed universal life embedded
derivatives and noted that a 10% decline in equity market prices would result in an estimated decrease in fair
value of $13 million and $1 million, respectively, as compared to an estimated decrease in fair value of
$24 million and $1 million, respectively, as of December 31, 2019.

Foreign Currency Risk

One means of assessing exposure to changes in foreign currency exchange rates is to model effects on
reported income using a sensitivity analysis. We analyzed our combined currency exposure for the year ended
December 31, 2020, and remeasured our pre-tax earnings assuming a 10% decrease in foreign currency exchange
rates compared to the U.S. dollar. Under this model, with all other factors constant, we estimated that such a
decrease would reduce our operating results, before taxes and noncontrolling interests, by $8 million and
$17 million under this model for the years ended December 31, 2020 and 2019, respectively.

We also performed a similar sensitivity analysis on our foreign currency derivative portfolio and noted that

a 10% decrease in foreign currency exchange rates resulted in an increase in fair value of $92 million as of
December 31, 2020, as compared to an estimated increase of $23 million under this model for the year ended
December 31, 2019. The change in fair value of derivatives may not result in a direct impact to our net income as
a result of certain derivatives that may be designated as qualifying hedge relationships.

Derivative Counterparty Credit Risk

For all derivative instruments, a counterparty (or its guarantor, as applicable) may not have a long-term
unsecured debt rating below “A-/A3” as rated by S&P and Moody’s, respectively, at the date of execution of the
derivative instrument. The same requirement applies where a Credit Support Annex (“CSA”) to an ISDA Master
Agreement has been obtained such that the counterparty is obligated to provide collateral. In the case of a split or
single rating, the lowest or the single rating will apply.

In the case of foreign exchange transactions with a tenor of exposure of less than one year, a counterparty

must have a short-term credit rating of “A-1/P-1” or its equivalent. In the case of a split or single rating, the
lowest or the single rating will apply.

All counterparty exposure is measured on a net mark-to-market basis where the valuation of a derivative is

adjusted to reflect current market values. This is achieved by estimating the net present value of derivatives
positions contracted and outstanding with each counterparty and calculating the gross loss (excluding recoveries)
that would be sustained in the event of a counterparty bankruptcy (taking into account netting and pledged
collateral under the applicable ISDA Master Agreement and CSA). Investment exposure limits to counterparties
take into account all exposures (through derivatives, bond investments, repurchase transactions or otherwise).

We also engage in derivatives transactions traded on regulated exchanges or clearinghouses where the

exchanges or clearinghouses ensure the performance of the contracts.

Item 8. Financial Statements and Supplementary Data

Genworth Financial, Inc.

Index to Consolidated Financial Statements

Annual Financial Statements:

and 2018:

Report of KPMG LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

186

Financial Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements:

Note 1—Nature of Business and Formation of Genworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 2—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 3—Earnings (Loss) Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 4—Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 5—Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 6—Deferred Acquisition Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 7—Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 8—Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 9—Insurance Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 10—Liability for Policy and Contract Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 11—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 12—Borrowings and Other Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 13—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14—Supplemental Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 15—Stock-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 16—Fair Value of Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 17—Insurance Subsidiary Financial Information and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . .

Note 18—Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 19—Quarterly Results of Operations (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 20—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 21—Changes in Accumulated Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 22—Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 23—Sale of Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Statement Schedules as of December 31, 2020 and 2019 and for the years ended December 31,

2020, 2019 and 2018:

Schedule I, Summary of Investments-Other Than Investments in Related Parties . . . . . . . . . . . . . . . . . . . . .

Schedule II, Financial Statements of Genworth Financial, Inc. (Parent Only) . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule III, Supplemental Insurance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

190

191

192

193

194

195

197

220

221

236

242

243

244

248

251

257

259

263

267

267

271

289

296

304

307

312

314

314

319

320

326

184

185

We performed a similar sensitivity analysis on our equity market derivatives and noted that a 10% decline in

equity market prices would result in an increase in fair value of $35 million and a decrease of $14 million,

respectively, based on our equity market derivatives as of December 31, 2020 and 2019. The estimated increase

in fair value primarily relates to non-qualified derivatives used to mitigate equity market risk associated with our

GMWB and fixed index annuity embedded derivative liabilities. We also performed a similar sensitivity analysis

on our embedded derivatives associated with our GMWB liabilities and noted that a 10% decline in equity

market prices would result in an estimated increase in fair value of $41 million and $42 million based on our

GMWB embedded derivative liabilities as of December 31, 2020 and 2019, respectively. As of December 31,

2020, we performed a similar sensitivity analysis on our fixed index annuity and indexed universal life embedded

derivatives and noted that a 10% decline in equity market prices would result in an estimated decrease in fair

value of $13 million and $1 million, respectively, as compared to an estimated decrease in fair value of

$24 million and $1 million, respectively, as of December 31, 2019.

Foreign Currency Risk

One means of assessing exposure to changes in foreign currency exchange rates is to model effects on

reported income using a sensitivity analysis. We analyzed our combined currency exposure for the year ended

December 31, 2020, and remeasured our pre-tax earnings assuming a 10% decrease in foreign currency exchange

rates compared to the U.S. dollar. Under this model, with all other factors constant, we estimated that such a

decrease would reduce our operating results, before taxes and noncontrolling interests, by $8 million and

$17 million under this model for the years ended December 31, 2020 and 2019, respectively.

We also performed a similar sensitivity analysis on our foreign currency derivative portfolio and noted that

a 10% decrease in foreign currency exchange rates resulted in an increase in fair value of $92 million as of

December 31, 2020, as compared to an estimated increase of $23 million under this model for the year ended

December 31, 2019. The change in fair value of derivatives may not result in a direct impact to our net income as

a result of certain derivatives that may be designated as qualifying hedge relationships.

Derivative Counterparty Credit Risk

For all derivative instruments, a counterparty (or its guarantor, as applicable) may not have a long-term

unsecured debt rating below “A-/A3” as rated by S&P and Moody’s, respectively, at the date of execution of the

derivative instrument. The same requirement applies where a Credit Support Annex (“CSA”) to an ISDA Master

Agreement has been obtained such that the counterparty is obligated to provide collateral. In the case of a split or

single rating, the lowest or the single rating will apply.

In the case of foreign exchange transactions with a tenor of exposure of less than one year, a counterparty

must have a short-term credit rating of “A-1/P-1” or its equivalent. In the case of a split or single rating, the

lowest or the single rating will apply.

All counterparty exposure is measured on a net mark-to-market basis where the valuation of a derivative is

adjusted to reflect current market values. This is achieved by estimating the net present value of derivatives

positions contracted and outstanding with each counterparty and calculating the gross loss (excluding recoveries)

that would be sustained in the event of a counterparty bankruptcy (taking into account netting and pledged

collateral under the applicable ISDA Master Agreement and CSA). Investment exposure limits to counterparties

take into account all exposures (through derivatives, bond investments, repurchase transactions or otherwise).

We also engage in derivatives transactions traded on regulated exchanges or clearinghouses where the

exchanges or clearinghouses ensure the performance of the contracts.

Item 8. Financial Statements and Supplementary Data

Genworth Financial, Inc.

Index to Consolidated Financial Statements

Annual Financial Statements:
Report of KPMG LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019

and 2018:

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements:
Note 1—Nature of Business and Formation of Genworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 2—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 3—Earnings (Loss) Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 4—Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 5—Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 6—Deferred Acquisition Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 7—Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 8—Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 9—Insurance Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 10—Liability for Policy and Contract Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 11—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 12—Borrowings and Other Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 13—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 14—Supplemental Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 15—Stock-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 16—Fair Value of Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 17—Insurance Subsidiary Financial Information and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . .
Note 18—Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 19—Quarterly Results of Operations (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 20—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 21—Changes in Accumulated Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 22—Noncontrolling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 23—Sale of Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statement Schedules as of December 31, 2020 and 2019 and for the years ended December 31,

2020, 2019 and 2018:

Page

186

190
191
192
193
194

195
197
220
221
236
242
243
244
248
251
257
259
263
267
267
271
289
296
304
307
312
314
314

Schedule I, Summary of Investments-Other Than Investments in Related Parties . . . . . . . . . . . . . . . . . . . . .
Schedule II, Financial Statements of Genworth Financial, Inc. (Parent Only) . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule III, Supplemental Insurance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

319
320
326

184

185

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Genworth Financial, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Genworth Financial, Inc. and subsidiaries (the
Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive
income, changes in equity, and cash flows for each of the years in the three year period ended December 31,
2020, and the related notes and financial statement schedules I to III (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31, 2020, in conformity with U.S.
generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2021 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.

Loss recognition testing for long-term care insurance

As discussed in Notes 2 and 9 to the consolidated financial statements, of the Company’s total future policy
benefits balance of $42,695 million as of December 31, 2020, long-term care insurance contracts were

$28,770 million. At least annually, the liability for future policy benefit is evaluated to determine if a

premium deficiency exists. Loss recognition testing is generally performed at the line of business level. If

the liability for future policy benefits plus the current present value of expected future gross premiums is

less than the current present value of expected future benefits and expenses (including any unamortized

deferred acquisition costs (DAC)), a charge to net income (loss) is recorded for accelerated DAC

amortization and, if necessary, a premium deficiency reserve is established. The loss recognition test is

based upon expected estimated claims and premium payment patterns, which includes assumptions for

future in-force rate actions and morbidity. Estimates of future in-force rate actions include those that are

approved or anticipated to be approved, including premium rate increases and associated benefit reductions

not yet filed.

We identified the evaluation of future in-force rate actions and morbidity assumptions (key assumptions)

used in loss recognition testing for long-term care insurance as a critical audit matter. Due to the

measurement uncertainty and extent of audit effort required, the evaluation of the key assumptions required

especially subjective auditor judgment. Specialized skills were needed to evaluate the future in-force rate

actions and morbidity assumptions used in the Company’s loss recognition testing.

The following are the primary procedures we performed to address this critical audit matter. With the

assistance of actuarial professionals, as appropriate, we evaluated the design and tested the operating

effectiveness of certain internal controls related to the Company’s loss recognition testing. This included

controls over the development of future in-force rate actions and the morbidity assumptions. We tested the

Company’s process to develop the assumptions used in the annual loss recognition testing through the

procedures below. We assessed the reasonableness of the Company’s updated future in-force rate actions

assumptions in relation to the Company’s historical and expected experience, including assessing the

Company’s intent and ability to achieve the expected future in-force rate actions. We also involved actuarial

professionals with specialized skills and knowledge, who assisted in:

• Evaluating the methods and assumptions for consistency with generally accepted actuarial

methodologies and industry practice

• Evaluating the Company’s key assumptions, including the determination of whether to update the key

assumptions in the current year, by assessing the consistency of the assumptions with each other,

relevant historical and experience data, and industry data, as applicable

• Assessing the reasonableness of the Company’s updated morbidity assumptions in relation to the

Company’s historical and expected experience

• Analyzing the actual impact of individual key assumption changes to the results of the loss recognition

test using the Company’s analysis of the impact of each update to the projected cash flows.

Long-term care claim reserves

As discussed in Notes 2 and 10 to the consolidated financial statements, the liability for policy and contract

claims for long-term care insurance products (long-term care claim reserves) represents the present value of

the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that

have occurred on or before December 31, 2020. Key assumptions include insured morbidity, which includes

frequency and severity of claims, including claim termination rates (CTR) and benefit utilization rates

(BUR). The Company’s long-term care claim reserve was $10,518 million of a total liability for policy and

contract claims of $11,817 million as of December 31, 2020.

We identified the assessment of the estimate of the long-term care claim reserves as a critical audit matter.

The evaluation of the CTR and BUR assumptions used in the determination of the morbidity assumption for

claim duration and severity required especially subjective auditor judgment and increased extent of effort as

small changes in the assumptions could have material impacts on reserves. Additionally, specialized skills

were needed to evaluate the Company’s CTR and BUR assumptions used to derive the morbidity

assumptions and the impact of those assumptions on the long-term care claim reserves.

186

187

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Genworth Financial, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Genworth Financial, Inc. and subsidiaries (the

Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive

income, changes in equity, and cash flows for each of the years in the three year period ended December 31,

2020, and the related notes and financial statement schedules I to III (collectively, the consolidated financial

statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its

cash flows for each of the years in the three year period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020,

based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2021 expressed an

unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility

is to express an opinion on these consolidated financial statements based on our audits. We are a public

accounting firm registered with the PCAOB and are required to be independent with respect to the Company in

accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free

of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the

risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and

performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements. Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable

basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the

consolidated financial statements that were communicated or required to be communicated to the audit

committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements

and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical

audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,

and we are not, by communicating the critical audit matters below, providing separate opinions on the critical

audit matters or on the accounts or disclosures to which they relate.

Loss recognition testing for long-term care insurance

As discussed in Notes 2 and 9 to the consolidated financial statements, of the Company’s total future policy

benefits balance of $42,695 million as of December 31, 2020, long-term care insurance contracts were

$28,770 million. At least annually, the liability for future policy benefit is evaluated to determine if a
premium deficiency exists. Loss recognition testing is generally performed at the line of business level. If
the liability for future policy benefits plus the current present value of expected future gross premiums is
less than the current present value of expected future benefits and expenses (including any unamortized
deferred acquisition costs (DAC)), a charge to net income (loss) is recorded for accelerated DAC
amortization and, if necessary, a premium deficiency reserve is established. The loss recognition test is
based upon expected estimated claims and premium payment patterns, which includes assumptions for
future in-force rate actions and morbidity. Estimates of future in-force rate actions include those that are
approved or anticipated to be approved, including premium rate increases and associated benefit reductions
not yet filed.

We identified the evaluation of future in-force rate actions and morbidity assumptions (key assumptions)
used in loss recognition testing for long-term care insurance as a critical audit matter. Due to the
measurement uncertainty and extent of audit effort required, the evaluation of the key assumptions required
especially subjective auditor judgment. Specialized skills were needed to evaluate the future in-force rate
actions and morbidity assumptions used in the Company’s loss recognition testing.

The following are the primary procedures we performed to address this critical audit matter. With the
assistance of actuarial professionals, as appropriate, we evaluated the design and tested the operating
effectiveness of certain internal controls related to the Company’s loss recognition testing. This included
controls over the development of future in-force rate actions and the morbidity assumptions. We tested the
Company’s process to develop the assumptions used in the annual loss recognition testing through the
procedures below. We assessed the reasonableness of the Company’s updated future in-force rate actions
assumptions in relation to the Company’s historical and expected experience, including assessing the
Company’s intent and ability to achieve the expected future in-force rate actions. We also involved actuarial
professionals with specialized skills and knowledge, who assisted in:

• Evaluating the methods and assumptions for consistency with generally accepted actuarial

methodologies and industry practice

• Evaluating the Company’s key assumptions, including the determination of whether to update the key
assumptions in the current year, by assessing the consistency of the assumptions with each other,
relevant historical and experience data, and industry data, as applicable

• Assessing the reasonableness of the Company’s updated morbidity assumptions in relation to the

Company’s historical and expected experience

• Analyzing the actual impact of individual key assumption changes to the results of the loss recognition

test using the Company’s analysis of the impact of each update to the projected cash flows.

Long-term care claim reserves

As discussed in Notes 2 and 10 to the consolidated financial statements, the liability for policy and contract
claims for long-term care insurance products (long-term care claim reserves) represents the present value of
the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that
have occurred on or before December 31, 2020. Key assumptions include insured morbidity, which includes
frequency and severity of claims, including claim termination rates (CTR) and benefit utilization rates
(BUR). The Company’s long-term care claim reserve was $10,518 million of a total liability for policy and
contract claims of $11,817 million as of December 31, 2020.

We identified the assessment of the estimate of the long-term care claim reserves as a critical audit matter.
The evaluation of the CTR and BUR assumptions used in the determination of the morbidity assumption for
claim duration and severity required especially subjective auditor judgment and increased extent of effort as
small changes in the assumptions could have material impacts on reserves. Additionally, specialized skills
were needed to evaluate the Company’s CTR and BUR assumptions used to derive the morbidity
assumptions and the impact of those assumptions on the long-term care claim reserves.

186

187

The following are the primary procedures we performed to address this critical audit matter. We evaluated,
with the assistance of actuarial professionals as appropriate, the design and tested the operating effectiveness of
certain internal controls related to the Company’s estimate of the long-term care claims reserve. This included
controls related to the development of the CTR and BUR assumptions used to derive the morbidity
assumptions. We tested the Company’s process to develop the CTR and BUR assumptions through the
procedures below. We involved actuarial professionals with specialized skills and knowledge, who assisted in:

• Evaluating the methods and assumptions for consistency with generally accepted actuarial

methodologies and industry practice

• Assessing the consistency of expected claims experience with actual historical claims experience to

evaluate the Company’s updated morbidity assumptions

• Developing an estimate of the long-term care claim reserves for a selection of contracts using the

Company’s assumptions and comparing the results to the Company’s recorded claim reserves for the
selected contracts.

Liability for guarantees and deferred acquisition costs for universal life and term universal life policies

As discussed in Notes 2, 6 and 9 to the consolidated financial statements, the liability for guarantees
represents a supplementary reserve established in addition to the contract value and is calculated by
applying a benefit ratio to accumulated contract holder assessments, and then deducting accumulated paid
claims. The benefit ratio is equal to the ratio of benefits to assessments, accumulated with interest and
considering both past and anticipated future claims experience. Amortization of deferred acquisition costs
(DAC) for universal life and term universal life insurance contracts is based on expected gross profits. Key
assumptions used to determine the estimated future benefits used in the benefit ratio and expected gross
profits for amortization of DAC include insured mortality and expected policy lapses. The Company’s
policyholder account balances related to universal and term universal life insurance contracts was
$11,227 million of total policyholder account balances of $21,503 million as of December 31, 2020. Of the
total $11,227 million, a portion of this represents the additional benefit reserves for guarantees related to
universal and term universal life insurance contracts. The Company’s DAC balance is $1,529 million as of
December 31, 2020, a portion of which relates to universal and term universal life insurance contracts.

We identified the assessment of the estimate of the liability for guarantees related to universal life and term
universal life policies (secondary guarantees) and amortization of DAC as a critical audit matter. Specifically,
the evaluation of the mortality and lapse assumptions used in the estimation of the additional benefit reserves for
guarantees and expected gross profits for amortization of DAC required especially subjective auditor judgment.
Increased effort and specialized skills were needed to evaluate the Company’s mortality and lapse assumptions
and the impact of those assumptions on the liability for secondary guarantees and amortization of DAC.

The following are the primary procedures we performed to address this critical audit matter. With the
assistance of actuarial professionals, where appropriate, we evaluated the design and tested the operating
effectiveness of certain internal controls related to the valuation of the liability for secondary guarantees and
amortization of DAC. This included controls related to the development of the mortality and lapse
assumptions. We tested the Company’s process to develop the universal and term universal life liability for
secondary guarantees and amortization of DAC through the procedures below. We involved actuarial
professionals with specialized skills and knowledge, who assisted in:

• Evaluating the methods and assumptions for consistency with generally accepted actuarial

methodologies and industry practice

• Evaluating the Company’s mortality and lapse assumptions by assessing the consistency of the
assumptions with the underlying historical claims and lapse experience data and industry data

• Developing an estimate of the secondary guarantee reserve and DAC and the expected gross profits for
amortization of DAC for a selection of contracts using the Company’s assumptions and comparing the
results to the Company’s recorded reserves and DAC for the selected contracts.

Mortgage insurance reserves

As described in Notes 2 and 10 to the consolidated financial statements, the Company estimates the

liabilities for mortgage insurance policies (mortgage insurance reserves) based on notices of mortgage loan

defaults and estimates of defaults that have been incurred but have not been reported by loan servicers. The

estimates are determined using either a factor-based approach, in which assumptions of claim rates for loans

in default and the average amount paid for loans that result in a claim are calculated using actuarial

techniques, or a case-based approach, in which each individual delinquent loan is reviewed and a best-

estimate loss is determined based on the status of the insured loan and an estimation of net sale proceeds

from the disposition of the mortgaged property. The Company’s mortgage insurance reserves were

$897 million of a total liability for policy and contract claims of $11,817 million as of December 31, 2020.

We identified the assessment of the valuation of mortgage insurance reserves to be a critical audit matter.

The assumptions related to the ultimate amounts and timing of claim payments used to develop reserves

were inherently uncertain and involved significant management judgment, which required especially

subjective auditor judgment. Additionally, the audit effort to assess the valuation of mortgage insurance

reserves required the involvement of professionals with specialized knowledge and experience.

The following are the primary procedures we performed to address the critical audit matter. We evaluated,

with the assistance of actuarial professionals, the design and tested the operating effectiveness of certain

internal controls related to the valuation of mortgage insurance reserves. This included controls related to

the review and approval of the reserve factors used in the estimate for mortgage insurance reserves. We

involved actuarial professionals with specialized knowledge and experience, who assisted in:

• Assessing the Company’s reserving methodology and assumptions by comparing to accepted actuarial

methodologies

• Developing an independent estimate and range for a portion of the mortgage insurance reserve, using

the Company’s underlying historical claims and delinquency data and independently developed models

and assumptions and assessing the year-over-year movements of the Company’s recorded mortgage

insurance reserves within the developed independent range

• Challenging management’s process, methodology, and assumptions applied and the resulting reserve

adjustments, considering historical data, external macroeconomic factors, and consistency in

application year over year for another portion of the reserves.

We have served as the Company’s auditor since 2002.

/s/ KPMG LLP

Richmond, Virginia

February 26, 2021

188

189

The following are the primary procedures we performed to address this critical audit matter. We evaluated,

with the assistance of actuarial professionals as appropriate, the design and tested the operating effectiveness of

certain internal controls related to the Company’s estimate of the long-term care claims reserve. This included

controls related to the development of the CTR and BUR assumptions used to derive the morbidity

assumptions. We tested the Company’s process to develop the CTR and BUR assumptions through the

procedures below. We involved actuarial professionals with specialized skills and knowledge, who assisted in:

• Evaluating the methods and assumptions for consistency with generally accepted actuarial

methodologies and industry practice

• Assessing the consistency of expected claims experience with actual historical claims experience to

evaluate the Company’s updated morbidity assumptions

• Developing an estimate of the long-term care claim reserves for a selection of contracts using the

Company’s assumptions and comparing the results to the Company’s recorded claim reserves for the

selected contracts.

Liability for guarantees and deferred acquisition costs for universal life and term universal life policies

As discussed in Notes 2, 6 and 9 to the consolidated financial statements, the liability for guarantees

represents a supplementary reserve established in addition to the contract value and is calculated by

applying a benefit ratio to accumulated contract holder assessments, and then deducting accumulated paid

claims. The benefit ratio is equal to the ratio of benefits to assessments, accumulated with interest and

considering both past and anticipated future claims experience. Amortization of deferred acquisition costs

(DAC) for universal life and term universal life insurance contracts is based on expected gross profits. Key

assumptions used to determine the estimated future benefits used in the benefit ratio and expected gross

profits for amortization of DAC include insured mortality and expected policy lapses. The Company’s

policyholder account balances related to universal and term universal life insurance contracts was

$11,227 million of total policyholder account balances of $21,503 million as of December 31, 2020. Of the

total $11,227 million, a portion of this represents the additional benefit reserves for guarantees related to

universal and term universal life insurance contracts. The Company’s DAC balance is $1,529 million as of

December 31, 2020, a portion of which relates to universal and term universal life insurance contracts.

We identified the assessment of the estimate of the liability for guarantees related to universal life and term

universal life policies (secondary guarantees) and amortization of DAC as a critical audit matter. Specifically,

the evaluation of the mortality and lapse assumptions used in the estimation of the additional benefit reserves for

guarantees and expected gross profits for amortization of DAC required especially subjective auditor judgment.

Increased effort and specialized skills were needed to evaluate the Company’s mortality and lapse assumptions

and the impact of those assumptions on the liability for secondary guarantees and amortization of DAC.

The following are the primary procedures we performed to address this critical audit matter. With the

assistance of actuarial professionals, where appropriate, we evaluated the design and tested the operating

effectiveness of certain internal controls related to the valuation of the liability for secondary guarantees and

amortization of DAC. This included controls related to the development of the mortality and lapse

assumptions. We tested the Company’s process to develop the universal and term universal life liability for

secondary guarantees and amortization of DAC through the procedures below. We involved actuarial

professionals with specialized skills and knowledge, who assisted in:

• Evaluating the methods and assumptions for consistency with generally accepted actuarial

methodologies and industry practice

• Evaluating the Company’s mortality and lapse assumptions by assessing the consistency of the

assumptions with the underlying historical claims and lapse experience data and industry data

• Developing an estimate of the secondary guarantee reserve and DAC and the expected gross profits for

amortization of DAC for a selection of contracts using the Company’s assumptions and comparing the

results to the Company’s recorded reserves and DAC for the selected contracts.

Mortgage insurance reserves

As described in Notes 2 and 10 to the consolidated financial statements, the Company estimates the
liabilities for mortgage insurance policies (mortgage insurance reserves) based on notices of mortgage loan
defaults and estimates of defaults that have been incurred but have not been reported by loan servicers. The
estimates are determined using either a factor-based approach, in which assumptions of claim rates for loans
in default and the average amount paid for loans that result in a claim are calculated using actuarial
techniques, or a case-based approach, in which each individual delinquent loan is reviewed and a best-
estimate loss is determined based on the status of the insured loan and an estimation of net sale proceeds
from the disposition of the mortgaged property. The Company’s mortgage insurance reserves were
$897 million of a total liability for policy and contract claims of $11,817 million as of December 31, 2020.

We identified the assessment of the valuation of mortgage insurance reserves to be a critical audit matter.
The assumptions related to the ultimate amounts and timing of claim payments used to develop reserves
were inherently uncertain and involved significant management judgment, which required especially
subjective auditor judgment. Additionally, the audit effort to assess the valuation of mortgage insurance
reserves required the involvement of professionals with specialized knowledge and experience.

The following are the primary procedures we performed to address the critical audit matter. We evaluated,
with the assistance of actuarial professionals, the design and tested the operating effectiveness of certain
internal controls related to the valuation of mortgage insurance reserves. This included controls related to
the review and approval of the reserve factors used in the estimate for mortgage insurance reserves. We
involved actuarial professionals with specialized knowledge and experience, who assisted in:

• Assessing the Company’s reserving methodology and assumptions by comparing to accepted actuarial

methodologies

• Developing an independent estimate and range for a portion of the mortgage insurance reserve, using

the Company’s underlying historical claims and delinquency data and independently developed models
and assumptions and assessing the year-over-year movements of the Company’s recorded mortgage
insurance reserves within the developed independent range

• Challenging management’s process, methodology, and assumptions applied and the resulting reserve

adjustments, considering historical data, external macroeconomic factors, and consistency in
application year over year for another portion of the reserves.

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Richmond, Virginia
February 26, 2021

188

189

GENWORTH FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except per share amounts)

Assets

Investments:

Fixed maturity securities available-for-sale, at fair value (amortized cost of $55,676 and

Commercial mortgage loans, net

allowance for credit losses of $4 as of December 31, 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4
as of December 31, 2020 and 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets and goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable, net

December 31,

2020

2019

$ 65,790
476

$ 60,339
239

6,774
(31)
6,743
1,978
2,253
77,240
2,656
671
1,529
200
16,864
(45)
16,819
444
107
6,081
$105,747

6,976
(13)
6,963
2,058
1,632
71,231
3,341
654
1,836
201
17,103
—
17,103
443
425
6,108
$101,342

Liabilities and equity

Liabilities:

Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policyholder account balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability for policy and contract claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-recourse funding obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separate account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities related to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 42,695
21,503
11,817
1,968
1,718
—
3,548
6,081
597
89,927

$ 40,384
22,217
10,958
1,893
1,386
311
3,277
6,108
176
86,710

Commitments and contingencies
Equity:

Class A common stock, $0.001 par value; 1.5 billion shares authorized; 594 million and

592 million shares issued as of December 31, 2020 and 2019, respectively; 506 million and
504 million shares outstanding as of December 31, 2020 and 2019, respectively . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Treasury stock, at cost (88 million shares as of December 31, 2020 and 2019)
Total Genworth Financial, Inc.’s stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
12,008
4,425
1,584
(2,700)
15,318
502
15,820

1
11,990
3,433
1,461
(2,700)
14,185
447
14,632

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105,747

$101,342

See Notes to Consolidated Financial Statements

190

See Notes to Consolidated Financial Statements

191

GENWORTH FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in millions, except per share amounts)

Years ended December 31,

2020

2019

2018

549

988

492

5

202

7,627

1,031

270

761

(549)

212

577

962

441

—

239

714

195

519

11

530

64

611

943

348

—

256

137

70

67

230

297

70

Revenues:

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,110

3,260

$4,037

3,220

$3,994

3,121

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

558

730

50

789

(9)

795

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,658

8,096

7,901

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,391

5,163

5,606

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . . . . . . . . . . . . . . . . . .

Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,382

7,764

Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

Less: net income from discontinued operations attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

123

108

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . .

$ 178

$ 343

$ 119

Net income (loss) available to Genworth Financial, Inc.’s common stockholders:

Income (loss) from continuing operations available to Genworth Financial,

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 727

$ 455

$

(3)

Income (loss) from discontinued operations available to Genworth Financial,

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(549)

(112)

122

Net income available to Genworth Financial, Inc.’s common stockholders . . . . .

$ 178

$ 343

$ 119

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.44

$ 0.90

$ (0.01)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.42

$ 0.89

$ (0.01)

Net income available to Genworth Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.68

$ 0.24

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.67

$ 0.24

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505.2

502.9

500.4

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

511.6

509.7

500.4

GENWORTH FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except per share amounts)

Assets

Investments:

Fixed maturity securities available-for-sale, at fair value (amortized cost of $55,676 and

allowance for credit losses of $4 as of December 31, 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65,790

$ 60,339

Equity securities, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4

as of December 31, 2020 and 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets and goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2020

2019

476

239

6,774

(31)

6,743

1,978

2,253

77,240

2,656

671

1,529

200

16,864

(45)

16,819

444

107

6,081

6,976

(13)

6,963

2,058

1,632

71,231

3,341

654

1,836

201

17,103

—

17,103

443

425

6,108

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105,747

$101,342

Liabilities and equity

Liabilities:

Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 42,695

$ 40,384

Policyholder account balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liability for policy and contract claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-recourse funding obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities related to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,503

11,817

1,968

1,718

—

3,548

6,081

597

22,217

10,958

1,893

1,386

311

3,277

6,108

176

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89,927

86,710

Commitments and contingencies

Equity:

Class A common stock, $0.001 par value; 1.5 billion shares authorized; 594 million and

592 million shares issued as of December 31, 2020 and 2019, respectively; 506 million and

504 million shares outstanding as of December 31, 2020 and 2019, respectively . . . . . . . . . . . .

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,008

11,990

Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treasury stock, at cost (88 million shares as of December 31, 2020 and 2019)

. . . . . . . . . . . . . . .

Total Genworth Financial, Inc.’s stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105,747

$101,342

1

1

4,425

1,584

(2,700)

15,318

502

15,820

3,433

1,461

(2,700)

14,185

447

14,632

GENWORTH FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)

Years ended December 31,

2020

2019

2018

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,110
3,260
558
730

$4,037
3,220
50
789

$3,994
3,121
(9)
795

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,658

8,096

7,901

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations attributable to noncontrolling

5,391
549
988
492
5
202
7,627

1,031
270

761
(549)

212

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

Less: net income from discontinued operations attributable to noncontrolling

5,163
577
962
441
—
239
7,382

714
195

519
11

530

64

5,606
611
943
348
—
256
7,764

137
70

67
230

297

70

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

123

108

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . .

$ 178

$ 343

$ 119

Net income (loss) available to Genworth Financial, Inc.’s common stockholders:
Income (loss) from continuing operations available to Genworth Financial,

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 727

$ 455

$

(3)

Income (loss) from discontinued operations available to Genworth Financial,

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(549)

(112)

122

Net income available to Genworth Financial, Inc.’s common stockholders . . . . .

$ 178

$ 343

$ 119

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.44

$ 0.90

$ (0.01)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.42

$ 0.89

$ (0.01)

Net income available to Genworth Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.68

$ 0.24

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.67

$ 0.24

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505.2

502.9

500.4

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

511.6

509.7

500.4

See Notes to Consolidated Financial Statements

190

See Notes to Consolidated Financial Statements

191

846
2
221
487

764 —
(6) —

—
—
(669)
(2)
(298)
(301)

Net unrealized gains (losses) on securities without an allowance for credit losses . .
Net unrealized gains (losses) on securities with an allowance for credit losses . . . . .
Net unrealized gains (losses) on securities not other-than-temporarily impaired . . . —
Net unrealized gains (losses) on other-than-temporarily impaired securities . . . . . . —
209
Derivatives qualifying as hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

GENWORTH FINANCIAL, INC.

GENWORTH FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 212 $ 530 $

297

Other comprehensive income (loss), net of taxes:

Years ended December 31,

2020

2019

2018

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,022

1,556

(1,270)

Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: comprehensive income attributable to noncontrolling interests . . . . . . . . . . . . . . . .

1,234
64

2,086
354

(973)
22

Total comprehensive income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,170 $1,732 $ (995)

See Notes to Consolidated Financial Statements

2018 . . . . . . . . . . . . . . . . . . . . . . .

1

11,987

2,044

1,118

(2,700)

12,450

1,739

14,189

192

Accumulated

Additional

other

Common

stock

paid-in

capital

comprehensive

income (loss)

Retained

earnings

stockholders’

Noncontrolling

equity

interests

Total

equity

Total

Genworth

Financial,

Inc.’s

Treasury

stock, at

cost

2017 . . . . . . . . . . . . . . . . . . . . . . .

$

1

$11,977

$ 3,027

$1,113

$(2,700)

$13,418

$ 1,910

$15,328

Balances as of December 31,

Cumulative effect of change in

accounting, net of taxes . . . . . . . .

Repurchase of subsidiary shares . . .

Comprehensive income (loss):

Net income . . . . . . . . . . . . . . . .

Other comprehensive loss, net

of taxes . . . . . . . . . . . . . . . . .

Total comprehensive income

(loss) . . . . . . . . . . . . . . . . . . .

Dividends to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense

and exercises and other

. . . . . . . .

Balances as of December 31,

Repurchase of subsidiary shares . . .

Sale of business that included

noncontrolling interests . . . . . . . .

Comprehensive income:

Net income . . . . . . . . . . . . . . . .

Other comprehensive income,

net of taxes . . . . . . . . . . . . . .

Total comprehensive

income . . . . . . . . . . . . . . . . .

Dividends to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense

and exercises and other

. . . . . . . .

Balances as of December 31,

Cumulative effect of change in

accounting, net of taxes . . . . . . . .

Comprehensive income:

Net income . . . . . . . . . . . . . . . .

Other comprehensive income,

net of taxes . . . . . . . . . . . . . .

Total comprehensive

income . . . . . . . . . . . . . . . . .

Dividends to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense

and exercises and other

. . . . . . . .

Balances as of December 31,

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

10

—

—

—

—

—

3

—

—

—

—

18

131

—

—

(1,114)

1,389

—

—

—

—

—

—

—

—

—

992

—

—

193

(114)

—

119

—

—

—

—

—

343

—

—

—

(55)

178

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(1,114)

(156)

(1,270)

17

—

119

(995)

—

10

—

—

343

1,389

1,732

—

3

(55)

178

992

1,170

—

18

(44)

(44)

(1,417)

(1,417)

(197)

(197)

12

15

—

(105)

178

22

(97)

9

187

167

354

—

34

30

64

(9)

—

17

(105)

297

(973)

(97)

19

530

1,556

2,086

(55)

212

1,022

1,234

(9)

18

2020 . . . . . . . . . . . . . . . . . . . . . . .

$

1

$12,008

$ 4,425

$1,584

$(2,700)

$15,318

$

502

$15,820

See Notes to Consolidated Financial Statements

2019 . . . . . . . . . . . . . . . . . . . . . . .

1

$11,990

$ 3,433

$1,461

$(2,700)

$14,185

$

447

$14,632

GENWORTH FINANCIAL, INC.

GENWORTH FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in millions)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in millions)

Years ended December 31,

2020

2019

2018

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 212 $ 530 $

297

Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities without an allowance for credit losses . .

Net unrealized gains (losses) on securities with an allowance for credit losses . . . . .

764 —

(6) —

Net unrealized gains (losses) on securities not other-than-temporarily impaired . . . —

Net unrealized gains (losses) on other-than-temporarily impaired securities . . . . . . —

Derivatives qualifying as hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .

209

55

846

2

221

487

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,022

1,556

(1,270)

Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,234

2,086

Less: comprehensive income attributable to noncontrolling interests . . . . . . . . . . . . . . . .

64

354

Total comprehensive income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,170 $1,732 $ (995)

—

—

(669)

(2)

(298)

(301)

(973)

22

See Notes to Consolidated Financial Statements

Common
stock

Additional
paid-in
capital

Accumulated
other
comprehensive
income (loss)

Retained
earnings

Treasury
stock, at
cost

Total
Genworth
Financial,
Inc.’s
stockholders’
equity

Noncontrolling
interests

Total
equity

Balances as of December 31,

2017 . . . . . . . . . . . . . . . . . . . . . . .

$

1

$11,977

$ 3,027

$1,113

$(2,700)

$13,418

$ 1,910

$15,328

Cumulative effect of change in

accounting, net of taxes . . . . . . . .
Repurchase of subsidiary shares . . .
Comprehensive income (loss):

Net income . . . . . . . . . . . . . . . .
Other comprehensive loss, net

of taxes . . . . . . . . . . . . . . . . .

Total comprehensive income

(loss) . . . . . . . . . . . . . . . . . . .

Dividends to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense

and exercises and other

. . . . . . . .

Balances as of December 31,

—
—

—

—

—

—

—
—

—

—

—

10

131
—

—

(1,114)

—

—

(114)
—

119

—

—

—

—
—

—

—

—

—

17

—

119

—
(105)

178

17
(105)

297

(1,114)

(156)

(1,270)

(995)

—

10

22

(97)

9

(973)

(97)

19

2018 . . . . . . . . . . . . . . . . . . . . . . .

1

11,987

2,044

1,118

(2,700)

12,450

1,739

14,189

Repurchase of subsidiary shares . . .
Sale of business that included

noncontrolling interests . . . . . . . .

Comprehensive income:

Net income . . . . . . . . . . . . . . . .
Other comprehensive income,

net of taxes . . . . . . . . . . . . . .

Total comprehensive

income . . . . . . . . . . . . . . . . .

Dividends to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense

and exercises and other

. . . . . . . .

Balances as of December 31,

—

—

—

—

—

—

—

—

—

—

—

3

—

—

—

1,389

—

—

—

—

343

—

—

—

—

—

—

—

—

—

—

—

343

1,389

1,732

—

3

(44)

(44)

(1,417)

(1,417)

187

167

354

530

1,556

2,086

(197)

(197)

12

15

2019 . . . . . . . . . . . . . . . . . . . . . . .

1

$11,990

$ 3,433

$1,461

$(2,700)

$14,185

$

447

$14,632

Cumulative effect of change in

accounting, net of taxes . . . . . . . .

Comprehensive income:

Net income . . . . . . . . . . . . . . . .
Other comprehensive income,

net of taxes . . . . . . . . . . . . . .

Total comprehensive

income . . . . . . . . . . . . . . . . .

Dividends to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense

and exercises and other

. . . . . . . .

Balances as of December 31,

—

—

—

—

—

—

—

—

—

18

—

—

992

—

—

(55)

178

—

—

—

—

—

—

—

—

(55)

178

992

1,170

—

18

—

34

30

64

(9)

—

(55)

212

1,022

1,234

(9)

18

2020 . . . . . . . . . . . . . . . . . . . . . . .

$

1

$12,008

$ 4,425

$1,584

$(2,700)

$15,318

$

502

$15,820

See Notes to Consolidated Financial Statements

192

193

GENWORTH FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)

Years ended December 31,

2020

2019

2018

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less (income) loss from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash from operating activities:

$

212
549

$

530
(11)

$

297
(230)

Amortization of fixed maturity securities discounts and premiums . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges assessed to policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments and limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities, policy and contract claims and other policy-related balances . . . . . . . . . . . . . . . . . .
Cash from (used by) operating activities—discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(138)
(558)
(646)
(15)
492
5
268
(87)
40

(142)
1,217
(10)
1,042
(269)

1,960

(118)
(50)
(699)
(27)
441
—
139
(98)
27

(358)
1,259
26
609
409

2,079

(130)
9
(697)
(42)
348
—

28
(260)
35

(166)
1,555
8
598
280

1,633

Cash flows from (used by) investing activities:

Proceeds from maturities and repayments of investments:

Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,800
744
182

3,436
597
153

3,312
746
83

Proceeds from sales of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,234

3,883

5,488

Purchases and originations of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, net
Policy loans, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of business, net of cash transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash from (used by) investing activities—discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash from (used by) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows used by financing activities:

Deposits to universal life and investment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Withdrawals from universal life and investment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption and repurchase of non-recourse funding obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt
Repayment and repurchase of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of borrowings related to securitization entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of subsidiary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used by financing activities—discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9,386)
(547)
(449)
79
190
—
—

(1,153)

862
(2,282)
(315)
766
(527)
—
—

(9)
(2)

—

(6,899)
(813)
(476)
(66)
62
1,398
26

1,301

824
(2,319)
—
—
(446)
—
(22)
(87)
(35)
(132)

(9,386)
(1,047)
(360)
538
35
—
(31)

(622)

1,193
(2,355)
—
441
(600)
(40)
(55)
(40)
(56)
(109)

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,507)

(2,217)

(1,621)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $—, $6 and $(25)

related to discontinued operations)

Net change in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less cash, cash equivalents and restricted cash of discontinued operations at end of period . . . . . . . . . . . . . . . .

15

(685)
3,341

2,656
—

1

1,164
2,177

3,341
—

(88)

(698)
2,875

2,177
203

Cash, cash equivalents and restricted cash of continuing operations at end of period . . . . . . . . . . . . . . . . . . . . .

$ 2,656

$ 3,341

$ 1,974

See Notes to Consolidated Financial Statements

194

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(1) Nature of Business and Formation of Genworth

Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was

incorporated in Delaware in 2003 in preparation for an initial public offering (“IPO”) of Genworth’s common

stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding

company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a

new public holding company that it had formed. The new public holding company was incorporated in Delaware

on December 5, 2012, in connection with the reorganization, and was renamed Genworth Financial, Inc.

(“Genworth Financial”) upon the completion of the reorganization.

The accompanying financial statements include on a consolidated basis the accounts of Genworth Financial

and our affiliate companies in which we hold a majority voting interest or power to direct activities of certain

variable interest entities (“VIEs”), which we refer to as “Genworth,” “Genworth Financial,” the “Company,”

“we,” “us” or “our” unless the context otherwise requires. All intercompany accounts and transactions have been

eliminated in consolidation.

We operate our business through the following four operating segments:

• U.S. Mortgage Insurance. In the United States, we offer mortgage insurance products predominantly

insuring prime-based, individually underwritten residential mortgage loans at specified coverage

percentages (“primary mortgage insurance”). We also selectively enter into insurance transactions with

lenders and investors, under which we insure a portfolio of loans at or after origination (“pool mortgage

insurance”).

• Australia Mortgage Insurance. In Australia, we offer lender mortgage insurance products which

predominantly insure individually underwritten residential mortgage loans (“flow mortgage

insurance”) and selectively provide mortgage insurance on a bulk basis (“bulk mortgage insurance”)

that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk.

• U.S. Life Insurance. We offer long-term care insurance products as well as service traditional life

insurance and fixed annuity products in the United States.

• Runoff. The Runoff segment includes the results of products which have not been actively sold since

2011, but we continue to service our existing blocks of business. These products primarily include

variable annuity, variable life insurance and corporate-owned life insurance, as well as funding

agreements.

In addition to our four operating business segments, we also have Corporate and Other activities which

include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income

and expenses, eliminations of inter-segment transactions and the results of other businesses that are managed

outside of our operating segments, including certain smaller international mortgage insurance businesses and

discontinued operations. See note 23 for additional information related to discontinued operations.

Each reporting period, we assess our ability to continue as a going concern for one year from the date the

financial statements are issued. As of December 31, 2020, Genworth Holdings has $1,032 million of unrestricted

cash and cash equivalents. For the year ended December 31, 2020, our evaluation of our ability to meet our

obligations included the following contractual obligations due within one year from the issue date of our audited

consolidated financial statements included herein:

• Genworth Holdings had $338 million of its 7.20% senior notes that matured in February 2021 and

$659 million of its 7.625% senior notes that will mature in September 2021, excluding deferred

195

GENWORTH FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Less (income) loss from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

212

549

$

530

(11)

$

297

(230)

Adjustments to reconcile net income to net cash from operating activities:

Amortization of fixed maturity securities discounts and premiums . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charges assessed to policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition costs deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill impairment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative instruments and limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other liabilities, policy and contract claims and other policy-related balances . . . . . . . . . . . . . . . . . .

Cash from (used by) operating activities—discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,079

1,633

Cash flows from (used by) investing activities:

Proceeds from maturities and repayments of investments:

Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,800

744

182

3,436

597

153

3,312

746

83

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,234

3,883

5,488

Proceeds from sales of investments:

Purchases and originations of investments:

Fixed maturity and equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9,386)

(6,899)

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-term investments, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from sale of business, net of cash transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash from (used by) investing activities—discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash from (used by) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,153)

Cash flows used by financing activities:

Deposits to universal life and investment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

862

824

Withdrawals from universal life and investment contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,282)

(2,319)

1,193

(2,355)

Redemption and repurchase of non-recourse funding obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from issuance of long-term debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repayment and repurchase of long-term debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repayment of borrowings related to securitization entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repurchase of subsidiary shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash used by financing activities—discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,507)

(2,217)

(1,621)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $—, $6 and $(25)

related to discontinued operations)

Net change in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less cash, cash equivalents and restricted cash of discontinued operations at end of period . . . . . . . . . . . . . . . .

15

(685)

3,341

2,656

—

1

1,164

2,177

3,341

—

Cash, cash equivalents and restricted cash of continuing operations at end of period . . . . . . . . . . . . . . . . . . . . .

$ 2,656

$ 3,341

$ 1,974

Years ended December 31,

2020

2019

2018

(138)

(558)

(646)

(15)

492

5

268

(87)

40

(142)

1,217

(10)

1,042

(269)

1,960

(547)

(449)

79

190

—

—

(315)

766

(527)

—

—

—

(9)

(2)

(118)

(50)

(699)

(27)

441

—

139

(98)

27

(358)

1,259

26

609

409

(130)

9

(697)

(42)

348

—

28

(260)

35

(166)

1,555

8

598

280

(813)

(476)

(66)

1,398

62

26

1,301

—

—

—

(446)

(22)

(87)

(35)

(132)

(9,386)

(1,047)

(360)

538

35

—

(31)

(622)

—

441

(600)

(40)

(55)

(40)

(56)

(109)

(88)

(698)

2,875

2,177

203

See Notes to Consolidated Financial Statements

194

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(1) Nature of Business and Formation of Genworth

Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was
incorporated in Delaware in 2003 in preparation for an initial public offering (“IPO”) of Genworth’s common
stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding
company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a
new public holding company that it had formed. The new public holding company was incorporated in Delaware
on December 5, 2012, in connection with the reorganization, and was renamed Genworth Financial, Inc.
(“Genworth Financial”) upon the completion of the reorganization.

The accompanying financial statements include on a consolidated basis the accounts of Genworth Financial

and our affiliate companies in which we hold a majority voting interest or power to direct activities of certain
variable interest entities (“VIEs”), which we refer to as “Genworth,” “Genworth Financial,” the “Company,”
“we,” “us” or “our” unless the context otherwise requires. All intercompany accounts and transactions have been
eliminated in consolidation.

We operate our business through the following four operating segments:

• U.S. Mortgage Insurance. In the United States, we offer mortgage insurance products predominantly
insuring prime-based, individually underwritten residential mortgage loans at specified coverage
percentages (“primary mortgage insurance”). We also selectively enter into insurance transactions with
lenders and investors, under which we insure a portfolio of loans at or after origination (“pool mortgage
insurance”).

• Australia Mortgage Insurance. In Australia, we offer lender mortgage insurance products which
predominantly insure individually underwritten residential mortgage loans (“flow mortgage
insurance”) and selectively provide mortgage insurance on a bulk basis (“bulk mortgage insurance”)
that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk.

• U.S. Life Insurance. We offer long-term care insurance products as well as service traditional life

insurance and fixed annuity products in the United States.

• Runoff. The Runoff segment includes the results of products which have not been actively sold since
2011, but we continue to service our existing blocks of business. These products primarily include
variable annuity, variable life insurance and corporate-owned life insurance, as well as funding
agreements.

In addition to our four operating business segments, we also have Corporate and Other activities which
include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income
and expenses, eliminations of inter-segment transactions and the results of other businesses that are managed
outside of our operating segments, including certain smaller international mortgage insurance businesses and
discontinued operations. See note 23 for additional information related to discontinued operations.

Each reporting period, we assess our ability to continue as a going concern for one year from the date the
financial statements are issued. As of December 31, 2020, Genworth Holdings has $1,032 million of unrestricted
cash and cash equivalents. For the year ended December 31, 2020, our evaluation of our ability to meet our
obligations included the following contractual obligations due within one year from the issue date of our audited
consolidated financial statements included herein:

• Genworth Holdings had $338 million of its 7.20% senior notes that matured in February 2021 and
$659 million of its 7.625% senior notes that will mature in September 2021, excluding deferred

195

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

amounts. We are currently in compliance with the terms of our debt agreements and interest payments
on our senior notes are forecasted to be $165 million for the next twelve months. See note 12 for
additional details on our long-term borrowings.

• As part of the settlement agreement reached in July 2020 regarding the case titled AXA S.A. v.

Genworth Financial International Holdings, LLC et al., we issued a secured promissory note to
AXA S.A. (“AXA”) that is due in 2022. Under the settlement, certain cash flows to Genworth
Holdings, including dividends and capital raises, above defined thresholds must be paid to AXA
until the promissory note is fully repaid. In addition, to date in 2021 and over the next year, we
expect to pay AXA approximately $53 million consisting of interest on the promissory note,
assuming we do not make any pre-payments, and a one-time payment on an unrelated liability
associated with underwriting losses on a product sold by a distributor in our former lifestyle
protection insurance business. See note 20 for additional details on the case. See note 23 for
additional details related to the sale of our former lifestyle protection insurance business and
amounts recorded related to discontinued operations.

We also evaluate other conditions and events and their relative significance in relation to our ability to meet

our obligations. For example, Genworth Holdings received in the fourth quarter of 2020 intercompany cash tax
payments generated primarily from taxable income on investment gains and is expecting additional intercompany
cash tax payments in future periods. In addition, we are exposed to risks associated with the coronavirus
pandemic (“COVID-19”), which has disrupted the global economy and financial markets, business operations,
and consumer behavior and confidence.

•

In 2021, until the secured promissory note to AXA is paid, dividends above $50 million from our U.S.
mortgage insurance subsidiaries are subject to mandatory prepayment conditions. In addition, the
receipt of dividends and sale proceeds above certain thresholds from our Australian mortgage insurance
business are also subject to mandatory prepayment conditions.

• On October 21, 2016, we entered into an agreement with China Oceanwide Holdings Group Co., Ltd.

(“China Oceanwide”), under which China Oceanwide agreed to acquire all of our outstanding common
stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. As part of
the transaction, China Oceanwide and/or its affiliates, additionally committed to contribute an
aggregate of $1.5 billion to us over time following consummation of the merger. Due to the uncertainty
around the completion and timing of the remaining steps required to close the China Oceanwide
transaction, on January 4, 2021, Genworth and China Oceanwide agreed that an extension of the then
current December 31, 2020 merger agreement end date would not be sought. The consummation of this
transaction is dependent on steps outside of our control; accordingly, the associated post-closing capital
contributions from China Oceanwide have not been included in this evaluation.

In connection with repaying our senior notes maturing in September 2021, Genworth Holdings expects to

have a cash shortfall of approximately $15 million which raises doubt about our ability to meet our financial
obligations within the next year. While conditions and events occurring and expected to occur raise doubt about
our ability to meet our financial obligations, management’s plans alleviate this doubt. We believe that our plans,
along with existing cash and cash equivalents, will provide Genworth Holdings sufficient liquidity to meet its
obligations and maintain business operations for one year from the issue date of the consolidated financial
statements.

insurance business, subject to market conditions. In addition to a partial sale of our U.S. mortgage insurance

business through a public offering, we are also evaluating the possibility of the issuance of convertible, equity-

linked securities or another transaction, prior to our senior notes maturing in September 2021. We believe an

equity transaction involving our U.S. mortgage insurance business, or another transaction, if needed, is probable

of being effectively executed. Support for our assessment includes the relatively small amount of the shortfall,

the value of the U.S. and Australia mortgage insurance businesses, the healthy conditions of the relevant markets,

investor interest, views from our financial advisors, and our successful history of similar transactions, among

other factors.

The impact of the ongoing coronavirus pandemic is very difficult to predict. Its related outcomes and impact

on our business and the capital markets, and our ability to raise capital will depend on the length of the pandemic,

economic impacts of social, global and political influences, and the shape of the economic recovery, among other

factors and uncertainties. While these risks exist, we believe we have sufficient funds to meet our obligations for

one year following the issuance of our consolidated financial statements.

(2) Summary of Significant Accounting Policies

Our consolidated financial statements have been prepared on the basis of U.S. generally accepted

accounting principles (“U.S. GAAP”). Preparing financial statements in conformity with U.S. GAAP requires us

to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could

differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year

presentation. The ultimate impact from COVID-19 remains unknown, although certain trends, impacts and

uncertainties related to COVID-19 have impacted our financial results under this annual report. Continued risks

and uncertainties of COVID-19 may include declines in investment valuations and impairments, commercial

mortgage loan restructurings, deferred acquisition cost or intangible assets impairments or the acceleration of

amortization, deferred tax asset recoverability and increases to insurance reserves, including higher claims

reserves in our mortgage insurance businesses, among other matters.

a) Premiums

For traditional long-duration insurance contracts, we report premiums as earned when due. For short-

duration insurance contracts, we report premiums as revenue over the terms of the related insurance policies on a

pro-rata basis or in proportion to expected claims.

For single premium mortgage insurance contracts, we report premiums over the estimated policy life in

accordance with the expected pattern of risk emergence as further described in our accounting policy for

unearned premiums. In addition, we have a practice of refunding the post-delinquent premiums in our U.S.

mortgage insurance business to the insured party if the delinquent loan goes to claim. We record a liability for

premiums received on the delinquent loans where our practice is to refund post-delinquent premiums.

Premiums received under annuity contracts without significant mortality risk and premiums received on

investment and universal life insurance products are not reported as revenues but rather as deposits and are

included in liabilities for policyholder account balances.

b) Net Investment Income and Net Investment Gains and Losses

To address this shortfall and longer-term obligations, as well as build cash buffers, we are actively taking
additional steps toward raising capital by preparing for a possible partial public offering of our U.S. mortgage

Investment income is recognized when earned. Income or loss upon call or prepayment of available-for-sale

fixed maturity securities is recognized in net investment income, except for hybrid securities where the income or

196

197

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

amounts. We are currently in compliance with the terms of our debt agreements and interest payments

on our senior notes are forecasted to be $165 million for the next twelve months. See note 12 for

additional details on our long-term borrowings.

• As part of the settlement agreement reached in July 2020 regarding the case titled AXA S.A. v.

Genworth Financial International Holdings, LLC et al., we issued a secured promissory note to

AXA S.A. (“AXA”) that is due in 2022. Under the settlement, certain cash flows to Genworth

Holdings, including dividends and capital raises, above defined thresholds must be paid to AXA

until the promissory note is fully repaid. In addition, to date in 2021 and over the next year, we

expect to pay AXA approximately $53 million consisting of interest on the promissory note,

assuming we do not make any pre-payments, and a one-time payment on an unrelated liability

associated with underwriting losses on a product sold by a distributor in our former lifestyle

protection insurance business. See note 20 for additional details on the case. See note 23 for

additional details related to the sale of our former lifestyle protection insurance business and

amounts recorded related to discontinued operations.

We also evaluate other conditions and events and their relative significance in relation to our ability to meet

our obligations. For example, Genworth Holdings received in the fourth quarter of 2020 intercompany cash tax

payments generated primarily from taxable income on investment gains and is expecting additional intercompany

cash tax payments in future periods. In addition, we are exposed to risks associated with the coronavirus

pandemic (“COVID-19”), which has disrupted the global economy and financial markets, business operations,

and consumer behavior and confidence.

•

In 2021, until the secured promissory note to AXA is paid, dividends above $50 million from our U.S.

mortgage insurance subsidiaries are subject to mandatory prepayment conditions. In addition, the

receipt of dividends and sale proceeds above certain thresholds from our Australian mortgage insurance

business are also subject to mandatory prepayment conditions.

• On October 21, 2016, we entered into an agreement with China Oceanwide Holdings Group Co., Ltd.

(“China Oceanwide”), under which China Oceanwide agreed to acquire all of our outstanding common

stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. As part of

the transaction, China Oceanwide and/or its affiliates, additionally committed to contribute an

aggregate of $1.5 billion to us over time following consummation of the merger. Due to the uncertainty

around the completion and timing of the remaining steps required to close the China Oceanwide

transaction, on January 4, 2021, Genworth and China Oceanwide agreed that an extension of the then

current December 31, 2020 merger agreement end date would not be sought. The consummation of this

transaction is dependent on steps outside of our control; accordingly, the associated post-closing capital

contributions from China Oceanwide have not been included in this evaluation.

In connection with repaying our senior notes maturing in September 2021, Genworth Holdings expects to

have a cash shortfall of approximately $15 million which raises doubt about our ability to meet our financial

obligations within the next year. While conditions and events occurring and expected to occur raise doubt about

our ability to meet our financial obligations, management’s plans alleviate this doubt. We believe that our plans,

along with existing cash and cash equivalents, will provide Genworth Holdings sufficient liquidity to meet its

obligations and maintain business operations for one year from the issue date of the consolidated financial

statements.

insurance business, subject to market conditions. In addition to a partial sale of our U.S. mortgage insurance
business through a public offering, we are also evaluating the possibility of the issuance of convertible, equity-
linked securities or another transaction, prior to our senior notes maturing in September 2021. We believe an
equity transaction involving our U.S. mortgage insurance business, or another transaction, if needed, is probable
of being effectively executed. Support for our assessment includes the relatively small amount of the shortfall,
the value of the U.S. and Australia mortgage insurance businesses, the healthy conditions of the relevant markets,
investor interest, views from our financial advisors, and our successful history of similar transactions, among
other factors.

The impact of the ongoing coronavirus pandemic is very difficult to predict. Its related outcomes and impact
on our business and the capital markets, and our ability to raise capital will depend on the length of the pandemic,
economic impacts of social, global and political influences, and the shape of the economic recovery, among other
factors and uncertainties. While these risks exist, we believe we have sufficient funds to meet our obligations for
one year following the issuance of our consolidated financial statements.

(2) Summary of Significant Accounting Policies

Our consolidated financial statements have been prepared on the basis of U.S. generally accepted

accounting principles (“U.S. GAAP”). Preparing financial statements in conformity with U.S. GAAP requires us
to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could
differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year
presentation. The ultimate impact from COVID-19 remains unknown, although certain trends, impacts and
uncertainties related to COVID-19 have impacted our financial results under this annual report. Continued risks
and uncertainties of COVID-19 may include declines in investment valuations and impairments, commercial
mortgage loan restructurings, deferred acquisition cost or intangible assets impairments or the acceleration of
amortization, deferred tax asset recoverability and increases to insurance reserves, including higher claims
reserves in our mortgage insurance businesses, among other matters.

a) Premiums

For traditional long-duration insurance contracts, we report premiums as earned when due. For short-
duration insurance contracts, we report premiums as revenue over the terms of the related insurance policies on a
pro-rata basis or in proportion to expected claims.

For single premium mortgage insurance contracts, we report premiums over the estimated policy life in

accordance with the expected pattern of risk emergence as further described in our accounting policy for
unearned premiums. In addition, we have a practice of refunding the post-delinquent premiums in our U.S.
mortgage insurance business to the insured party if the delinquent loan goes to claim. We record a liability for
premiums received on the delinquent loans where our practice is to refund post-delinquent premiums.

Premiums received under annuity contracts without significant mortality risk and premiums received on

investment and universal life insurance products are not reported as revenues but rather as deposits and are
included in liabilities for policyholder account balances.

b) Net Investment Income and Net Investment Gains and Losses

To address this shortfall and longer-term obligations, as well as build cash buffers, we are actively taking

additional steps toward raising capital by preparing for a possible partial public offering of our U.S. mortgage

Investment income is recognized when earned. Income or loss upon call or prepayment of available-for-sale
fixed maturity securities is recognized in net investment income, except for hybrid securities where the income or

196

197

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

loss upon call is recognized in net investment gains and losses. Investment gains and losses are calculated on the
basis of specific identification on the trade date.

Investment income on mortgage-backed and asset-backed securities is initially based upon yield, cash flow

and prepayment assumptions at the date of purchase. Subsequent revisions in those assumptions are recorded
using the retrospective or prospective method. Under the retrospective method used for mortgage-backed and
asset-backed securities of high credit quality (ratings equal to or greater than “AA” or that are backed by a U.S.
agency) which cannot be contractually prepaid in such a manner that we would not recover a substantial portion
of the initial investment, amortized cost of the security is adjusted to the amount that would have existed had the
revised assumptions been in place at the date of purchase. The adjustments to amortized cost are recorded as a
charge or credit to net investment income. Under the prospective method, which is used for all other mortgage-
backed and asset-backed securities, future cash flows are estimated and interest income is recognized going
forward using the new internal rate of return.

c) Policy Fees and Other Income

Policy fees and other income consists primarily of insurance charges assessed on universal and term
universal life insurance contracts and fees assessed against customer account values. For universal and term
universal life insurance contracts, charges to policyholder accounts for cost of insurance are recognized as
revenue when due. Variable product fees are charged to variable annuity contractholders and variable life
insurance policyholders based upon the daily net assets of the contractholder’s and policyholder’s account values
and are recognized as revenue when charged. Policy surrender fees are recognized as income when the policy is
surrendered.

d) Investment Securities

At the time of purchase, we designate our fixed maturity securities as either available-for-sale or trading and

report them in our consolidated balance sheets at fair value. Our portfolio of fixed maturity securities comprises
primarily investment grade securities. Changes in the fair value of available-for-sale fixed maturity securities, net
of the effect on deferred acquisition costs (“DAC”), present value of future profits (“PVFP”), benefit reserves
and deferred income taxes, are reflected as unrealized investment gains or losses in a separate component of
accumulated other comprehensive income (loss). Equity securities are recorded at fair value in our consolidated
balance sheets and changes in the fair value are reflected in net investment gains (losses). Realized and
unrealized gains and losses related to trading securities are reflected in net investment gains (losses).

Allowance for Credit Losses and Impairments on Available-For-Sale Fixed Maturity Securities

On January 1, 2020, we adopted new accounting guidance related to credit losses on financial instruments.
Under this new accounting guidance, securities in an unrealized loss position are evaluated to determine whether
the decline in fair value is related to credit losses or other factors. In making this assessment, we consider the
extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency/
agencies and adverse conditions specifically related to the security, among other factors. If a credit loss exists,
the present value of cash flows expected to be collected from the security are compared to the amortized cost
basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost
basis and we have either (i) the intent to sell the security, or (ii) it is more likely than not that we will be required
to sell the security prior to recovering the amortized cost, we record a reduction to the security’s amortized cost
and recognize the loss in net investment gains (losses) for the difference between the security’s amortized cost

and estimated fair value. If neither of the two preceding conditions exist, an allowance for credit losses is

recorded and a loss is recognized in net investment gains (losses), limited to the amount that the fair value is less

than the amortized cost basis. Losses are written off against the allowance when deemed uncollectible or when

we intend to sell or expect we will be required to sell a security prior to recovering its amortized cost. When there

is an allowance for credit losses, we reassess the credit losses each balance sheet date and subsequent increases

or decreases are recorded as an adjustment to the allowance for credit losses, with a corresponding gain or loss

recorded in net investment gains (losses).

Estimating the cash flows expected to be collected is a quantitative and qualitative process that incorporates

information received from third-party sources along with internal assumptions and judgments. When developing

the estimate of cash flows expected to be collected at the individual security level, we utilize an analytical model

that provides for various loss scenarios and consider the industry sector, current levels of subordination,

geographic location and other relevant characteristics of the security or underlying assets, as well as reasonable

and supportable forecasts. We regularly monitor our investment portfolio to ensure that securities with a credit

loss are identified in a timely manner and any losses are recognized in the proper period.

We exclude accrued interest related to available-for-sale fixed maturity securities from the estimate of

allowance for credit losses. Accrued interest is included in accrued investment income in our consolidated

balance sheet and had a carrying value of $548 million as of December 31, 2020. We do not measure an

allowance for credit losses related to accrued interest as uncollectible accrued interest related to our

available-for-sale fixed maturity securities is written off after 90 days and once collectability is determined to be

uncertain and not probable. Amounts written off related to accrued interest are recorded as a credit loss expense

included in net investment gains (losses).

Prior to the adoption of new accounting guidance related to credit losses on financial instruments on

January 1, 2020, we evaluated securities in an unrealized loss position for other-than-temporary impairment as of

each balance sheet date. For debt securities, we considered all available information relevant to the collectability

of the security, including information about past events, then-current conditions, and reasonable and supportable

forecasts, when developing the estimate of cash flows expected to be collected. More specifically for mortgage-

backed and asset-backed securities, we also utilized performance indicators of the underlying assets including

default or delinquency rates, loan to collateral value ratios, third-party credit enhancements, current levels of

subordination, vintage and other relevant characteristics of the security or underlying assets to develop our

estimate of cash flows. Estimating the cash flows expected to be collected is a quantitative and qualitative

process that incorporates information received from third-party sources along with certain internal assumptions

and judgments regarding the future performance of the underlying collateral. Where possible, this data was

benchmarked against third-party sources.

We recognized other-than-temporary impairments on debt securities in an unrealized loss position when one

of the following circumstances exists:

• we did not expect full recovery of our amortized cost basis when due,

the present value of cash flows expected to be collected was less than our amortized cost basis,

•

•

• we intended to sell a security or

it was more likely than not that we would be required to sell a security prior to recovery.

For other-than-temporary impairments recognized during the period, we presented the total other-than-

temporary impairments, the portion of other-than-temporary impairments included in other comprehensive

198

199

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

loss upon call is recognized in net investment gains and losses. Investment gains and losses are calculated on the

basis of specific identification on the trade date.

Investment income on mortgage-backed and asset-backed securities is initially based upon yield, cash flow

and prepayment assumptions at the date of purchase. Subsequent revisions in those assumptions are recorded

using the retrospective or prospective method. Under the retrospective method used for mortgage-backed and

asset-backed securities of high credit quality (ratings equal to or greater than “AA” or that are backed by a U.S.

agency) which cannot be contractually prepaid in such a manner that we would not recover a substantial portion

of the initial investment, amortized cost of the security is adjusted to the amount that would have existed had the

revised assumptions been in place at the date of purchase. The adjustments to amortized cost are recorded as a

charge or credit to net investment income. Under the prospective method, which is used for all other mortgage-

backed and asset-backed securities, future cash flows are estimated and interest income is recognized going

forward using the new internal rate of return.

c) Policy Fees and Other Income

Policy fees and other income consists primarily of insurance charges assessed on universal and term

universal life insurance contracts and fees assessed against customer account values. For universal and term

universal life insurance contracts, charges to policyholder accounts for cost of insurance are recognized as

revenue when due. Variable product fees are charged to variable annuity contractholders and variable life

insurance policyholders based upon the daily net assets of the contractholder’s and policyholder’s account values

and are recognized as revenue when charged. Policy surrender fees are recognized as income when the policy is

surrendered.

d) Investment Securities

At the time of purchase, we designate our fixed maturity securities as either available-for-sale or trading and

report them in our consolidated balance sheets at fair value. Our portfolio of fixed maturity securities comprises

primarily investment grade securities. Changes in the fair value of available-for-sale fixed maturity securities, net

of the effect on deferred acquisition costs (“DAC”), present value of future profits (“PVFP”), benefit reserves

and deferred income taxes, are reflected as unrealized investment gains or losses in a separate component of

accumulated other comprehensive income (loss). Equity securities are recorded at fair value in our consolidated

balance sheets and changes in the fair value are reflected in net investment gains (losses). Realized and

unrealized gains and losses related to trading securities are reflected in net investment gains (losses).

Allowance for Credit Losses and Impairments on Available-For-Sale Fixed Maturity Securities

On January 1, 2020, we adopted new accounting guidance related to credit losses on financial instruments.

Under this new accounting guidance, securities in an unrealized loss position are evaluated to determine whether

the decline in fair value is related to credit losses or other factors. In making this assessment, we consider the

extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency/

agencies and adverse conditions specifically related to the security, among other factors. If a credit loss exists,

the present value of cash flows expected to be collected from the security are compared to the amortized cost

basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost

basis and we have either (i) the intent to sell the security, or (ii) it is more likely than not that we will be required

to sell the security prior to recovering the amortized cost, we record a reduction to the security’s amortized cost

and recognize the loss in net investment gains (losses) for the difference between the security’s amortized cost

and estimated fair value. If neither of the two preceding conditions exist, an allowance for credit losses is
recorded and a loss is recognized in net investment gains (losses), limited to the amount that the fair value is less
than the amortized cost basis. Losses are written off against the allowance when deemed uncollectible or when
we intend to sell or expect we will be required to sell a security prior to recovering its amortized cost. When there
is an allowance for credit losses, we reassess the credit losses each balance sheet date and subsequent increases
or decreases are recorded as an adjustment to the allowance for credit losses, with a corresponding gain or loss
recorded in net investment gains (losses).

Estimating the cash flows expected to be collected is a quantitative and qualitative process that incorporates
information received from third-party sources along with internal assumptions and judgments. When developing
the estimate of cash flows expected to be collected at the individual security level, we utilize an analytical model
that provides for various loss scenarios and consider the industry sector, current levels of subordination,
geographic location and other relevant characteristics of the security or underlying assets, as well as reasonable
and supportable forecasts. We regularly monitor our investment portfolio to ensure that securities with a credit
loss are identified in a timely manner and any losses are recognized in the proper period.

We exclude accrued interest related to available-for-sale fixed maturity securities from the estimate of
allowance for credit losses. Accrued interest is included in accrued investment income in our consolidated
balance sheet and had a carrying value of $548 million as of December 31, 2020. We do not measure an
allowance for credit losses related to accrued interest as uncollectible accrued interest related to our
available-for-sale fixed maturity securities is written off after 90 days and once collectability is determined to be
uncertain and not probable. Amounts written off related to accrued interest are recorded as a credit loss expense
included in net investment gains (losses).

Prior to the adoption of new accounting guidance related to credit losses on financial instruments on

January 1, 2020, we evaluated securities in an unrealized loss position for other-than-temporary impairment as of
each balance sheet date. For debt securities, we considered all available information relevant to the collectability
of the security, including information about past events, then-current conditions, and reasonable and supportable
forecasts, when developing the estimate of cash flows expected to be collected. More specifically for mortgage-
backed and asset-backed securities, we also utilized performance indicators of the underlying assets including
default or delinquency rates, loan to collateral value ratios, third-party credit enhancements, current levels of
subordination, vintage and other relevant characteristics of the security or underlying assets to develop our
estimate of cash flows. Estimating the cash flows expected to be collected is a quantitative and qualitative
process that incorporates information received from third-party sources along with certain internal assumptions
and judgments regarding the future performance of the underlying collateral. Where possible, this data was
benchmarked against third-party sources.

We recognized other-than-temporary impairments on debt securities in an unrealized loss position when one

of the following circumstances exists:

• we did not expect full recovery of our amortized cost basis when due,

•

the present value of cash flows expected to be collected was less than our amortized cost basis,

• we intended to sell a security or

•

it was more likely than not that we would be required to sell a security prior to recovery.

For other-than-temporary impairments recognized during the period, we presented the total other-than-
temporary impairments, the portion of other-than-temporary impairments included in other comprehensive

198

199

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

income (loss) (“OCI”) and the net other-than-temporary impairments as supplemental disclosure presented on the
face of our consolidated statements of income.

Total other-than-temporary impairments that emerged in the period were calculated as the difference

between the amortized cost and fair value. For other-than-temporarily impaired securities where we did not
intend to sell the security and it was not more likely than not that we would be required to sell the security prior
to recovery, total other-than-temporary impairments were adjusted by the portion of other-than-temporary
impairments recognized in OCI (“non-credit”). Net other-than-temporary impairments recorded in net income
(loss) represented the credit loss on the other-than-temporarily impaired securities with the offset recognized as
an adjustment to the amortized cost to determine the new amortized cost basis of the securities.

For securities that were deemed to be other-than-temporarily impaired and a non-credit loss was recorded in

OCI, the amount recorded as an unrealized gain (loss) represented the difference between the fair value and the
new amortized cost for each period presented. The unrealized gain (loss) on an other-than-temporarily impaired
security was recorded as a separate component in OCI until the security was sold or until we recorded an other-
than-temporary impairment where we intended to sell the security or were required to sell the security prior to
recovery.

To estimate the amount of other-than-temporary impairment attributed to credit losses on debt securities
where we did not intend to sell the security and it was not more likely than not that we would be required to sell
the security prior to recovery, we determined our best estimate of the present value of the cash flows expected to
be collected from a security using the effective yield on the security prior to recording any other-than-temporary
impairment. If the present value of the discounted cash flows was lower than the amortized cost of the security,
the difference between the present value and amortized cost represented the credit loss associated with the
security with the remaining difference between fair value and amortized cost recorded as a non-credit other-than-
temporary impairment in OCI.

While the other-than-temporary impairment model for debt securities generally included fixed maturity

securities, there were certain hybrid securities that are classified as fixed maturity securities where the
application of a debt impairment model depended on whether there had been any evidence of deterioration in
credit of the issuer, such as a downgrade to below investment grade. Under certain circumstances, evidence of
deterioration in credit of the issuer may have resulted in the application of the equity securities impairment model
where we recognized an impairment charge in the period in which we determined that the security would not
recover to book value within a reasonable period of time. We determined what constituted a reasonable period on
a security-by-security basis based upon consideration of all the evidence available to us, including the magnitude
of an unrealized loss and its duration. In any event, this period did not exceed 15 months. We measured other-
than-temporary impairments based upon the difference between the amortized cost of a security and its fair
value.

e) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. We have fixed maturity securities,
short-term investments, equity securities, limited partnerships, derivatives, embedded derivatives, securities held
as collateral, separate account assets and certain other financial instruments, which are carried at fair value.

Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect

market data obtained from independent sources, while unobservable inputs reflect our view of market

assumptions in the absence of observable market information. We utilize valuation techniques that maximize the

use of observable inputs and minimize the use of unobservable inputs. All assets and liabilities carried at fair

value are classified and disclosed in one of the following three categories:

• Level 1—Quoted prices for identical instruments in active markets.

• Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar

instruments in markets that are not active; and model-derived valuations for which inputs are

observable or where those significant value drivers are observable.

• Level 3—Instruments for which significant value drivers are unobservable.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as

actively traded equity securities and actively traded mutual fund investments.

Level 2 includes those financial instruments that are valued using industry-standard pricing methodologies,

models or other valuation methodologies. These models are primarily industry-standard models that consider

various inputs, such as interest rate, credit spread and foreign exchange rates for the underlying financial

instruments. All significant inputs are observable, or derived from observable information in the marketplace or

are supported by observable levels at which transactions are executed in the marketplace. Financial instruments

in this category primarily include: certain public and private corporate fixed maturity and equity securities;

government or agency securities; certain mortgage-backed and asset-backed securities; securities held as

collateral; and certain non-exchange-traded derivatives such as interest rate or cross currency swaps.

Level 3 comprises financial instruments whose fair value is estimated based on industry-standard pricing

methodologies and internally developed models utilizing significant inputs not based on, nor corroborated by,

readily available market information. In certain instances, this category may also utilize non-binding broker

quotes. This category primarily consists of certain less liquid fixed maturity, equity and trading securities and

certain derivative instruments or embedded derivatives where we cannot corroborate the significant valuation

inputs with market observable data.

As of each reporting period, all assets and liabilities recorded at fair value are classified in their entirety

based on the lowest level of input that is significant to the fair value measurement. Our assessment of the

significance of a particular input to the fair value measurement in its entirety requires judgment, and considers

factors specific to the asset or liability, such as the relative impact on the fair value as a result of including a

particular input. We review the fair value hierarchy classifications each reporting period. Changes in the

observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities.

Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting

period in which the changes occur. See note 16 for additional information related to fair value measurements.

f) Commercial Mortgage Loans

The carrying value of commercial mortgage loans is stated at principal amounts outstanding, net of

unamortized premium or discount, deferred expenses and allowance for credit losses. Interest on loans is

recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Loan

origination fees and direct costs, as well as premiums and discounts, are amortized as level yield adjustments

over the respective loan terms. Unamortized net fees or costs are recognized upon early repayment of the loans.

Loan commitment fees are deferred and amortized on an effective yield basis over the term of the loan.

Commercial mortgage loans are considered past due when contractual payments have not been received from the

borrower by the required payment date.

200

201

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

income (loss) (“OCI”) and the net other-than-temporary impairments as supplemental disclosure presented on the

face of our consolidated statements of income.

Total other-than-temporary impairments that emerged in the period were calculated as the difference

between the amortized cost and fair value. For other-than-temporarily impaired securities where we did not

intend to sell the security and it was not more likely than not that we would be required to sell the security prior

to recovery, total other-than-temporary impairments were adjusted by the portion of other-than-temporary

impairments recognized in OCI (“non-credit”). Net other-than-temporary impairments recorded in net income

(loss) represented the credit loss on the other-than-temporarily impaired securities with the offset recognized as

an adjustment to the amortized cost to determine the new amortized cost basis of the securities.

For securities that were deemed to be other-than-temporarily impaired and a non-credit loss was recorded in

OCI, the amount recorded as an unrealized gain (loss) represented the difference between the fair value and the

new amortized cost for each period presented. The unrealized gain (loss) on an other-than-temporarily impaired

security was recorded as a separate component in OCI until the security was sold or until we recorded an other-

than-temporary impairment where we intended to sell the security or were required to sell the security prior to

recovery.

To estimate the amount of other-than-temporary impairment attributed to credit losses on debt securities

where we did not intend to sell the security and it was not more likely than not that we would be required to sell

the security prior to recovery, we determined our best estimate of the present value of the cash flows expected to

be collected from a security using the effective yield on the security prior to recording any other-than-temporary

impairment. If the present value of the discounted cash flows was lower than the amortized cost of the security,

the difference between the present value and amortized cost represented the credit loss associated with the

security with the remaining difference between fair value and amortized cost recorded as a non-credit other-than-

temporary impairment in OCI.

While the other-than-temporary impairment model for debt securities generally included fixed maturity

securities, there were certain hybrid securities that are classified as fixed maturity securities where the

application of a debt impairment model depended on whether there had been any evidence of deterioration in

credit of the issuer, such as a downgrade to below investment grade. Under certain circumstances, evidence of

deterioration in credit of the issuer may have resulted in the application of the equity securities impairment model

where we recognized an impairment charge in the period in which we determined that the security would not

recover to book value within a reasonable period of time. We determined what constituted a reasonable period on

a security-by-security basis based upon consideration of all the evidence available to us, including the magnitude

of an unrealized loss and its duration. In any event, this period did not exceed 15 months. We measured other-

than-temporary impairments based upon the difference between the amortized cost of a security and its fair

value.

e) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. We have fixed maturity securities,

short-term investments, equity securities, limited partnerships, derivatives, embedded derivatives, securities held

as collateral, separate account assets and certain other financial instruments, which are carried at fair value.

Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect

market data obtained from independent sources, while unobservable inputs reflect our view of market

assumptions in the absence of observable market information. We utilize valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs. All assets and liabilities carried at fair
value are classified and disclosed in one of the following three categories:

• Level 1—Quoted prices for identical instruments in active markets.

• Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar

instruments in markets that are not active; and model-derived valuations for which inputs are
observable or where those significant value drivers are observable.

• Level 3—Instruments for which significant value drivers are unobservable.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as

actively traded equity securities and actively traded mutual fund investments.

Level 2 includes those financial instruments that are valued using industry-standard pricing methodologies,

models or other valuation methodologies. These models are primarily industry-standard models that consider
various inputs, such as interest rate, credit spread and foreign exchange rates for the underlying financial
instruments. All significant inputs are observable, or derived from observable information in the marketplace or
are supported by observable levels at which transactions are executed in the marketplace. Financial instruments
in this category primarily include: certain public and private corporate fixed maturity and equity securities;
government or agency securities; certain mortgage-backed and asset-backed securities; securities held as
collateral; and certain non-exchange-traded derivatives such as interest rate or cross currency swaps.

Level 3 comprises financial instruments whose fair value is estimated based on industry-standard pricing
methodologies and internally developed models utilizing significant inputs not based on, nor corroborated by,
readily available market information. In certain instances, this category may also utilize non-binding broker
quotes. This category primarily consists of certain less liquid fixed maturity, equity and trading securities and
certain derivative instruments or embedded derivatives where we cannot corroborate the significant valuation
inputs with market observable data.

As of each reporting period, all assets and liabilities recorded at fair value are classified in their entirety

based on the lowest level of input that is significant to the fair value measurement. Our assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability, such as the relative impact on the fair value as a result of including a
particular input. We review the fair value hierarchy classifications each reporting period. Changes in the
observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities.
Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting
period in which the changes occur. See note 16 for additional information related to fair value measurements.

f) Commercial Mortgage Loans

The carrying value of commercial mortgage loans is stated at principal amounts outstanding, net of
unamortized premium or discount, deferred expenses and allowance for credit losses. Interest on loans is
recognized on an accrual basis at the applicable interest rate on the principal amount outstanding. Loan
origination fees and direct costs, as well as premiums and discounts, are amortized as level yield adjustments
over the respective loan terms. Unamortized net fees or costs are recognized upon early repayment of the loans.
Loan commitment fees are deferred and amortized on an effective yield basis over the term of the loan.
Commercial mortgage loans are considered past due when contractual payments have not been received from the
borrower by the required payment date.

200

201

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Loans that are considered uncollectible are carried on non-accrual status. Loans are placed on non-accrual
status when, in management’s opinion, the collection of principal or interest is not probable, typically when the
collection of principal or interest is 90 days or more past due. In determining whether it is probable that we will
be unable to collect all amounts due, we consider current payment status, debt service coverage ratios, occupancy
levels and current loan-to-value. Income on loans on non-accrual status is not recognized until we believe it is
probable that we will collect all future contractual principal and interest. Commercial mortgage loans are written
off against the allowance to the extent principal or interest is deemed uncollectible.

We determine the adequacy of the allowance for credit losses utilizing an analytical model that provides
various loss scenarios based on historical experience adjusted for current events, trends, economic conditions and
reasonable and supportable forecasts that result in a loss in the loan portfolio over the estimated life of the loans.
We revert to historical credit loss experience for periods beyond forecasts that are reasonable and supportable.
The allowance for credit losses is measured on a collective basis with consideration for debt service coverage
ratio, debt-to-value, property-type and geographic location. Key inputs into the analytical model include
exposure, weighted-average life, return, historical loss rates and forecast scenarios. Actual amounts realized over
time could differ from the amounts estimated for the allowance for credit losses reported in the consolidated
financial statements. Additions and reductions to the allowance through periodic provisions or benefits are
recorded in net investment gains (losses). See note 4 for additional disclosures related to commercial mortgage
loans.

Accrued interest related to commercial mortgage loans is included in accrued investment income in our
consolidated balance sheet and had a carrying value of $23 million as of December 31, 2020. We do not measure
an allowance for credit losses related to accrued interest as uncollectible accrued interest related to our
commercial mortgage loans is written off after 90 days and once collectability is determined to be uncertain and
not probable. Amounts written off related to accrued interest are recorded as a credit loss expense included in net
investment gains (losses).

Prior to the adoption of new accounting guidance related to credit losses on financial instruments on
January 1, 2020, we evaluated the impairment of commercial mortgage loans first on an individual loan basis.
“Impaired” loans were defined by U.S. GAAP as loans for which it is probable that the lender will be unable to
collect all amounts due according to original contractual terms of the loan agreement. For individually impaired
loans, we recorded an impairment charge when it was probable that a loss has been incurred. The impairment
was recorded as an increase in the allowance for loan losses. If an individual loan was not deemed impaired, then
we evaluated the remaining loans collectively to determine whether an impairment should be recorded. The
allowance for loan losses for loans that were not considered individually impaired that were evaluated
collectively was maintained at a level that we determined was adequate to absorb estimated probable incurred
losses in the loan portfolio. Our process to determine the adequacy of the allowance utilized an analytical model
based on historical loss experience adjusted for current events, trends and economic conditions that would result
in a loss in the loan portfolio over the next 12 months. Key inputs into our evaluation included debt service
coverage ratios, debt-to-value, property-type, occupancy levels, geographic region, and probability weighting of
the scenarios generated by the model.

g) Securities Lending Activity

We engage in certain securities lending transactions for the purpose of enhancing the yield on our

investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue
to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently

indemnified against counterparty credit risk by the intermediary. See note 12 for additional information related to

our securities lending activity.

h) Cash, Cash Equivalents and Restricted Cash

Certificates of deposit, money market funds and other highly liquid investments with original maturities of

three months or less are considered cash equivalents in the consolidated balance sheets and consolidated

statements of cash flows. Items with maturities greater than three months but less than one year at the time of

acquisition are generally considered short-term investments.

i) Deferred Acquisition Costs

Acquisition costs include costs that are directly related to the successful acquisition of new or renewal

insurance contracts. Acquisition costs are deferred and amortized to the extent they are recoverable from future

profits.

Long-Duration Contracts. Acquisition costs include commissions in excess of ultimate renewal

commissions and for contracts issued, certain other costs such as underwriting, medical inspection and issuance

expenses. DAC for traditional long-duration insurance contracts, including term life and long-term care

insurance, is amortized as a level percentage of premiums based on assumptions, including, investment returns,

health care experience (including type of care and cost of care), policyholder persistency or lapses (i.e., the

probability that a policy or contract will remain in-force from one period to the next), insured life expectancy or

longevity, insured morbidity (i.e., frequency and severity of claim, including claim termination rates and benefit

utilization rates) and expenses, established when the contract is issued. Amortization is adjusted each period to

reflect actual lapse or termination rates.

Amortization for deferred annuity and universal life insurance contracts is based on expected gross profits.

Expected gross profits are adjusted quarterly to reflect actual experience to date or for changes in underlying

assumptions relating to future gross profits. Estimates of gross profits for DAC amortization are based on

assumptions including interest rates, policyholder persistency or lapses, insured life expectancy or longevity and

expenses.

We are required to analyze the impacts from net unrealized investment gains and losses on our

available-for-sale investment securities backing insurance liabilities, as if those unrealized investment gains and

losses were realized. These “shadow accounting” adjustments result in the recognition of unrealized gains and

losses on related insurance assets and liabilities in a manner consistent with the recognition of the unrealized

gains and losses on available-for-sale investment securities within the statement of comprehensive income and

changes in equity. Changes to net unrealized investment (gains) losses may increase or decrease the ending DAC

balance. Similar to a loss recognition event, when the DAC balance is reduced to zero, additional insurance

liabilities are established if necessary. Unlike a loss recognition event, based on changes in net unrealized

investment (gains) losses, these shadow adjustments may reverse from period to period.

Therefore, DAC amortized based on expected gross profits is adjusted to reflect the effects that would have

been recognized had the unrealized investment (gains) losses been actually realized with a corresponding amount

recorded in other comprehensive income (loss). DAC associated with traditional long-duration insurance

contracts is not adjusted for unrealized investment (gains) or losses unless a premium deficiency would have

resulted upon the (gain) or loss being realized.

202

203

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Loans that are considered uncollectible are carried on non-accrual status. Loans are placed on non-accrual

status when, in management’s opinion, the collection of principal or interest is not probable, typically when the

collection of principal or interest is 90 days or more past due. In determining whether it is probable that we will

be unable to collect all amounts due, we consider current payment status, debt service coverage ratios, occupancy

levels and current loan-to-value. Income on loans on non-accrual status is not recognized until we believe it is

probable that we will collect all future contractual principal and interest. Commercial mortgage loans are written

off against the allowance to the extent principal or interest is deemed uncollectible.

We determine the adequacy of the allowance for credit losses utilizing an analytical model that provides

various loss scenarios based on historical experience adjusted for current events, trends, economic conditions and

reasonable and supportable forecasts that result in a loss in the loan portfolio over the estimated life of the loans.

We revert to historical credit loss experience for periods beyond forecasts that are reasonable and supportable.

The allowance for credit losses is measured on a collective basis with consideration for debt service coverage

ratio, debt-to-value, property-type and geographic location. Key inputs into the analytical model include

exposure, weighted-average life, return, historical loss rates and forecast scenarios. Actual amounts realized over

time could differ from the amounts estimated for the allowance for credit losses reported in the consolidated

financial statements. Additions and reductions to the allowance through periodic provisions or benefits are

recorded in net investment gains (losses). See note 4 for additional disclosures related to commercial mortgage

loans.

Accrued interest related to commercial mortgage loans is included in accrued investment income in our

consolidated balance sheet and had a carrying value of $23 million as of December 31, 2020. We do not measure

an allowance for credit losses related to accrued interest as uncollectible accrued interest related to our

commercial mortgage loans is written off after 90 days and once collectability is determined to be uncertain and

not probable. Amounts written off related to accrued interest are recorded as a credit loss expense included in net

investment gains (losses).

Prior to the adoption of new accounting guidance related to credit losses on financial instruments on

January 1, 2020, we evaluated the impairment of commercial mortgage loans first on an individual loan basis.

“Impaired” loans were defined by U.S. GAAP as loans for which it is probable that the lender will be unable to

collect all amounts due according to original contractual terms of the loan agreement. For individually impaired

loans, we recorded an impairment charge when it was probable that a loss has been incurred. The impairment

was recorded as an increase in the allowance for loan losses. If an individual loan was not deemed impaired, then

we evaluated the remaining loans collectively to determine whether an impairment should be recorded. The

allowance for loan losses for loans that were not considered individually impaired that were evaluated

collectively was maintained at a level that we determined was adequate to absorb estimated probable incurred

losses in the loan portfolio. Our process to determine the adequacy of the allowance utilized an analytical model

based on historical loss experience adjusted for current events, trends and economic conditions that would result

in a loss in the loan portfolio over the next 12 months. Key inputs into our evaluation included debt service

coverage ratios, debt-to-value, property-type, occupancy levels, geographic region, and probability weighting of

the scenarios generated by the model.

g) Securities Lending Activity

We engage in certain securities lending transactions for the purpose of enhancing the yield on our

investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue

to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently

indemnified against counterparty credit risk by the intermediary. See note 12 for additional information related to
our securities lending activity.

h) Cash, Cash Equivalents and Restricted Cash

Certificates of deposit, money market funds and other highly liquid investments with original maturities of

three months or less are considered cash equivalents in the consolidated balance sheets and consolidated
statements of cash flows. Items with maturities greater than three months but less than one year at the time of
acquisition are generally considered short-term investments.

i) Deferred Acquisition Costs

Acquisition costs include costs that are directly related to the successful acquisition of new or renewal
insurance contracts. Acquisition costs are deferred and amortized to the extent they are recoverable from future
profits.

Long-Duration Contracts. Acquisition costs include commissions in excess of ultimate renewal

commissions and for contracts issued, certain other costs such as underwriting, medical inspection and issuance
expenses. DAC for traditional long-duration insurance contracts, including term life and long-term care
insurance, is amortized as a level percentage of premiums based on assumptions, including, investment returns,
health care experience (including type of care and cost of care), policyholder persistency or lapses (i.e., the
probability that a policy or contract will remain in-force from one period to the next), insured life expectancy or
longevity, insured morbidity (i.e., frequency and severity of claim, including claim termination rates and benefit
utilization rates) and expenses, established when the contract is issued. Amortization is adjusted each period to
reflect actual lapse or termination rates.

Amortization for deferred annuity and universal life insurance contracts is based on expected gross profits.

Expected gross profits are adjusted quarterly to reflect actual experience to date or for changes in underlying
assumptions relating to future gross profits. Estimates of gross profits for DAC amortization are based on
assumptions including interest rates, policyholder persistency or lapses, insured life expectancy or longevity and
expenses.

We are required to analyze the impacts from net unrealized investment gains and losses on our

available-for-sale investment securities backing insurance liabilities, as if those unrealized investment gains and
losses were realized. These “shadow accounting” adjustments result in the recognition of unrealized gains and
losses on related insurance assets and liabilities in a manner consistent with the recognition of the unrealized
gains and losses on available-for-sale investment securities within the statement of comprehensive income and
changes in equity. Changes to net unrealized investment (gains) losses may increase or decrease the ending DAC
balance. Similar to a loss recognition event, when the DAC balance is reduced to zero, additional insurance
liabilities are established if necessary. Unlike a loss recognition event, based on changes in net unrealized
investment (gains) losses, these shadow adjustments may reverse from period to period.

Therefore, DAC amortized based on expected gross profits is adjusted to reflect the effects that would have
been recognized had the unrealized investment (gains) losses been actually realized with a corresponding amount
recorded in other comprehensive income (loss). DAC associated with traditional long-duration insurance
contracts is not adjusted for unrealized investment (gains) or losses unless a premium deficiency would have
resulted upon the (gain) or loss being realized.

202

203

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Short-Duration Contracts. Acquisition costs primarily consist of commissions and premium taxes and are

amortized ratably over the terms of the underlying policies.

We regularly review our assumptions and test DAC for recoverability at least annually. For deferred annuity

and universal life insurance contracts, if the present value of expected future gross profits is less than the
unamortized DAC for a line of business, a charge to net income (loss) is recorded for additional DAC
amortization. For traditional long-duration and short-duration contracts, if the benefit reserve plus anticipated
future premiums and interest income for a line of business are less than the current estimate of future benefits and
expenses (including any unamortized DAC), a charge to net income (loss) is recorded for additional DAC
amortization or for increased benefit reserves. See note 6 for additional information related to DAC including
loss recognition and recoverability.

j) Intangible Assets

Present Value of Future Profits. In conjunction with the acquisition of a block of insurance policies or
investment contracts, a portion of the purchase price is assigned to the right to receive future gross profits arising
from existing insurance and investment contracts. This intangible asset, called PVFP, represents the actuarially
estimated present value of future cash flows from the acquired policies. PVFP is amortized, net of accreted
interest, in a manner similar to the amortization of DAC.

We regularly review our PVFP assumptions and periodically test PVFP for recoverability similar to our

treatment of DAC. See note 7 for additional information related to PVFP including recoverability.

Deferred Sales Inducements to Contractholders. We defer sales inducements to contractholders for features
on variable annuities that entitle the contractholder to an incremental amount to be credited to the account value
upon making a deposit, and for fixed annuities with crediting rates higher than the contract’s expected ongoing
crediting rates for periods after the inducement. Deferred sales inducements to contractholders are reported as a
separate intangible asset and amortized in benefits and other changes in policy reserves using the same
methodology and assumptions used to amortize DAC.

Other Intangible Assets. We amortize the costs of other intangibles over their estimated useful lives unless
such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted
cash flows, which requires the use of estimates and judgment, and, if impaired, written down to fair value based
on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested at least
annually for impairment using a qualitative or quantitative assessment and are written down to fair value as
required.

k) Goodwill

Goodwill is not amortized but is tested for impairment annually or between annual tests if an event occurs or

circumstances change that would more likely than not reduce the fair value of the reporting unit below its
carrying value. The determination of fair value requires the use of estimates and judgment, at the “reporting unit”
level. A reporting unit is the operating segment, or a business, one level below that operating segment (the
“component” level) if discrete financial information is prepared and regularly reviewed by management at the
component level. If the reporting unit’s fair value is below its carrying value, we recognize an impairment in an
amount equal to the difference between the carrying value and the fair value of the reporting unit up to the
amount of recorded goodwill. In 2020, we recorded a goodwill impairment charge of $5 million related to our

mortgage insurance business in Australia, which represented the full amount of goodwill of that business. No

goodwill impairment charges were recorded in 2019 or 2018. As of December 31, 2020, we had no remaining

goodwill recorded in our consolidated balance sheet.

l) Reinsurance

Premium revenue, benefits and acquisition and operating expenses, net of deferrals, are reported net of the

amounts relating to reinsurance ceded to and assumed from other companies. Amounts due from reinsurers for

incurred and estimated future claims are reflected in the reinsurance recoverable asset. Amounts received from

reinsurers that represent recovery of acquisition costs are netted against DAC so that the net amount is

capitalized. The cost of reinsurance is accounted for over the terms of the related treaties using assumptions

consistent with those used to account for the underlying reinsured policies. Premium revenue, benefits and

acquisition and operating expenses, net of deferrals, for reinsurance contracts that do not qualify for reinsurance

accounting are accounted for under the deposit method of accounting.

Allowance for Credit Losses on Reinsurance Recoverables

On January 1, 2020, we adopted new accounting guidance related to credit losses on financial instruments.

Under this new accounting guidance, we record an allowance for credit losses related to reinsurance

recoverables. The allowance for credit losses is evaluated based on historical loss experience adjusted for current

events and reasonable and supportable forecasts from both internal and external sources. The allowance is

measured by reinsurer, taking into consideration the reinsured product type and collateral type, and is calculated

based on an externally reported probability of default corresponding to the reinsurer’s credit rating and the

expected duration of the reinsurer’s contractual obligation to reimburse us for ceded claims on the underlying

policies. Our estimate of the allowance reflects consideration for collateral securing the reinsurance agreements

and expected recoveries of amounts previously charged off and expected to be charged off. We also consider

other credit risk factors, including, among other factors, the historical frequency and severity of the associated

insurance claims, aging of recoverables and regulatory, legal and economic factors, to determine if an additional

incremental allowance for credit losses is required. No reversion adjustments are necessary as the starting point

for our allowance for credit losses reflects historical loss experience covering the expected duration of the

reinsurer’s contractual obligation to reimburse us. If available facts and circumstances indicate the reinsurance

recoverable does not reflect expectations consistent with the collective analysis, the reinsurance recoverable is

assessed on a separate basis. Write-offs are deducted from the allowance in the period the reinsurance

recoverable is determined to be uncollectible.

m) Derivatives

Derivative instruments are used to manage risk through one of four principal risk management strategies

including: (i) liabilities; (ii) invested assets; (iii) portfolios of assets or liabilities; and (iv) forecasted transactions.

On the date we enter into a derivative contract, management designates the derivative as a hedge of the

identified exposure (cash flow or foreign currency). If a derivative does not qualify for hedge accounting, the

changes in its fair value and all scheduled periodic settlement receipts and payments are reported in net income

(loss).

We formally document all relationships between hedging instruments and hedged items, as well as our risk

management objective and strategy for undertaking various hedge transactions. In this documentation, we

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GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Short-Duration Contracts. Acquisition costs primarily consist of commissions and premium taxes and are

amortized ratably over the terms of the underlying policies.

We regularly review our assumptions and test DAC for recoverability at least annually. For deferred annuity

and universal life insurance contracts, if the present value of expected future gross profits is less than the

unamortized DAC for a line of business, a charge to net income (loss) is recorded for additional DAC

amortization. For traditional long-duration and short-duration contracts, if the benefit reserve plus anticipated

future premiums and interest income for a line of business are less than the current estimate of future benefits and

expenses (including any unamortized DAC), a charge to net income (loss) is recorded for additional DAC

amortization or for increased benefit reserves. See note 6 for additional information related to DAC including

loss recognition and recoverability.

j) Intangible Assets

Present Value of Future Profits. In conjunction with the acquisition of a block of insurance policies or

investment contracts, a portion of the purchase price is assigned to the right to receive future gross profits arising

from existing insurance and investment contracts. This intangible asset, called PVFP, represents the actuarially

estimated present value of future cash flows from the acquired policies. PVFP is amortized, net of accreted

interest, in a manner similar to the amortization of DAC.

We regularly review our PVFP assumptions and periodically test PVFP for recoverability similar to our

treatment of DAC. See note 7 for additional information related to PVFP including recoverability.

Deferred Sales Inducements to Contractholders. We defer sales inducements to contractholders for features

on variable annuities that entitle the contractholder to an incremental amount to be credited to the account value

upon making a deposit, and for fixed annuities with crediting rates higher than the contract’s expected ongoing

crediting rates for periods after the inducement. Deferred sales inducements to contractholders are reported as a

separate intangible asset and amortized in benefits and other changes in policy reserves using the same

methodology and assumptions used to amortize DAC.

Other Intangible Assets. We amortize the costs of other intangibles over their estimated useful lives unless

such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted

cash flows, which requires the use of estimates and judgment, and, if impaired, written down to fair value based

on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested at least

annually for impairment using a qualitative or quantitative assessment and are written down to fair value as

required.

k) Goodwill

Goodwill is not amortized but is tested for impairment annually or between annual tests if an event occurs or

circumstances change that would more likely than not reduce the fair value of the reporting unit below its

carrying value. The determination of fair value requires the use of estimates and judgment, at the “reporting unit”

level. A reporting unit is the operating segment, or a business, one level below that operating segment (the

“component” level) if discrete financial information is prepared and regularly reviewed by management at the

component level. If the reporting unit’s fair value is below its carrying value, we recognize an impairment in an

amount equal to the difference between the carrying value and the fair value of the reporting unit up to the

amount of recorded goodwill. In 2020, we recorded a goodwill impairment charge of $5 million related to our

mortgage insurance business in Australia, which represented the full amount of goodwill of that business. No
goodwill impairment charges were recorded in 2019 or 2018. As of December 31, 2020, we had no remaining
goodwill recorded in our consolidated balance sheet.

l) Reinsurance

Premium revenue, benefits and acquisition and operating expenses, net of deferrals, are reported net of the
amounts relating to reinsurance ceded to and assumed from other companies. Amounts due from reinsurers for
incurred and estimated future claims are reflected in the reinsurance recoverable asset. Amounts received from
reinsurers that represent recovery of acquisition costs are netted against DAC so that the net amount is
capitalized. The cost of reinsurance is accounted for over the terms of the related treaties using assumptions
consistent with those used to account for the underlying reinsured policies. Premium revenue, benefits and
acquisition and operating expenses, net of deferrals, for reinsurance contracts that do not qualify for reinsurance
accounting are accounted for under the deposit method of accounting.

Allowance for Credit Losses on Reinsurance Recoverables

On January 1, 2020, we adopted new accounting guidance related to credit losses on financial instruments.

Under this new accounting guidance, we record an allowance for credit losses related to reinsurance
recoverables. The allowance for credit losses is evaluated based on historical loss experience adjusted for current
events and reasonable and supportable forecasts from both internal and external sources. The allowance is
measured by reinsurer, taking into consideration the reinsured product type and collateral type, and is calculated
based on an externally reported probability of default corresponding to the reinsurer’s credit rating and the
expected duration of the reinsurer’s contractual obligation to reimburse us for ceded claims on the underlying
policies. Our estimate of the allowance reflects consideration for collateral securing the reinsurance agreements
and expected recoveries of amounts previously charged off and expected to be charged off. We also consider
other credit risk factors, including, among other factors, the historical frequency and severity of the associated
insurance claims, aging of recoverables and regulatory, legal and economic factors, to determine if an additional
incremental allowance for credit losses is required. No reversion adjustments are necessary as the starting point
for our allowance for credit losses reflects historical loss experience covering the expected duration of the
reinsurer’s contractual obligation to reimburse us. If available facts and circumstances indicate the reinsurance
recoverable does not reflect expectations consistent with the collective analysis, the reinsurance recoverable is
assessed on a separate basis. Write-offs are deducted from the allowance in the period the reinsurance
recoverable is determined to be uncollectible.

m) Derivatives

Derivative instruments are used to manage risk through one of four principal risk management strategies
including: (i) liabilities; (ii) invested assets; (iii) portfolios of assets or liabilities; and (iv) forecasted transactions.

On the date we enter into a derivative contract, management designates the derivative as a hedge of the
identified exposure (cash flow or foreign currency). If a derivative does not qualify for hedge accounting, the
changes in its fair value and all scheduled periodic settlement receipts and payments are reported in net income
(loss).

We formally document all relationships between hedging instruments and hedged items, as well as our risk

management objective and strategy for undertaking various hedge transactions. In this documentation, we

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GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

specifically identify the asset, liability or forecasted transaction that has been designated as a hedged item, state
how the hedging instrument is expected to hedge the risks related to the hedged item, and set forth the method
that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness. We generally
determine hedge effectiveness based on total changes in fair value of the hedged item attributable to the hedged
risk and the total changes in fair value of the derivative instrument.

We discontinue hedge accounting prospectively when: (i) it is determined that the derivative is no longer
effective in offsetting changes in the cash flows of a hedged item; (ii) the derivative expires or is sold, terminated
or exercised; (iii) the derivative is de-designated as a hedge instrument; or (iv) it is no longer probable that the
forecasted transaction will occur.

For all qualifying and highly effective cash flow hedges, changes in fair value of the derivative instrument

are reported as a component of OCI. When hedge accounting is discontinued because it is probable that a
forecasted transaction will not occur, the derivative continues to be carried in the consolidated balance sheets at
its fair value, and gains and losses that were accumulated in OCI are recognized immediately in net income
(loss). When the hedged forecasted transaction is no longer probable, but is reasonably possible, the accumulated
gain or loss remains in OCI and is recognized when the transaction affects net income (loss); however,
prospective hedge accounting for the transaction is terminated. In all other situations in which hedge accounting
is discontinued on a cash flow hedge, amounts previously deferred in OCI are reclassified into net income (loss)
when net income (loss) is impacted by the variability of the cash flow of the hedged item.

We may enter into contracts that are not themselves derivative instruments but contain embedded
derivatives. For each contract, we assess whether the economic characteristics of the embedded derivative are
clearly and closely related to those of the host contract and determine whether a separate instrument with the
same terms as the embedded instrument would meet the definition of a derivative instrument.

If it is determined that the embedded derivative possesses economic characteristics that are not clearly and
closely related to the economic characteristics of the host contract, and that a separate instrument with the same
terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and
accounted for as a stand-alone derivative. Such embedded derivatives are recorded in the consolidated balance
sheets at fair value and are classified consistent with their host contract. Changes in their fair value are
recognized in current period net income (loss). If we are unable to properly identify and measure an embedded
derivative for separation from its host contract, the entire contract is carried in the consolidated balance sheets at
fair value, with changes in fair value recognized in current period net income (loss).

Changes in the fair value of non-qualifying derivatives, including embedded derivatives, are reported in net

investment gains (losses).

The majority of our derivative arrangements require the posting of collateral upon meeting certain net
exposure thresholds. The amounts recognized for derivative counterparty collateral received by us are recorded
in cash, cash equivalents and restricted cash with a corresponding amount recorded in other liabilities to
represent our obligation to return the collateral retained by us. We also receive non-cash collateral that is not
recognized in our consolidated balance sheet unless we exercise our right to sell or re-pledge the underlying
asset. As of December 31, 2020 and 2019, the fair value of non-cash collateral received was $161 million and
$112 million, respectively, and the underlying assets were not sold or re-pledged. We pledged $505 million and
$405 million of fixed maturity securities as of December 31, 2020 and 2019, respectively. Additionally, as of
December 31, 2020 and 2019, we pledged $100 million and $64 million, respectively, of cash as collateral to

derivative counterparties. Fixed maturity securities that we pledge as collateral remain on our consolidated

balance sheet within fixed maturity securities available-for-sale. Any cash collateral pledged to a derivative

counterparty is derecognized with a receivable recorded in other assets for the right to receive our cash collateral

back from the counterparty. Daily changes in the fair value of the derivative contract, commonly referred to as

variation margin, for derivatives cleared through a Central Clearing Party, such as the Chicago Mercantile

Exchange are treated as daily settlements of the derivative contract.

n) Separate Accounts and Related Insurance Obligations

Separate account assets represent funds for which the investment income and investment gains and losses

accrue directly to the contractholders and are reflected in our consolidated balance sheets at fair value, reported

as summary total separate account assets with an equivalent summary total reported for liabilities. Amounts

assessed against the contractholders for mortality, administrative and other services are included in revenues.

Changes in liabilities for minimum guarantees are included in benefits and other changes in policy reserves. Net

investment income, net investment gains (losses) and the related liability changes associated with the separate

account are offset within the same line item in the consolidated statements of income. There were no gains or

losses on transfers of assets from the general account to the separate account.

We offer certain minimum guarantees associated with our variable annuity contracts. Our variable annuity

contracts usually contain a basic guaranteed minimum death benefit (“GMDB”) which provides a minimum

benefit to be paid upon the annuitant’s death equal to the larger of account value and the return of net deposits.

Some variable annuity contracts permit contractholders to purchase through riders, at an additional charge,

enhanced death benefits such as the highest contract anniversary value (“ratchets”), accumulated net deposits at a

stated rate (“rollups”), or combinations thereof.

Additionally, some of our variable annuity contracts provide the contractholder with living benefits such as

a guaranteed minimum withdrawal benefit (“GMWB”) or certain types of guaranteed annuitization benefits. The

GMWB allows contractholders to withdraw a pre-defined percentage of account value or benefit base each year,

either for a specified period of time or for life. The guaranteed annuitization benefit generally provides for a

guaranteed minimum level of income upon annuitization accompanied by the potential for upside market

participation.

Most of our reserves for additional insurance and annuitization benefits are calculated by applying a benefit

ratio to accumulated contractholder assessments, and then deducting accumulated paid claims. The benefit ratio

is equal to the ratio of benefits to assessments, accumulated with interest and considering both past and

anticipated future experience. The projections utilize stochastic scenarios of separate account returns

incorporating reversion to the mean, as well as assumptions for mortality and lapses. Some of our minimum

guarantees, mainly GMWBs, are accounted for as embedded derivatives; see notes 5 and 16 for additional

information on these embedded derivatives and related fair value measurement disclosures.

o) Insurance Reserves

Future Policy Benefits

The liability for future policy benefits is equal to the present value of expected future benefits and expenses,

less the present value of expected future net premiums based on assumptions including projected interest rates

and investment returns, health care experience (including type of care and cost of care), policyholder persistency

or lapses (i.e., the probability that a policy or contract will remain in-force from one period to the next), insured

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GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

specifically identify the asset, liability or forecasted transaction that has been designated as a hedged item, state

how the hedging instrument is expected to hedge the risks related to the hedged item, and set forth the method

that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness. We generally

determine hedge effectiveness based on total changes in fair value of the hedged item attributable to the hedged

risk and the total changes in fair value of the derivative instrument.

We discontinue hedge accounting prospectively when: (i) it is determined that the derivative is no longer

effective in offsetting changes in the cash flows of a hedged item; (ii) the derivative expires or is sold, terminated

or exercised; (iii) the derivative is de-designated as a hedge instrument; or (iv) it is no longer probable that the

forecasted transaction will occur.

For all qualifying and highly effective cash flow hedges, changes in fair value of the derivative instrument

are reported as a component of OCI. When hedge accounting is discontinued because it is probable that a

forecasted transaction will not occur, the derivative continues to be carried in the consolidated balance sheets at

its fair value, and gains and losses that were accumulated in OCI are recognized immediately in net income

(loss). When the hedged forecasted transaction is no longer probable, but is reasonably possible, the accumulated

gain or loss remains in OCI and is recognized when the transaction affects net income (loss); however,

prospective hedge accounting for the transaction is terminated. In all other situations in which hedge accounting

is discontinued on a cash flow hedge, amounts previously deferred in OCI are reclassified into net income (loss)

when net income (loss) is impacted by the variability of the cash flow of the hedged item.

We may enter into contracts that are not themselves derivative instruments but contain embedded

derivatives. For each contract, we assess whether the economic characteristics of the embedded derivative are

clearly and closely related to those of the host contract and determine whether a separate instrument with the

same terms as the embedded instrument would meet the definition of a derivative instrument.

If it is determined that the embedded derivative possesses economic characteristics that are not clearly and

closely related to the economic characteristics of the host contract, and that a separate instrument with the same

terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and

accounted for as a stand-alone derivative. Such embedded derivatives are recorded in the consolidated balance

sheets at fair value and are classified consistent with their host contract. Changes in their fair value are

recognized in current period net income (loss). If we are unable to properly identify and measure an embedded

derivative for separation from its host contract, the entire contract is carried in the consolidated balance sheets at

fair value, with changes in fair value recognized in current period net income (loss).

Changes in the fair value of non-qualifying derivatives, including embedded derivatives, are reported in net

investment gains (losses).

The majority of our derivative arrangements require the posting of collateral upon meeting certain net

exposure thresholds. The amounts recognized for derivative counterparty collateral received by us are recorded

in cash, cash equivalents and restricted cash with a corresponding amount recorded in other liabilities to

represent our obligation to return the collateral retained by us. We also receive non-cash collateral that is not

recognized in our consolidated balance sheet unless we exercise our right to sell or re-pledge the underlying

asset. As of December 31, 2020 and 2019, the fair value of non-cash collateral received was $161 million and

$112 million, respectively, and the underlying assets were not sold or re-pledged. We pledged $505 million and

$405 million of fixed maturity securities as of December 31, 2020 and 2019, respectively. Additionally, as of

December 31, 2020 and 2019, we pledged $100 million and $64 million, respectively, of cash as collateral to

derivative counterparties. Fixed maturity securities that we pledge as collateral remain on our consolidated
balance sheet within fixed maturity securities available-for-sale. Any cash collateral pledged to a derivative
counterparty is derecognized with a receivable recorded in other assets for the right to receive our cash collateral
back from the counterparty. Daily changes in the fair value of the derivative contract, commonly referred to as
variation margin, for derivatives cleared through a Central Clearing Party, such as the Chicago Mercantile
Exchange are treated as daily settlements of the derivative contract.

n) Separate Accounts and Related Insurance Obligations

Separate account assets represent funds for which the investment income and investment gains and losses
accrue directly to the contractholders and are reflected in our consolidated balance sheets at fair value, reported
as summary total separate account assets with an equivalent summary total reported for liabilities. Amounts
assessed against the contractholders for mortality, administrative and other services are included in revenues.
Changes in liabilities for minimum guarantees are included in benefits and other changes in policy reserves. Net
investment income, net investment gains (losses) and the related liability changes associated with the separate
account are offset within the same line item in the consolidated statements of income. There were no gains or
losses on transfers of assets from the general account to the separate account.

We offer certain minimum guarantees associated with our variable annuity contracts. Our variable annuity

contracts usually contain a basic guaranteed minimum death benefit (“GMDB”) which provides a minimum
benefit to be paid upon the annuitant’s death equal to the larger of account value and the return of net deposits.
Some variable annuity contracts permit contractholders to purchase through riders, at an additional charge,
enhanced death benefits such as the highest contract anniversary value (“ratchets”), accumulated net deposits at a
stated rate (“rollups”), or combinations thereof.

Additionally, some of our variable annuity contracts provide the contractholder with living benefits such as
a guaranteed minimum withdrawal benefit (“GMWB”) or certain types of guaranteed annuitization benefits. The
GMWB allows contractholders to withdraw a pre-defined percentage of account value or benefit base each year,
either for a specified period of time or for life. The guaranteed annuitization benefit generally provides for a
guaranteed minimum level of income upon annuitization accompanied by the potential for upside market
participation.

Most of our reserves for additional insurance and annuitization benefits are calculated by applying a benefit
ratio to accumulated contractholder assessments, and then deducting accumulated paid claims. The benefit ratio
is equal to the ratio of benefits to assessments, accumulated with interest and considering both past and
anticipated future experience. The projections utilize stochastic scenarios of separate account returns
incorporating reversion to the mean, as well as assumptions for mortality and lapses. Some of our minimum
guarantees, mainly GMWBs, are accounted for as embedded derivatives; see notes 5 and 16 for additional
information on these embedded derivatives and related fair value measurement disclosures.

o) Insurance Reserves

Future Policy Benefits

The liability for future policy benefits is equal to the present value of expected future benefits and expenses,

less the present value of expected future net premiums based on assumptions including projected interest rates
and investment returns, health care experience (including type of care and cost of care), policyholder persistency
or lapses (i.e., the probability that a policy or contract will remain in-force from one period to the next), insured

206

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GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and severity of claim, including
claim termination rates and benefit utilization rates) and expenses, all of which are locked-in at the time the
policies are issued or acquired. Claim termination rates refer to the expected rates at which claims end. Benefit
utilization rates estimate how much of the available policy benefits are expected to be used.

The liability for future policy benefits is evaluated at least annually to determine if a premium deficiency

exists. Loss recognition testing is generally performed at the line of business level, with acquired blocks and
certain reinsured blocks tested separately. If the liability for future policy benefits plus the current present value
of expected future gross premiums are less than the current present value of expected future benefits and
expenses (including any unamortized DAC), a charge to net income (loss) is recorded for accelerated DAC
amortization and, if necessary, a premium deficiency reserve is established. If a charge is recorded, DAC
amortization and the liability for future policy benefits are measured using updated assumptions, which become
the new locked-in assumptions utilized going forward unless another premium deficiency charge is recorded. Our
estimates of future in-force rate actions used in loss recognition testing for our long-term care insurance business
include assumptions for significant premium rate increases and associated benefit reductions that have been
approved or are anticipated to be approved (including premium rate increases and associated benefit reductions
not yet filed). These anticipated future increases are based on our best estimate of the rate increases we expect to
obtain, considering, among other factors, our historical experience from prior rate increase approvals and based
on our best estimate of expected claim costs.

We are also required to accrue additional future policy benefit reserves when the overall reserve is adequate,

but profits are projected in early periods followed by losses projected in later periods. When this pattern of
profits followed by losses exists, we ratably accrue this additional profits followed by losses liability over time,
increasing reserves in the profitable periods to offset estimated losses expected during the periods that
follow. We calculate and adjust the additional reserves using our current best estimate of the amount necessary to
offset the losses in future periods, based on the pattern of expected income and current best estimate assumptions
consistent with our loss recognition testing. We adjust the accrual rate prospectively, going forward over the
remaining profit periods, without any catch-up adjustment.

For long-term care insurance products, benefit reductions are treated as partial lapse of coverage with the

balance of our future policy benefits and DAC both reduced in proportion to the reduced coverage. For level
premium term life insurance products, we floor the liability for future policy benefits on each policy at zero.

Estimates and actuarial assumptions used for establishing the liability for future policy benefits and in loss

recognition testing involve the exercise of significant judgment, and changes in assumptions or deviations of
actual experience from assumptions can have material impacts on our liability for future policy benefits and net
income (loss). Because these assumptions relate to factors that are not known in advance, change over time, are
difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate
amounts we will pay for actual claims or the timing of those payments. Small changes in assumptions or small
deviations of actual experience from assumptions can have, and in the past have had, material impacts on our
reserves, results of operations and financial condition. The risk that our claims experience may differ
significantly from our pricing and valuation assumptions is particularly significant for our long-term care
insurance products. Long-term care insurance policies provide for long-duration coverage and, therefore, our
actual claims experience will emerge over many years after pricing and locked-in valuation assumptions have
been established.

Policyholder Account Balances

The liability for policyholder account balances represents the contract value that has accrued to the benefit

of the policyholder as of the balance sheet date for investment-type and universal and term universal life

insurance contracts. We are also required to establish additional benefit reserves for guarantees or product

features in addition to the contract value where the additional benefit reserves are calculated by applying a

benefit ratio to accumulated contractholder assessments, and then deducting accumulated paid claims. The

benefit ratio is equal to the ratio of benefits to assessments, accumulated with interest and considering both past

and anticipated future claims experience, which includes assumptions for insured mortality (i.e. life expectancy

or longevity), interest rates and policyholder persistency or lapses (i.e., the probability that a policy or contract

will remain in-force from one period to the next), among other assumptions.

Investment-type contracts are broadly defined to include contracts without significant mortality or morbidity

risk. Payments received from sales of investment contracts are recognized by providing a liability equal to the

current account value of the policyholders’ contracts. Interest rates credited to investment contracts are

guaranteed for the initial policy term with renewal rates determined as necessary by management.

p) Liability for Policy and Contract Claims

The liability for policy and contract claims, or claim reserves, represents the amount needed to provide for

the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the end of

the respective reporting period. The estimated liability includes requirements for future payments of: (a) claims

that have been reported to the insurer; (b) claims related to insured events that have occurred but that have not

been reported to the insurer as of the date the liability is estimated; and (c) claim adjustment expenses. Claim

adjustment expenses include costs incurred in the claim settlement process such as legal fees and costs to record,

process and adjust claims.

Our liability for policy and contract claims is reviewed regularly, with changes in our estimates of future

claims recorded through net income (loss). Estimates and actuarial assumptions used for establishing the liability

for policy and contract claims involve the exercise of significant judgment, and changes in assumptions or

deviations of actual experience from assumptions can have material impacts on our liability for policy and

contract claims and net income (loss). Because these assumptions relate to factors that are not known in advance,

change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with

precision the ultimate amounts we will pay for actual claims or the timing of those payments. Small changes in

assumptions or small deviations of actual experience from assumptions can have, and in the past have had,

material impacts on our reserves, results of operations and financial condition.

The liability for policy and contract claims for our long-term care insurance products represents the present

value of the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events

that have occurred on or before the end of the respective reporting period. Key assumptions include projected

interest rates and investment returns, health care experience (including type of care and cost of care),

policyholder persistency or lapses (i.e., the probability that a policy or contract will remain in-force from one

period to the next), insured mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and

severity of claim, including claim termination rates and benefit utilization rates) and expenses. Claim termination

rates refer to the expected rates at which claims end. Benefit utilization rates estimate how much of the available

policy benefits are expected to be used. Both claim termination rates and benefit utilization rates are influenced

by, among other things, gender, age at claim, diagnosis, type of care needed, benefit period, and daily benefit

amount. Because these assumptions relate to factors that are not known in advance, change over time, are

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GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and severity of claim, including

claim termination rates and benefit utilization rates) and expenses, all of which are locked-in at the time the

policies are issued or acquired. Claim termination rates refer to the expected rates at which claims end. Benefit

utilization rates estimate how much of the available policy benefits are expected to be used.

The liability for future policy benefits is evaluated at least annually to determine if a premium deficiency

exists. Loss recognition testing is generally performed at the line of business level, with acquired blocks and

certain reinsured blocks tested separately. If the liability for future policy benefits plus the current present value

of expected future gross premiums are less than the current present value of expected future benefits and

expenses (including any unamortized DAC), a charge to net income (loss) is recorded for accelerated DAC

amortization and, if necessary, a premium deficiency reserve is established. If a charge is recorded, DAC

amortization and the liability for future policy benefits are measured using updated assumptions, which become

the new locked-in assumptions utilized going forward unless another premium deficiency charge is recorded. Our

estimates of future in-force rate actions used in loss recognition testing for our long-term care insurance business

include assumptions for significant premium rate increases and associated benefit reductions that have been

approved or are anticipated to be approved (including premium rate increases and associated benefit reductions

not yet filed). These anticipated future increases are based on our best estimate of the rate increases we expect to

obtain, considering, among other factors, our historical experience from prior rate increase approvals and based

on our best estimate of expected claim costs.

We are also required to accrue additional future policy benefit reserves when the overall reserve is adequate,

but profits are projected in early periods followed by losses projected in later periods. When this pattern of

profits followed by losses exists, we ratably accrue this additional profits followed by losses liability over time,

increasing reserves in the profitable periods to offset estimated losses expected during the periods that

follow. We calculate and adjust the additional reserves using our current best estimate of the amount necessary to

offset the losses in future periods, based on the pattern of expected income and current best estimate assumptions

consistent with our loss recognition testing. We adjust the accrual rate prospectively, going forward over the

remaining profit periods, without any catch-up adjustment.

For long-term care insurance products, benefit reductions are treated as partial lapse of coverage with the

balance of our future policy benefits and DAC both reduced in proportion to the reduced coverage. For level

premium term life insurance products, we floor the liability for future policy benefits on each policy at zero.

Estimates and actuarial assumptions used for establishing the liability for future policy benefits and in loss

recognition testing involve the exercise of significant judgment, and changes in assumptions or deviations of

actual experience from assumptions can have material impacts on our liability for future policy benefits and net

income (loss). Because these assumptions relate to factors that are not known in advance, change over time, are

difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate

amounts we will pay for actual claims or the timing of those payments. Small changes in assumptions or small

deviations of actual experience from assumptions can have, and in the past have had, material impacts on our

reserves, results of operations and financial condition. The risk that our claims experience may differ

significantly from our pricing and valuation assumptions is particularly significant for our long-term care

insurance products. Long-term care insurance policies provide for long-duration coverage and, therefore, our

actual claims experience will emerge over many years after pricing and locked-in valuation assumptions have

been established.

Policyholder Account Balances

The liability for policyholder account balances represents the contract value that has accrued to the benefit

of the policyholder as of the balance sheet date for investment-type and universal and term universal life
insurance contracts. We are also required to establish additional benefit reserves for guarantees or product
features in addition to the contract value where the additional benefit reserves are calculated by applying a
benefit ratio to accumulated contractholder assessments, and then deducting accumulated paid claims. The
benefit ratio is equal to the ratio of benefits to assessments, accumulated with interest and considering both past
and anticipated future claims experience, which includes assumptions for insured mortality (i.e. life expectancy
or longevity), interest rates and policyholder persistency or lapses (i.e., the probability that a policy or contract
will remain in-force from one period to the next), among other assumptions.

Investment-type contracts are broadly defined to include contracts without significant mortality or morbidity

risk. Payments received from sales of investment contracts are recognized by providing a liability equal to the
current account value of the policyholders’ contracts. Interest rates credited to investment contracts are
guaranteed for the initial policy term with renewal rates determined as necessary by management.

p) Liability for Policy and Contract Claims

The liability for policy and contract claims, or claim reserves, represents the amount needed to provide for

the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the end of
the respective reporting period. The estimated liability includes requirements for future payments of: (a) claims
that have been reported to the insurer; (b) claims related to insured events that have occurred but that have not
been reported to the insurer as of the date the liability is estimated; and (c) claim adjustment expenses. Claim
adjustment expenses include costs incurred in the claim settlement process such as legal fees and costs to record,
process and adjust claims.

Our liability for policy and contract claims is reviewed regularly, with changes in our estimates of future
claims recorded through net income (loss). Estimates and actuarial assumptions used for establishing the liability
for policy and contract claims involve the exercise of significant judgment, and changes in assumptions or
deviations of actual experience from assumptions can have material impacts on our liability for policy and
contract claims and net income (loss). Because these assumptions relate to factors that are not known in advance,
change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with
precision the ultimate amounts we will pay for actual claims or the timing of those payments. Small changes in
assumptions or small deviations of actual experience from assumptions can have, and in the past have had,
material impacts on our reserves, results of operations and financial condition.

The liability for policy and contract claims for our long-term care insurance products represents the present
value of the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events
that have occurred on or before the end of the respective reporting period. Key assumptions include projected
interest rates and investment returns, health care experience (including type of care and cost of care),
policyholder persistency or lapses (i.e., the probability that a policy or contract will remain in-force from one
period to the next), insured mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and
severity of claim, including claim termination rates and benefit utilization rates) and expenses. Claim termination
rates refer to the expected rates at which claims end. Benefit utilization rates estimate how much of the available
policy benefits are expected to be used. Both claim termination rates and benefit utilization rates are influenced
by, among other things, gender, age at claim, diagnosis, type of care needed, benefit period, and daily benefit
amount. Because these assumptions relate to factors that are not known in advance, change over time, are

208

209

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate
amounts we will pay for actual claims or the timing of those payments. Small changes in assumptions or small
deviations of actual experience from assumptions can have, and in the past have had, material impacts on our
reserves, results of operations and financial condition.

The liabilities for our mortgage insurance policies represent our best estimates of the liabilities at the time

based on known facts, trends and other external factors, including economic conditions, housing prices and
employment rates. For our mortgage insurance policies, reserves for losses and loss adjustment expenses are
based on notices of mortgage loan defaults and estimates of defaults that have been incurred but have not been
reported by loan servicers. The estimates are determined using either a factor-based approach, in which
assumptions of claim rates for loans in default and the average amount paid for loans that result in a claim are
calculated using traditional actuarial techniques, or a case-based approach, in which each individual delinquent
loan is reviewed and a best-estimate loss is determined based on the status of the insured loan and an estimation
of net sale proceeds from the disposition of the mortgaged property. As is common accounting practice in the
mortgage insurance industry and in accordance with U.S. GAAP, we begin to provide for the ultimate claim
payment relating to a potential claim on a defaulted loan when the status of that loan first goes delinquent. Over
time, as the status of the underlying delinquent loans moves toward foreclosure and the likelihood of the
associated claim loss increases, the amount of the loss reserves associated with the potential claims may also
increase.

Management considers the liability for policy and contract claims provided to be its best estimate to cover
the losses that have occurred. Management monitors actual experience, and where circumstances warrant, will
revise its assumptions. The methods of determining such estimates and establishing the reserves are reviewed
periodically and any adjustments are reflected in operations in the period in which they become known. Future
developments may result in losses and loss expenses greater or less than the liability for policy and contract
claims provided.

q) Unearned Premiums

For single premium insurance contracts, we recognize premiums over the policy life in accordance with the

expected pattern of risk emergence. We recognize a portion of the revenue in premiums earned in the current
period, while the remaining portion is deferred as unearned premiums and earned over time in accordance with
the expected pattern of risk emergence. If single premium policies are cancelled and the premium is
non-refundable, then the remaining unearned premium related to each cancelled policy is recognized to earned
premiums upon notification of the cancellation. Expected pattern of risk emergence on which we base premium
recognition is inherently judgmental and is based on actuarial analysis of historical experience. We periodically
review our premium earnings recognition models with any adjustments to the estimates reflected as a cumulative
adjustment in current period net income (loss). Our reviews include the consideration of recent and projected loss
experience, policy cancellation experience and refinement of actuarial methods. We did not have any adjustments
associated with this review in 2020 and 2018. In 2019, the review resulted in an increase in earned premiums of
$14 million in our U.S. mortgage insurance business.

r) Stock-Based Compensation

We determine a grant date fair value and recognize the related compensation expense, adjusted for expected

forfeitures, through the income statement over the respective vesting period of the awards.

s) Employee Benefit Plans

We provide employees with a defined contribution pension plan and recognize expense throughout the year

based on the employee’s age, service and eligible pay. We make an annual contribution to the plan. We also

provide employees with defined contribution savings plans. We recognize expense for our contributions to the

savings plans at the time employees make contributions to the plans.

Some employees participate in defined benefit pension and postretirement benefit plans. We recognize

expense for these plans based upon actuarial valuations performed by external experts. We estimate aggregate

benefits by using assumptions for employee turnover, future compensation increases, rates of return on pension

plan assets and future health care costs. We recognize an expense for differences between actual experience and

estimates over the average future service period of participants. We recognize the overfunded or underfunded

status of a defined benefit plan as an asset or liability in our consolidated balance sheets and recognize changes in

that funded status in the year in which the changes occur through OCI.

t) Income Taxes

We determine deferred tax assets and/or liabilities by multiplying the differences between the financial

reporting and tax reporting bases for assets and liabilities by the enacted tax rates expected to be in effect when

such differences are recovered or settled if there is no change in law. The effect on deferred taxes of a change in

tax rates is recognized in net income (loss) in the period that includes the enactment date. Valuation allowances

on deferred tax assets are estimated based on our assessment of the realizability of such amounts.

Under U.S. GAAP, we are generally required to record U.S. deferred taxes on the anticipated repatriation of

foreign income as the income is recognized for financial reporting purposes. An exception under certain

accounting guidance permits us not to record a U.S. deferred tax liability for foreign income that we expect to

reinvest in our foreign operations and for which remittance will be postponed indefinitely. If it becomes apparent

that we cannot positively assert that some or all undistributed income will be reinvested indefinitely, the related

deferred taxes are recorded in that period based on the expected form of repatriation (i.e. distribution, loan or

sale). In determining indefinite reinvestment, we regularly evaluate the capital needs of our domestic and foreign

operations considering all available information, including operating and capital plans, regulatory capital

requirements, parent company financing and cash flow needs, as well as the applicable tax laws to which our

domestic and foreign subsidiaries are subject. Our estimates are based on our historical experience and our

expectation of future performance. Our judgments and assumptions are subject to change given the inherent

uncertainty in predicting future capital needs, which are impacted by such things as regulatory requirements,

policyholder behavior, competitor pricing, new product introductions, and specific industry and market

conditions.

Similarly, under another exception to the recognition of deferred taxes under U.S. GAAP, we do not record

deferred taxes on U.S. domestic subsidiary entities for the excess of the financial statement carrying amount over

the tax basis in the stock of the subsidiary (commonly referred to as “outside basis difference”) if we have the

ability under the tax law and intent to recover the basis difference in a tax free manner. Deferred taxes would be

recognized in the period of a change to our ability or intent.

Our companies have elected to file a single U.S. consolidated income tax return (the “life/non-life

consolidated return”). All companies domesticated in the United States are included in the life/non-life

consolidated return as allowed by the tax law and regulations. We have a tax sharing agreement in place and all

intercompany balances related to this agreement are settled at least annually.

210

211

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate

amounts we will pay for actual claims or the timing of those payments. Small changes in assumptions or small

deviations of actual experience from assumptions can have, and in the past have had, material impacts on our

reserves, results of operations and financial condition.

The liabilities for our mortgage insurance policies represent our best estimates of the liabilities at the time

based on known facts, trends and other external factors, including economic conditions, housing prices and

employment rates. For our mortgage insurance policies, reserves for losses and loss adjustment expenses are

based on notices of mortgage loan defaults and estimates of defaults that have been incurred but have not been

reported by loan servicers. The estimates are determined using either a factor-based approach, in which

assumptions of claim rates for loans in default and the average amount paid for loans that result in a claim are

calculated using traditional actuarial techniques, or a case-based approach, in which each individual delinquent

loan is reviewed and a best-estimate loss is determined based on the status of the insured loan and an estimation

of net sale proceeds from the disposition of the mortgaged property. As is common accounting practice in the

mortgage insurance industry and in accordance with U.S. GAAP, we begin to provide for the ultimate claim

payment relating to a potential claim on a defaulted loan when the status of that loan first goes delinquent. Over

time, as the status of the underlying delinquent loans moves toward foreclosure and the likelihood of the

associated claim loss increases, the amount of the loss reserves associated with the potential claims may also

increase.

Management considers the liability for policy and contract claims provided to be its best estimate to cover

the losses that have occurred. Management monitors actual experience, and where circumstances warrant, will

revise its assumptions. The methods of determining such estimates and establishing the reserves are reviewed

periodically and any adjustments are reflected in operations in the period in which they become known. Future

developments may result in losses and loss expenses greater or less than the liability for policy and contract

claims provided.

q) Unearned Premiums

For single premium insurance contracts, we recognize premiums over the policy life in accordance with the

expected pattern of risk emergence. We recognize a portion of the revenue in premiums earned in the current

period, while the remaining portion is deferred as unearned premiums and earned over time in accordance with

the expected pattern of risk emergence. If single premium policies are cancelled and the premium is

non-refundable, then the remaining unearned premium related to each cancelled policy is recognized to earned

premiums upon notification of the cancellation. Expected pattern of risk emergence on which we base premium

recognition is inherently judgmental and is based on actuarial analysis of historical experience. We periodically

review our premium earnings recognition models with any adjustments to the estimates reflected as a cumulative

adjustment in current period net income (loss). Our reviews include the consideration of recent and projected loss

experience, policy cancellation experience and refinement of actuarial methods. We did not have any adjustments

associated with this review in 2020 and 2018. In 2019, the review resulted in an increase in earned premiums of

$14 million in our U.S. mortgage insurance business.

r) Stock-Based Compensation

We determine a grant date fair value and recognize the related compensation expense, adjusted for expected

forfeitures, through the income statement over the respective vesting period of the awards.

s) Employee Benefit Plans

We provide employees with a defined contribution pension plan and recognize expense throughout the year

based on the employee’s age, service and eligible pay. We make an annual contribution to the plan. We also
provide employees with defined contribution savings plans. We recognize expense for our contributions to the
savings plans at the time employees make contributions to the plans.

Some employees participate in defined benefit pension and postretirement benefit plans. We recognize

expense for these plans based upon actuarial valuations performed by external experts. We estimate aggregate
benefits by using assumptions for employee turnover, future compensation increases, rates of return on pension
plan assets and future health care costs. We recognize an expense for differences between actual experience and
estimates over the average future service period of participants. We recognize the overfunded or underfunded
status of a defined benefit plan as an asset or liability in our consolidated balance sheets and recognize changes in
that funded status in the year in which the changes occur through OCI.

t) Income Taxes

We determine deferred tax assets and/or liabilities by multiplying the differences between the financial
reporting and tax reporting bases for assets and liabilities by the enacted tax rates expected to be in effect when
such differences are recovered or settled if there is no change in law. The effect on deferred taxes of a change in
tax rates is recognized in net income (loss) in the period that includes the enactment date. Valuation allowances
on deferred tax assets are estimated based on our assessment of the realizability of such amounts.

Under U.S. GAAP, we are generally required to record U.S. deferred taxes on the anticipated repatriation of

foreign income as the income is recognized for financial reporting purposes. An exception under certain
accounting guidance permits us not to record a U.S. deferred tax liability for foreign income that we expect to
reinvest in our foreign operations and for which remittance will be postponed indefinitely. If it becomes apparent
that we cannot positively assert that some or all undistributed income will be reinvested indefinitely, the related
deferred taxes are recorded in that period based on the expected form of repatriation (i.e. distribution, loan or
sale). In determining indefinite reinvestment, we regularly evaluate the capital needs of our domestic and foreign
operations considering all available information, including operating and capital plans, regulatory capital
requirements, parent company financing and cash flow needs, as well as the applicable tax laws to which our
domestic and foreign subsidiaries are subject. Our estimates are based on our historical experience and our
expectation of future performance. Our judgments and assumptions are subject to change given the inherent
uncertainty in predicting future capital needs, which are impacted by such things as regulatory requirements,
policyholder behavior, competitor pricing, new product introductions, and specific industry and market
conditions.

Similarly, under another exception to the recognition of deferred taxes under U.S. GAAP, we do not record
deferred taxes on U.S. domestic subsidiary entities for the excess of the financial statement carrying amount over
the tax basis in the stock of the subsidiary (commonly referred to as “outside basis difference”) if we have the
ability under the tax law and intent to recover the basis difference in a tax free manner. Deferred taxes would be
recognized in the period of a change to our ability or intent.

Our companies have elected to file a single U.S. consolidated income tax return (the “life/non-life
consolidated return”). All companies domesticated in the United States are included in the life/non-life
consolidated return as allowed by the tax law and regulations. We have a tax sharing agreement in place and all
intercompany balances related to this agreement are settled at least annually.

210

211

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

u) Foreign Currency Translation

The determination of the functional currency is made based on the appropriate economic and management
indicators. The assets and liabilities of foreign operations are translated into U.S. dollars at the exchange rates in
effect at the balance sheet date. Translation adjustments are included as a separate component of accumulated
other comprehensive income (loss). Revenues and expenses of the foreign operations are translated into U.S.
dollars at the average rates of exchange during the period of the transaction. Gains and losses from foreign
currency transactions are reported in net income (loss) and have not been material in any years presented in our
consolidated statements of income.

v) Variable Interest Entities

We are involved in certain entities that are considered VIEs as defined under U.S. GAAP, and, accordingly,

we evaluate the VIE to determine whether we are the primary beneficiary and are required to consolidate the
assets and liabilities of the entity. The primary beneficiary of a VIE is the enterprise that has the power to direct
the activities of a VIE that most significantly impacts the VIE’s economic performance and has the obligation to
absorb losses or receive benefits that could potentially be significant to the VIE. The determination of the
primary beneficiary for a VIE can be complex and requires management judgment regarding the expected results
of the entity and how those results are absorbed by variable interest holders, as well as which party has the power
to direct activities that most significantly impact the performance of the VIEs.

Our primary involvement related to VIEs includes securitization transactions, certain investments,

reinsurance transactions and certain mortgage insurance policies.

We have a beneficial interest in a VIE where we are the servicer and transferor of certain assets that were

sold to the VIE. Our primary economic interest in this VIE represents the excess interest of the commercial
mortgage loans. This securitization entity was designed to have significant limitations on the types of assets
owned, the types and extent of permitted activities and decision making rights and is comprised of an entity
backed by commercial mortgage loans. As a result of our involvement in the entity’s design or having certain
decision making ability regarding the assets held by the securitization entity, consolidation of the VIE is required.
As of December 31, 2020 and 2019, we had $38 million and $47 million, respectively, of total securitized assets
required to be consolidated. The assets held by the securitization entity are restricted and can only be used to
fulfill the obligations of the securitization entity. We do not have any additional exposure or guarantees
associated with this securitization entity. There was no new asset securitization activity in 2020.

We have reinsurance agreements with entities that are considered VIEs. Our involvement with these VIEs

represents mortgage insurance claim coverage through excess of loss reinsurance, which includes significant
insurance risk and a reasonable possibility of a significant loss but does not result in the unilateral power to direct
the activities that most significantly affect the VIEs’ economic performance or result in the obligation to absorb
losses or the right to receive benefits. Accordingly, consolidation of the VIEs is not required. The assets of the
VIEs are deposited in a reinsurance trust for our benefit that will be the source of reinsurance claim payments.
Refer to note 8 for additional information related to our reinsurance agreements with entities that are considered
VIEs.

We hold investments in certain structures that are considered VIEs. Our investments represent beneficial
interests that are primarily in the form of structured securities or alternative investments. Our involvement in
these structures typically represents a passive investment in the returns generated by the VIE and typically does
not result in having significant influence over the economic performance of the VIE.

We also provide mortgage insurance on certain residential mortgage loans originated and securitized by

third parties using VIEs to issue mortgage-backed securities. While we provide mortgage insurance on the

underlying loans, we do not typically have any ongoing involvement with the VIE other than our mortgage

insurance coverage and do not act in a servicing capacity for the underlying loans held by the VIE.

w) Accounting Changes

Defined Benefit Plan Disclosures

On January 1, 2020, we adopted new accounting guidance related to disclosure requirements for defined

benefit plans as part of the Financial Accounting Standards Board’s (the “FASB”) disclosure framework project.

The guidance adds, eliminates and modifies certain disclosure requirements for defined benefit pension and other

postretirement benefit plans. We adopted this new accounting guidance using the retrospective method, which

did not have a significant impact on our consolidated financial statements and disclosures.

Fair Value Disclosures

On January 1, 2020, we adopted new accounting guidance related to fair value disclosure requirements as

part of the FASB’s disclosure framework project. The guidance adds, eliminates and modifies certain disclosure

requirements for fair value measurements. The guidance includes new disclosure requirements related to changes

in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value

measurements held at the end of the reporting period and the range and weighted-average of significant

unobservable inputs used to develop Level 3 fair value measurements. We adopted this new accounting guidance

using the prospective method for disclosures related to changes in unrealized gains and losses included in other

comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting

period, the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value

measurements and the narrative description of measurement uncertainty and the retrospective method for all

other disclosures. This accounting guidance did not impact our consolidated financial statements but impacted

our fair value disclosures.

Accounting for Credit Losses on Financial Instruments

On January 1, 2020, we adopted new accounting guidance related to accounting for credit losses on

financial instruments. The guidance requires entities to recognize an allowance equal to its estimate of lifetime

expected credit losses and applies to most financial instruments not measured at fair value, which primarily

includes our commercial mortgage loans, bank loan investments and reinsurance recoverables. The new guidance

also requires the recognition of an allowance for expected credit losses as a liability in our consolidated balance

sheet for off-balance sheet credit exposures, including commitments to fund bank loan investments, private

placement investments and commercial mortgage loans. The FASB also issued an amendment to the guidance

allowing entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible

instruments, which we did not elect.

We adopted the guidance related to our investments carried at amortized cost, reinsurance recoverables and

off-balance sheet credit exposures using the modified retrospective method. We recorded an allowance related to

lifetime expected credit losses of $23 million, net of deferred taxes of $6 million, for commercial mortgage loans

and bank loan investments and $31 million, net of deferred taxes of $9 million, for reinsurance recoverables, with

an offset to cumulative effect of change in accounting within retained earnings. See notes 4 and 8 for additional

disclosures related to lifetime expected credit losses. In addition, we recorded an allowance related to lifetime

212

213

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

u) Foreign Currency Translation

The determination of the functional currency is made based on the appropriate economic and management

indicators. The assets and liabilities of foreign operations are translated into U.S. dollars at the exchange rates in

effect at the balance sheet date. Translation adjustments are included as a separate component of accumulated

other comprehensive income (loss). Revenues and expenses of the foreign operations are translated into U.S.

dollars at the average rates of exchange during the period of the transaction. Gains and losses from foreign

currency transactions are reported in net income (loss) and have not been material in any years presented in our

consolidated statements of income.

v) Variable Interest Entities

We are involved in certain entities that are considered VIEs as defined under U.S. GAAP, and, accordingly,

we evaluate the VIE to determine whether we are the primary beneficiary and are required to consolidate the

assets and liabilities of the entity. The primary beneficiary of a VIE is the enterprise that has the power to direct

the activities of a VIE that most significantly impacts the VIE’s economic performance and has the obligation to

absorb losses or receive benefits that could potentially be significant to the VIE. The determination of the

primary beneficiary for a VIE can be complex and requires management judgment regarding the expected results

of the entity and how those results are absorbed by variable interest holders, as well as which party has the power

to direct activities that most significantly impact the performance of the VIEs.

Our primary involvement related to VIEs includes securitization transactions, certain investments,

reinsurance transactions and certain mortgage insurance policies.

We have a beneficial interest in a VIE where we are the servicer and transferor of certain assets that were

sold to the VIE. Our primary economic interest in this VIE represents the excess interest of the commercial

mortgage loans. This securitization entity was designed to have significant limitations on the types of assets

owned, the types and extent of permitted activities and decision making rights and is comprised of an entity

backed by commercial mortgage loans. As a result of our involvement in the entity’s design or having certain

decision making ability regarding the assets held by the securitization entity, consolidation of the VIE is required.

As of December 31, 2020 and 2019, we had $38 million and $47 million, respectively, of total securitized assets

required to be consolidated. The assets held by the securitization entity are restricted and can only be used to

fulfill the obligations of the securitization entity. We do not have any additional exposure or guarantees

associated with this securitization entity. There was no new asset securitization activity in 2020.

We have reinsurance agreements with entities that are considered VIEs. Our involvement with these VIEs

represents mortgage insurance claim coverage through excess of loss reinsurance, which includes significant

insurance risk and a reasonable possibility of a significant loss but does not result in the unilateral power to direct

the activities that most significantly affect the VIEs’ economic performance or result in the obligation to absorb

losses or the right to receive benefits. Accordingly, consolidation of the VIEs is not required. The assets of the

VIEs are deposited in a reinsurance trust for our benefit that will be the source of reinsurance claim payments.

Refer to note 8 for additional information related to our reinsurance agreements with entities that are considered

VIEs.

We hold investments in certain structures that are considered VIEs. Our investments represent beneficial

interests that are primarily in the form of structured securities or alternative investments. Our involvement in

these structures typically represents a passive investment in the returns generated by the VIE and typically does

not result in having significant influence over the economic performance of the VIE.

We also provide mortgage insurance on certain residential mortgage loans originated and securitized by

third parties using VIEs to issue mortgage-backed securities. While we provide mortgage insurance on the
underlying loans, we do not typically have any ongoing involvement with the VIE other than our mortgage
insurance coverage and do not act in a servicing capacity for the underlying loans held by the VIE.

w) Accounting Changes

Defined Benefit Plan Disclosures

On January 1, 2020, we adopted new accounting guidance related to disclosure requirements for defined
benefit plans as part of the Financial Accounting Standards Board’s (the “FASB”) disclosure framework project.
The guidance adds, eliminates and modifies certain disclosure requirements for defined benefit pension and other
postretirement benefit plans. We adopted this new accounting guidance using the retrospective method, which
did not have a significant impact on our consolidated financial statements and disclosures.

Fair Value Disclosures

On January 1, 2020, we adopted new accounting guidance related to fair value disclosure requirements as

part of the FASB’s disclosure framework project. The guidance adds, eliminates and modifies certain disclosure
requirements for fair value measurements. The guidance includes new disclosure requirements related to changes
in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value
measurements held at the end of the reporting period and the range and weighted-average of significant
unobservable inputs used to develop Level 3 fair value measurements. We adopted this new accounting guidance
using the prospective method for disclosures related to changes in unrealized gains and losses included in other
comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting
period, the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value
measurements and the narrative description of measurement uncertainty and the retrospective method for all
other disclosures. This accounting guidance did not impact our consolidated financial statements but impacted
our fair value disclosures.

Accounting for Credit Losses on Financial Instruments

On January 1, 2020, we adopted new accounting guidance related to accounting for credit losses on
financial instruments. The guidance requires entities to recognize an allowance equal to its estimate of lifetime
expected credit losses and applies to most financial instruments not measured at fair value, which primarily
includes our commercial mortgage loans, bank loan investments and reinsurance recoverables. The new guidance
also requires the recognition of an allowance for expected credit losses as a liability in our consolidated balance
sheet for off-balance sheet credit exposures, including commitments to fund bank loan investments, private
placement investments and commercial mortgage loans. The FASB also issued an amendment to the guidance
allowing entities to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible
instruments, which we did not elect.

We adopted the guidance related to our investments carried at amortized cost, reinsurance recoverables and
off-balance sheet credit exposures using the modified retrospective method. We recorded an allowance related to
lifetime expected credit losses of $23 million, net of deferred taxes of $6 million, for commercial mortgage loans
and bank loan investments and $31 million, net of deferred taxes of $9 million, for reinsurance recoverables, with
an offset to cumulative effect of change in accounting within retained earnings. See notes 4 and 8 for additional
disclosures related to lifetime expected credit losses. In addition, we recorded an allowance related to lifetime

212

213

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

expected credit losses for our off-balance sheet credit exposures of $1 million, included in other liabilities in our
consolidated balance sheet, with an offset to cumulative effect of change in accounting within retained earnings.

We adopted the guidance related to our available-for-sale fixed maturity securities for which a previous
other-than-temporary impairment was recognized prior to the date of adoption using the prospective method and
the modified retrospective method for all other available-for-sale fixed maturity securities, which did not have
any impact upon adoption. The new guidance did not have a significant impact on other assets not measured at
fair value.

Reference Rate Reform

In March 2020 and January 2021, the FASB issued new accounting guidance related to reference rate
reform, which was effective for us on January 1, 2020. The guidance provides temporary guidance to ease the
potential burden in accounting for, or recognizing the effects of, reference rate reform, which includes the
transition away from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to
alternative reference rates, such as the Secured Overnight Financing Rate. This new guidance provides optional
practical expedients and exceptions for applying generally accepted accounting principles to investments,
derivatives or other transactions affected by reference rate reform such as those that impact the assessment of
derivative hedge effectiveness and contract modifications, to include continuing hedge accounting when certain
critical terms of a hedging relationship change and modifying certain effectiveness assessments to exclude
certain potential sources of ineffectiveness. The new guidance was updated to clarify that the optional practical
expedients and exceptions can be applied to derivatives that use an interest rate for margining, discounting, or
contract price alignment. In addition to the optional practical expedients, the guidance includes a general
principle that permits an entity to consider contract modifications due to reference rate reform to be an event that
does not require contract remeasurement at the modification date or reassessment of a previous accounting
determination. We adopted this guidance prospectively and it did not have a significant impact on our
consolidated financial statements or disclosures. However, the amendments in this guidance may be elected over
time through December 31, 2022 as reference rate reform activities occur and therefore, this guidance may
impact our procedures, including our process for assessing the effectiveness of our cash flow hedging
relationships, determined on an individual hedge basis, as we implement measures to transition away from
LIBOR.

Benchmark Interest Rates Used in Derivative Hedge Accounting

On January 1, 2019, we adopted new accounting guidance related to benchmark interest rates used in

derivative hedge accounting. The guidance adds an additional permissible U.S. benchmark interest rate, the
Secured Overnight Financing Rate, for hedge accounting purposes. We adopted this new accounting guidance
using the prospective method, which did not have any impact on our consolidated financial statements and
disclosures.

Nonemployee Shared-Based Payments

On January 1, 2019, we adopted new accounting guidance related to accounting for nonemployee share-

based payments. The guidance aligns the measurement and classification of share-based payments to
nonemployees issued in exchange for goods or services with the guidance for share-based payments to
employees, with certain exceptions. We adopted this new accounting guidance using the modified retrospective
method. This guidance is consistent with our previous accounting practices and, accordingly, had no impact on
our consolidated financial statements at adoption.

Amortization Period of Certain Callable Debt Securities Held at a Premium

On January 1, 2019, we adopted new accounting guidance related to shortening the amortization period of

certain callable debt securities held at a premium. The guidance requires the premium to be amortized to the

earliest call date. This change does not apply to securities held at a discount. We adopted this new accounting

guidance using the modified retrospective method, which did not have a significant impact on our consolidated

financial statements at adoption.

Accounting for Leases

On January 1, 2019, we adopted new accounting guidance related to the accounting for leases. The new

guidance generally requires lessees to recognize both a right-of-use asset and a corresponding lease liability on

the balance sheet. We adopted this new accounting guidance using the effective date transition method, which

permits entities to apply the new lease standard using a modified retrospective transition approach at the date of

adoption. As such, historical periods will continue to be measured and presented under the previous guidance

while current and future periods will be subject to this new accounting guidance. The package of practical

expedients was also elected upon adoption. Upon adoption we recorded a $52 million right-of-use asset related to

operating leases and a $55 million lease liability. In addition, we de-recognized accrued rent expense of

$3 million recorded under the previous accounting guidance. The right-of-use asset and the lease liability are

included in other assets and other liabilities, respectively, and did not have a significant impact on our

consolidated balance sheet as of December 31, 2019. The initial measurement of our right-of-use asset had no

significant initial direct costs, prepaid lease payments or lease incentives; therefore, a cumulative-effect

adjustment was not recorded to the opening retained earnings balance as a result of the change in accounting

principle.

Our leased assets are predominantly classified as operating leases and consist of office space in 11 locations

primarily in the United States and Australia. Lease payments included in the calculation of our lease liability

include fixed amounts contained within each rental agreement and variable lease payments that are based upon

an index or rate. We have elected to combine lease and non-lease components, as permitted under this new

accounting guidance, and as a result, non-lease components are included in the calculation of our lease liability

as opposed to being separated and accounted for as consideration under the new revenue recognition standard.

Our remaining lease terms ranged from less than 1 year to 18 years and had a weighted-average remaining lease

term of 9.4 years as of December 31, 2020. The implicit rate of our lease agreements was not readily

determinable; therefore, we utilized our incremental borrowing rate to discount future lease payments. The

weighted-average discount rate was 6.6% as of December 31, 2020. For the year ended December 31, 2020,

under this new accounting guidance, annual rental expense was $11 million.

Stranded Tax Effects

On January 1, 2018, we early adopted new accounting guidance on the reclassification from accumulated

other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs

Act (“TCJA”), or “stranded tax effects.” Under U.S. GAAP, deferred tax assets and liabilities are adjusted for the

effect of a change in tax laws or rates with the effect included in income (loss) from continuing operations in the

period that the changes were enacted. This also includes situations in which the related tax effects were originally

recognized in other comprehensive income (loss) as opposed to income (loss) from continuing operations. The

following summarizes the components for the cumulative effect adjustment recorded on January 1, 2018 related

214

215

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

expected credit losses for our off-balance sheet credit exposures of $1 million, included in other liabilities in our

consolidated balance sheet, with an offset to cumulative effect of change in accounting within retained earnings.

We adopted the guidance related to our available-for-sale fixed maturity securities for which a previous

other-than-temporary impairment was recognized prior to the date of adoption using the prospective method and

the modified retrospective method for all other available-for-sale fixed maturity securities, which did not have

any impact upon adoption. The new guidance did not have a significant impact on other assets not measured at

fair value.

Reference Rate Reform

In March 2020 and January 2021, the FASB issued new accounting guidance related to reference rate

reform, which was effective for us on January 1, 2020. The guidance provides temporary guidance to ease the

potential burden in accounting for, or recognizing the effects of, reference rate reform, which includes the

transition away from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to

alternative reference rates, such as the Secured Overnight Financing Rate. This new guidance provides optional

practical expedients and exceptions for applying generally accepted accounting principles to investments,

derivatives or other transactions affected by reference rate reform such as those that impact the assessment of

derivative hedge effectiveness and contract modifications, to include continuing hedge accounting when certain

critical terms of a hedging relationship change and modifying certain effectiveness assessments to exclude

certain potential sources of ineffectiveness. The new guidance was updated to clarify that the optional practical

expedients and exceptions can be applied to derivatives that use an interest rate for margining, discounting, or

contract price alignment. In addition to the optional practical expedients, the guidance includes a general

principle that permits an entity to consider contract modifications due to reference rate reform to be an event that

does not require contract remeasurement at the modification date or reassessment of a previous accounting

determination. We adopted this guidance prospectively and it did not have a significant impact on our

consolidated financial statements or disclosures. However, the amendments in this guidance may be elected over

time through December 31, 2022 as reference rate reform activities occur and therefore, this guidance may

impact our procedures, including our process for assessing the effectiveness of our cash flow hedging

relationships, determined on an individual hedge basis, as we implement measures to transition away from

LIBOR.

disclosures.

Benchmark Interest Rates Used in Derivative Hedge Accounting

On January 1, 2019, we adopted new accounting guidance related to benchmark interest rates used in

derivative hedge accounting. The guidance adds an additional permissible U.S. benchmark interest rate, the

Secured Overnight Financing Rate, for hedge accounting purposes. We adopted this new accounting guidance

using the prospective method, which did not have any impact on our consolidated financial statements and

Nonemployee Shared-Based Payments

On January 1, 2019, we adopted new accounting guidance related to accounting for nonemployee share-

based payments. The guidance aligns the measurement and classification of share-based payments to

nonemployees issued in exchange for goods or services with the guidance for share-based payments to

employees, with certain exceptions. We adopted this new accounting guidance using the modified retrospective

method. This guidance is consistent with our previous accounting practices and, accordingly, had no impact on

our consolidated financial statements at adoption.

Amortization Period of Certain Callable Debt Securities Held at a Premium

On January 1, 2019, we adopted new accounting guidance related to shortening the amortization period of

certain callable debt securities held at a premium. The guidance requires the premium to be amortized to the
earliest call date. This change does not apply to securities held at a discount. We adopted this new accounting
guidance using the modified retrospective method, which did not have a significant impact on our consolidated
financial statements at adoption.

Accounting for Leases

On January 1, 2019, we adopted new accounting guidance related to the accounting for leases. The new

guidance generally requires lessees to recognize both a right-of-use asset and a corresponding lease liability on
the balance sheet. We adopted this new accounting guidance using the effective date transition method, which
permits entities to apply the new lease standard using a modified retrospective transition approach at the date of
adoption. As such, historical periods will continue to be measured and presented under the previous guidance
while current and future periods will be subject to this new accounting guidance. The package of practical
expedients was also elected upon adoption. Upon adoption we recorded a $52 million right-of-use asset related to
operating leases and a $55 million lease liability. In addition, we de-recognized accrued rent expense of
$3 million recorded under the previous accounting guidance. The right-of-use asset and the lease liability are
included in other assets and other liabilities, respectively, and did not have a significant impact on our
consolidated balance sheet as of December 31, 2019. The initial measurement of our right-of-use asset had no
significant initial direct costs, prepaid lease payments or lease incentives; therefore, a cumulative-effect
adjustment was not recorded to the opening retained earnings balance as a result of the change in accounting
principle.

Our leased assets are predominantly classified as operating leases and consist of office space in 11 locations

primarily in the United States and Australia. Lease payments included in the calculation of our lease liability
include fixed amounts contained within each rental agreement and variable lease payments that are based upon
an index or rate. We have elected to combine lease and non-lease components, as permitted under this new
accounting guidance, and as a result, non-lease components are included in the calculation of our lease liability
as opposed to being separated and accounted for as consideration under the new revenue recognition standard.
Our remaining lease terms ranged from less than 1 year to 18 years and had a weighted-average remaining lease
term of 9.4 years as of December 31, 2020. The implicit rate of our lease agreements was not readily
determinable; therefore, we utilized our incremental borrowing rate to discount future lease payments. The
weighted-average discount rate was 6.6% as of December 31, 2020. For the year ended December 31, 2020,
under this new accounting guidance, annual rental expense was $11 million.

Stranded Tax Effects

On January 1, 2018, we early adopted new accounting guidance on the reclassification from accumulated
other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs
Act (“TCJA”), or “stranded tax effects.” Under U.S. GAAP, deferred tax assets and liabilities are adjusted for the
effect of a change in tax laws or rates with the effect included in income (loss) from continuing operations in the
period that the changes were enacted. This also includes situations in which the related tax effects were originally
recognized in other comprehensive income (loss) as opposed to income (loss) from continuing operations. The
following summarizes the components for the cumulative effect adjustment recorded on January 1, 2018 related

214

215

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

to the adoption of this new accounting guidance, including amounts related to our Canada mortgage insurance
business which were classified as held for sale prior to the fourth quarter of 2019:

(Amounts in millions)

Deferred taxes:

Accumulated other comprehensive
income (loss)

Net unrealized
investment
gains (losses)

Derivatives
qualifying
as hedges

Foreign currency
translation
and other
adjustments

Retained
earnings

Total
stockholders’
equity

Net unrealized gains on investment

securities . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains on derivatives . . . . . .
Investment in foreign subsidiaries . . . . . . .
Accrued commission and general

$192
—

(3)

expenses . . . . . . . . . . . . . . . . . . . . . . . . .

—

Cumulative effect of changes in

$—

12

—

—

$—
—
(46)

(1)

$(192)
(12)
49

1

$—
—
—

—

accounting . . . . . . . . . . . . . . . . . . . . . . .

$189

$ 12

$ (47)

$(154)

$—

The accounting for the temporary differences related to investment in foreign subsidiaries recorded in

accumulated other comprehensive income (loss) at adoption of the TCJA were provisional. Other than those
effects related to the TCJA, our policy is to release stranded tax effects from accumulated other comprehensive
income (loss) using the portfolio approach for items related to investments and derivatives, and upon disposition
of a subsidiary for items related to outside basis differences.

Amendments to the Hedge Accounting Model

On January 1, 2018, we early adopted new accounting guidance related to the hedge accounting model. The

new guidance amends the hedge accounting model to enable entities to better portray the economics of their
derivative risk management activities in the financial statements and enhance the transparency and
understandability of hedge results. In certain situations, the amendments also simplify the application of hedge
accounting and removed the requirements to separately measure and report hedge ineffectiveness. We adopted
this new accounting using the modified retrospective method and recognized a gain of $2 million in accumulated
other comprehensive income with a corresponding decrease to retained earnings at adoption. This gain was the
cumulative amount of hedge ineffectiveness related to active hedges that was previously included in earnings.

Accounting for Share-Based Compensation as a Modification

On January 1, 2018, we adopted new accounting guidance that clarifies when to account for a change to

share-based compensation as a modification. The new guidance requires modification accounting only if there
are changes to the fair value, vesting conditions or classification as a liability or equity of the share-based
compensation. We adopted this new accounting guidance prospectively and therefore, the guidance did not have
any impact at adoption.

Derecognition of Nonfinancial Assets

On January 1, 2018, we adopted new accounting guidance that clarifies the scope and accounting for gains

and losses from the derecognition of nonfinancial assets or an in substance nonfinancial asset that is not a
business and accounting for partial sales of nonfinancial assets. The new guidance clarifies when transferring
ownership interests in a consolidated subsidiary holding nonfinancial assets is within scope. It also states that the

reporting entity should identify each distinct nonfinancial asset and derecognize when a counterparty obtains

control. We adopted this new accounting guidance using the modified retrospective method, which had no impact

on our consolidated financial statements at adoption.

Simplifying the Test for Goodwill Impairment

On January 1, 2018, we early adopted new accounting guidance simplifying the test for goodwill

impairment. The new guidance states goodwill impairment is equal to the difference between the carrying value

and fair value of the reporting unit up to the amount of recorded goodwill. We adopted this new accounting

guidance prospectively and applied it to our 2018 and 2019 goodwill impairment tests. This new accounting

guidance simplified the test for goodwill impairment but had no impact on our consolidated financial statements.

Classification and Presentation of Changes in Restricted Cash

On January 1, 2018, we adopted new accounting guidance related to the classification and presentation of

changes in restricted cash. The new guidance requires that changes in the total of cash, cash equivalents,

restricted cash and restricted cash equivalents be shown in the statements of cash flows and requires additional

disclosures related to restricted cash and restricted cash equivalents. We adopted this new accounting guidance

retrospectively and modified the line item descriptions on our consolidated balance sheets and statements of cash

flows in our consolidated financial statements. The other impacts from this new accounting guidance did not

have a significant impact on our consolidated financial statements or disclosures.

Income Tax Effects of Intra-Entity Transfers of Assets Other Than Inventory

On January 1, 2018, we adopted new accounting guidance related to the income tax effects of intra-entity

transfers of assets other than inventory. The new guidance states that an entity should recognize the income tax

consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted

this new accounting guidance using the modified retrospective method, which did not have a significant impact

on our consolidated financial statements or disclosures at adoption.

Classification of Certain Cash Payments and Receipts

On January 1, 2018, we adopted new accounting guidance related to the classification of certain cash

payments and cash receipts on our statement of cash flows. The guidance reduces diversity in practice related to

eight specific cash flow issues. We adopted this new accounting guidance retrospectively and reclassified a

$20 million make-whole premium, which resulted in an increase in net cash used by financing activities and an

increase in net cash from operating activities in our statement of cash flows for the year ended December 31,

2016. The remaining specific cash flow issues did not have a significant impact on our consolidated financial

statements.

Recognition and Measurement of Financial Assets and Liabilities

On January 1, 2018, we adopted new accounting guidance related to the recognition and measurement of

financial assets and financial liabilities. Changes to financial instruments accounting primarily affects equity

investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for

financial instruments. Under the new guidance, equity investments with readily determinable fair value, except

those accounted for under the equity method of accounting, are measured at fair value with changes in fair value

216

217

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

to the adoption of this new accounting guidance, including amounts related to our Canada mortgage insurance

business which were classified as held for sale prior to the fourth quarter of 2019:

Accumulated other comprehensive

income (loss)

Net unrealized

Derivatives

investment

gains (losses)

qualifying

as hedges

translation

and other

adjustments

Total

Retained

earnings

stockholders’

equity

Foreign currency

(Amounts in millions)

Deferred taxes:

Net unrealized gains on investment

securities . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized gains on derivatives . . . . . .

Investment in foreign subsidiaries . . . . . . .

Accrued commission and general

$192

—

(3)

expenses . . . . . . . . . . . . . . . . . . . . . . . . .

—

Cumulative effect of changes in

$—

12

—

—

$—

—

(46)

(1)

$(192)

$—

(12)

49

1

—

—

—

accounting . . . . . . . . . . . . . . . . . . . . . . .

$189

$ 12

$ (47)

$(154)

$—

The accounting for the temporary differences related to investment in foreign subsidiaries recorded in

accumulated other comprehensive income (loss) at adoption of the TCJA were provisional. Other than those

effects related to the TCJA, our policy is to release stranded tax effects from accumulated other comprehensive

income (loss) using the portfolio approach for items related to investments and derivatives, and upon disposition

of a subsidiary for items related to outside basis differences.

Amendments to the Hedge Accounting Model

On January 1, 2018, we early adopted new accounting guidance related to the hedge accounting model. The

new guidance amends the hedge accounting model to enable entities to better portray the economics of their

derivative risk management activities in the financial statements and enhance the transparency and

understandability of hedge results. In certain situations, the amendments also simplify the application of hedge

accounting and removed the requirements to separately measure and report hedge ineffectiveness. We adopted

this new accounting using the modified retrospective method and recognized a gain of $2 million in accumulated

other comprehensive income with a corresponding decrease to retained earnings at adoption. This gain was the

cumulative amount of hedge ineffectiveness related to active hedges that was previously included in earnings.

Accounting for Share-Based Compensation as a Modification

On January 1, 2018, we adopted new accounting guidance that clarifies when to account for a change to

share-based compensation as a modification. The new guidance requires modification accounting only if there

are changes to the fair value, vesting conditions or classification as a liability or equity of the share-based

compensation. We adopted this new accounting guidance prospectively and therefore, the guidance did not have

any impact at adoption.

Derecognition of Nonfinancial Assets

On January 1, 2018, we adopted new accounting guidance that clarifies the scope and accounting for gains

and losses from the derecognition of nonfinancial assets or an in substance nonfinancial asset that is not a

business and accounting for partial sales of nonfinancial assets. The new guidance clarifies when transferring

ownership interests in a consolidated subsidiary holding nonfinancial assets is within scope. It also states that the

reporting entity should identify each distinct nonfinancial asset and derecognize when a counterparty obtains
control. We adopted this new accounting guidance using the modified retrospective method, which had no impact
on our consolidated financial statements at adoption.

Simplifying the Test for Goodwill Impairment

On January 1, 2018, we early adopted new accounting guidance simplifying the test for goodwill

impairment. The new guidance states goodwill impairment is equal to the difference between the carrying value
and fair value of the reporting unit up to the amount of recorded goodwill. We adopted this new accounting
guidance prospectively and applied it to our 2018 and 2019 goodwill impairment tests. This new accounting
guidance simplified the test for goodwill impairment but had no impact on our consolidated financial statements.

Classification and Presentation of Changes in Restricted Cash

On January 1, 2018, we adopted new accounting guidance related to the classification and presentation of

changes in restricted cash. The new guidance requires that changes in the total of cash, cash equivalents,
restricted cash and restricted cash equivalents be shown in the statements of cash flows and requires additional
disclosures related to restricted cash and restricted cash equivalents. We adopted this new accounting guidance
retrospectively and modified the line item descriptions on our consolidated balance sheets and statements of cash
flows in our consolidated financial statements. The other impacts from this new accounting guidance did not
have a significant impact on our consolidated financial statements or disclosures.

Income Tax Effects of Intra-Entity Transfers of Assets Other Than Inventory

On January 1, 2018, we adopted new accounting guidance related to the income tax effects of intra-entity
transfers of assets other than inventory. The new guidance states that an entity should recognize the income tax
consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted
this new accounting guidance using the modified retrospective method, which did not have a significant impact
on our consolidated financial statements or disclosures at adoption.

Classification of Certain Cash Payments and Receipts

On January 1, 2018, we adopted new accounting guidance related to the classification of certain cash
payments and cash receipts on our statement of cash flows. The guidance reduces diversity in practice related to
eight specific cash flow issues. We adopted this new accounting guidance retrospectively and reclassified a
$20 million make-whole premium, which resulted in an increase in net cash used by financing activities and an
increase in net cash from operating activities in our statement of cash flows for the year ended December 31,
2016. The remaining specific cash flow issues did not have a significant impact on our consolidated financial
statements.

Recognition and Measurement of Financial Assets and Liabilities

On January 1, 2018, we adopted new accounting guidance related to the recognition and measurement of

financial assets and financial liabilities. Changes to financial instruments accounting primarily affects equity
investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for
financial instruments. Under the new guidance, equity investments with readily determinable fair value, except
those accounted for under the equity method of accounting, are measured at fair value with changes in fair value

216

217

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

the amortization method for DAC will generally be on a straight-line basis over the expected contract

disclosures will be greatly expanded to include significant assumptions and product liability

•

•

term; and

rollforwards.

This guidance is effective for us on January 1, 2023 using the modified retrospective method, with early

adoption permitted, which we do not intend to elect. Given the nature and extent of the changes to our operations,

this guidance is expected to have a significant impact on our consolidated financial statements.

recognized in net income (loss). The new guidance also clarified that the need for a valuation allowance on a
deferred tax asset related to available-for-sale securities should be evaluated in combination with other deferred
tax assets. We adopted this new accounting guidance using the modified retrospective method and reclassified,
after adjustments for DAC and other intangible amortization and certain benefit reserves, taxes and
noncontrolling interests, $25 million of gains related to equity securities from accumulated other comprehensive
income and $17 million of gains related to limited partnerships previously recorded at cost to cumulative effect
of change in accounting within retained earnings, including amounts related to our Canada mortgage insurance
business which were classified as held for sale prior to the fourth quarter of 2019.

Revenue Recognition

On January 1, 2018, we adopted new accounting guidance related to revenue from contracts with customers.
The key principle of the new guidance is that entities should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for such goods or services. Insurance contracts are specifically excluded from this new
guidance. The FASB has clarified the scope that all of our insurance contracts, including mortgage insurance and
investment contracts are excluded from the scope of this new guidance. We adopted this new accounting
guidance using the modified retrospective method, which did not have a significant impact on our consolidated
financial statements at adoption.

x) Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued new accounting guidance related to simplifying the accounting for

income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation,
the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities
for outside basis differences. We adopted this new accounting guidance on January 1, 2021 using the
retrospective method or modified retrospective method for certain changes and prospective method for all other
changes, which did not have a significant impact on our consolidated financial statements and disclosures.

In August 2018, the FASB issued new accounting guidance that significantly changes the recognition and
measurement of long-duration insurance contracts and expands disclosure requirements, which impacts our life
insurance DAC and liabilities. In accordance with the guidance, the more significant changes include:

•

•

assumptions will no longer be locked-in at contract inception and all cash flow assumptions used to
estimate the liability for future policy benefits (except the discount rate) will be reviewed at least
annually in the same period each year or more frequently if actual experience indicates a change is
required. Changes will be recorded in net income (loss) using a retrospective approach with a
cumulative catch-up adjustment by recalculating the net premium ratio (which will be capped at 100%)
using actual historical and updated future cash flow assumptions;

the discount rate used to determine the liability for future policy benefits will be a current upper-
medium grade (low credit risk) fixed-income instrument yield, which is generally interpreted to mean a
single-A rated bond rate for the same duration, and is required to be reviewed quarterly, with changes
in the discount rate recorded in other comprehensive income (loss);

•

the provision for adverse deviation and the premium deficiency test will be eliminated;

• market risk benefits associated with deposit-type contracts will be measured at fair value with changes
related to instrument-specific credit risk recorded in other comprehensive income (loss) and remaining
changes recorded in net income (loss);

218

219

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

•

•

the amortization method for DAC will generally be on a straight-line basis over the expected contract
term; and

disclosures will be greatly expanded to include significant assumptions and product liability
rollforwards.

This guidance is effective for us on January 1, 2023 using the modified retrospective method, with early
adoption permitted, which we do not intend to elect. Given the nature and extent of the changes to our operations,
this guidance is expected to have a significant impact on our consolidated financial statements.

recognized in net income (loss). The new guidance also clarified that the need for a valuation allowance on a

deferred tax asset related to available-for-sale securities should be evaluated in combination with other deferred

tax assets. We adopted this new accounting guidance using the modified retrospective method and reclassified,

after adjustments for DAC and other intangible amortization and certain benefit reserves, taxes and

noncontrolling interests, $25 million of gains related to equity securities from accumulated other comprehensive

income and $17 million of gains related to limited partnerships previously recorded at cost to cumulative effect

of change in accounting within retained earnings, including amounts related to our Canada mortgage insurance

business which were classified as held for sale prior to the fourth quarter of 2019.

Revenue Recognition

On January 1, 2018, we adopted new accounting guidance related to revenue from contracts with customers.

The key principle of the new guidance is that entities should recognize revenue to depict the transfer of promised

goods or services to customers in an amount that reflects the consideration to which the entity expects to be

entitled in exchange for such goods or services. Insurance contracts are specifically excluded from this new

guidance. The FASB has clarified the scope that all of our insurance contracts, including mortgage insurance and

investment contracts are excluded from the scope of this new guidance. We adopted this new accounting

guidance using the modified retrospective method, which did not have a significant impact on our consolidated

financial statements at adoption.

x) Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued new accounting guidance related to simplifying the accounting for

income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation,

the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities

for outside basis differences. We adopted this new accounting guidance on January 1, 2021 using the

retrospective method or modified retrospective method for certain changes and prospective method for all other

changes, which did not have a significant impact on our consolidated financial statements and disclosures.

In August 2018, the FASB issued new accounting guidance that significantly changes the recognition and

measurement of long-duration insurance contracts and expands disclosure requirements, which impacts our life

insurance DAC and liabilities. In accordance with the guidance, the more significant changes include:

•

assumptions will no longer be locked-in at contract inception and all cash flow assumptions used to

estimate the liability for future policy benefits (except the discount rate) will be reviewed at least

annually in the same period each year or more frequently if actual experience indicates a change is

required. Changes will be recorded in net income (loss) using a retrospective approach with a

cumulative catch-up adjustment by recalculating the net premium ratio (which will be capped at 100%)

using actual historical and updated future cash flow assumptions;

•

the discount rate used to determine the liability for future policy benefits will be a current upper-

medium grade (low credit risk) fixed-income instrument yield, which is generally interpreted to mean a

single-A rated bond rate for the same duration, and is required to be reviewed quarterly, with changes

in the discount rate recorded in other comprehensive income (loss);

•

the provision for adverse deviation and the premium deficiency test will be eliminated;

• market risk benefits associated with deposit-type contracts will be measured at fair value with changes

related to instrument-specific credit risk recorded in other comprehensive income (loss) and remaining

changes recorded in net income (loss);

218

219

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Fixed maturity securities—taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,480

$2,494

$2,456

Fixed maturity securities—non-taxable . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents, restricted cash and short-term investments . . . .

6

13

345

199

295

17

8

16

348

180

234

39

11

20

327

169

181

48

Gross investment income before expenses and fees . . . . . . . . . . . .

Expenses and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,355

(95)

3,319

(99)

3,212

(91)

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,260

$3,220

$3,121

(3) Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented
below by the weighted-average basic and diluted common shares outstanding for the years ended December 31:

(Amounts in millions, except per share amounts)
Weighted-average common shares used in basic earnings (loss) per share

2020

2019

2018

calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505.2

502.9

500.4

Potentially dilutive securities:

Stock options, restricted stock units and stock appreciation rights . . . . . . . .

6.4

6.8

—

Weighted-average common shares used in diluted earnings (loss) per share

calculations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

511.6

509.7

500.4

Income from continuing operations:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 761

$ 519

$

34

64

67

70

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 727

$ 455

$

(3)

Basic per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.44

$ 0.90

$ (0.01)

Diluted per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.42

$ 0.89

$ (0.01)

Income (loss) from discontinued operations:
Income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from discontinued operations attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (549) $

11

$ 230

—

123

108

Income (loss) from discontinued operations available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (549) $ (112) $ 122

Basic per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1.09) $ (0.22) $ 0.24

Diluted per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1.07) $ (0.22) $ 0.24

Net income (loss):
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . .

$ 761
(549)
212
34
$ 178

$ 519
11
530
187
$ 343

$

67
230
297
178
$ 119

Basic per share (2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.68

$ 0.24

Diluted per share (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.67

$ 0.24

(1) Under applicable accounting guidance, companies in a loss position are required to use basic weighted-

average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our
loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the year
ended December 31, 2018, we were required to use basic weighted-average common shares outstanding as
the inclusion of shares for stock options, restricted stock units (“RSUs”) and stock appreciation rights
(“SARs”) of 3.8 million would have been antidilutive to the calculation. If we had not incurred a loss from
continuing operations available to Genworth Financial, Inc.’s common stockholders for the year ended
December 31, 2018, dilutive potential weighted-average common shares outstanding would have been
504.2 million.

(2) May not total due to whole number calculation.

220

221

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Fixed maturity securities—taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed maturity securities—non-taxable . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents, restricted cash and short-term investments . . . .

$2,480
6
13
345
199
295
17

$2,494
8
16
348
180
234
39

$2,456
11
20
327
169
181
48

Gross investment income before expenses and fees . . . . . . . . . . . .
Expenses and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,355
(95)

3,319
(99)

3,212
(91)

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,260

$3,220

$3,121

(3) Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented

below by the weighted-average basic and diluted common shares outstanding for the years ended December 31:

(Amounts in millions, except per share amounts)

2020

2019

2018

Weighted-average common shares used in basic earnings (loss) per share

calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

505.2

502.9

500.4

Potentially dilutive securities:

Stock options, restricted stock units and stock appreciation rights . . . . . . . .

6.4

6.8

—

Weighted-average common shares used in diluted earnings (loss) per share

calculations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

511.6

509.7

500.4

Income from continuing operations:

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 761

$ 519

$

Less: net income from continuing operations attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

64

67

70

Income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 727

$ 455

$

(3)

Basic per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.44

$ 0.90

$ (0.01)

Diluted per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.42

$ 0.89

$ (0.01)

Income (loss) from discontinued operations:

Income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . .

$ (549) $

11

$ 230

Less: net income from discontinued operations attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

123

108

Income (loss) from discontinued operations available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (549) $ (112) $ 122

Basic per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1.09) $ (0.22) $ 0.24

Diluted per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1.07) $ (0.22) $ 0.24

Net income (loss):

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .

$ 761

$ 519

$

(549)

212

34

11

530

187

67

230

297

178

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . .

$ 178

$ 343

$ 119

Basic per share (2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.68

$ 0.24

Diluted per share (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.67

$ 0.24

(1) Under applicable accounting guidance, companies in a loss position are required to use basic weighted-

average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our

loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the year

ended December 31, 2018, we were required to use basic weighted-average common shares outstanding as

the inclusion of shares for stock options, restricted stock units (“RSUs”) and stock appreciation rights

(“SARs”) of 3.8 million would have been antidilutive to the calculation. If we had not incurred a loss from

continuing operations available to Genworth Financial, Inc.’s common stockholders for the year ended

December 31, 2018, dilutive potential weighted-average common shares outstanding would have been

504.2 million.

(2) May not total due to whole number calculation.

220

221

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the years ended December 31:

See note 2 for a discussion of our policy for evaluating and measuring the allowance for credit losses related

to our available-for-sale fixed maturity securities. The following table represents the allowance for credit losses

aggregated by security type for available-for-sale fixed maturity investments as of and for the year ended

(Amounts in millions)

Available-for-sale fixed maturity securities:

2020

2019

2018

December 31, 2020:

Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$512
(34)

$107
(39)

$ 162
(137)

Net realized gains (losses) on available-for-sale fixed maturity securities . . . . . . . . . .

478

68

25

Impairments:

Total other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Portion of other-than-temporary impairments included in other comprehensive

(1) —

income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

—

—

Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(1) —

Net change in allowance for credit losses on available-for-sale fixed maturity securities . .
Write-down of available-for-sale fixed maturity securities (1) . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains (losses) on equity securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on equity securities still held . . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

—
—
11
(34)
11

(5) —
(4) —
(1)
2
112
(2)
(17)
(5)

9
14
29
(2) —
(72)

5 —

(22)

Net investment gains (losses)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$558

$ 50

$

(9)

(1) Represents write-down of securities we intend to sell or will be required to sell prior to recovery of the

(2)

amortized cost basis.
See note 5 for additional information on the impact of derivative instruments included in net investment
gains (losses).

222

223

Increase from

securities

without

allowance in

Increase

(decrease)

from securities

with allowance

Decrease

due to change

in intent or

requirement

Beginning

balance

previous

periods

in previous

Securities

periods

sold

to sell

Write-offs Recoveries

Ending

balance

Non-U.S. corporate . .

$—

$ (2)

$ (1)

$—

$—

$—

mortgage-backed . . —

—

—

—

—

—

$1

3

(Amounts in millions)

Fixed maturity securities:

Commercial

Total available-for-sale

fixed maturity

$4

3

$7

securities . . . . . . . . . . . .

$—

$ (2)

$ (1)

$—

$—

$—

$4

The following represents the activity for credit losses recognized in net income (loss) on debt securities

where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments

was included in OCI as of and for the years ended December 31:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2019

$24

2018

$32

(Amounts in millions)

Reductions:

Securities sold, paid down or disposed . . . . . . . . . . . . . . . . . . .

(2)

(8)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$22

$24

(c) Unrealized Investment Gains and Losses

Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component

of accumulated other comprehensive income (loss) were as follows as of December 31:

(Amounts in millions)

2020

2019

2018

Net unrealized gains (losses) on fixed maturity securities without an allowance for

credit losses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,159

$ 6,676

$1,775

Net unrealized gains (losses) on fixed maturity securities with an allowance for

credit losses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)

—

Adjustments to DAC, PVFP, sales inducements and benefit reserves . . . . . . . . . . . .

(7,302)

(4,789)

Income taxes, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(611)

(406)

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,239

1,481

Less: net unrealized investment gains (losses) attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

25

38

Net unrealized investment gains (losses) attributable to Genworth Financial,

Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,214

$ 1,456

$ 595

—

(952)

(190)

633

(1)

Excludes foreign exchange.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the years ended December 31:

(Amounts in millions)

Available-for-sale fixed maturity securities:

2020

2019

2018

Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$512

$107

$ 162

Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(34)

(39)

(137)

Net realized gains (losses) on available-for-sale fixed maturity securities . . . . . . . . . .

478

68

25

Impairments:

Total other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(1) —

Portion of other-than-temporary impairments included in other comprehensive

income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

—

Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(1) —

Net change in allowance for credit losses on available-for-sale fixed maturity securities . .

Write-down of available-for-sale fixed maturity securities (1) . . . . . . . . . . . . . . . . . . . . . . . .

Net realized gains (losses) on equity securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized gains (losses) on equity securities still held . . . . . . . . . . . . . . . . . . . . . . . . .

Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative instruments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) —

(4) —

9

14

29

(1)

2

112

(2)

(17)

(5)

(2) —

(72)

(22)

5 —

Net investment gains (losses)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$558

$ 50

$

(9)

—

—

—

11

(34)

11

(1) Represents write-down of securities we intend to sell or will be required to sell prior to recovery of the

(2)

See note 5 for additional information on the impact of derivative instruments included in net investment

amortized cost basis.

gains (losses).

See note 2 for a discussion of our policy for evaluating and measuring the allowance for credit losses related

to our available-for-sale fixed maturity securities. The following table represents the allowance for credit losses
aggregated by security type for available-for-sale fixed maturity investments as of and for the year ended
December 31, 2020:

Increase from
securities
without
allowance in
previous
periods

Increase
(decrease)
from securities
with allowance
in previous
periods

Decrease
due to change
in intent or
requirement
to sell

Securities
sold

Beginning
balance

Write-offs Recoveries

Ending
balance

(Amounts in millions)

Fixed maturity securities:

Non-U.S. corporate . .
Commercial

$—

mortgage-backed . . —

Total available-for-sale

fixed maturity
securities . . . . . . . . . . . .

$—

$4

3

$7

$ (2)

$ (1)

$—

$—

$—

—

—

—

—

—

$1

3

$ (2)

$ (1)

$—

$—

$—

$4

The following represents the activity for credit losses recognized in net income (loss) on debt securities

where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments
was included in OCI as of and for the years ended December 31:

(Amounts in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions:

2019

$24

2018

$32

Securities sold, paid down or disposed . . . . . . . . . . . . . . . . . . .

(2)

(8)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$22

$24

(c) Unrealized Investment Gains and Losses

Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component

of accumulated other comprehensive income (loss) were as follows as of December 31:

(Amounts in millions)

2020

2019

2018

Net unrealized gains (losses) on fixed maturity securities without an allowance for
credit losses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized gains (losses) on fixed maturity securities with an allowance for

credit losses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to DAC, PVFP, sales inducements and benefit reserves . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net unrealized investment gains (losses) attributable to noncontrolling

$10,159

$ 6,676

$1,775

(7)
(7,302)
(611)

—
(4,789)
(406)

2,239

1,481

—
(952)
(190)

633

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

25

38

Net unrealized investment gains (losses) attributable to Genworth Financial,

Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,214

$ 1,456

$ 595

(1)

Excludes foreign exchange.

222

223

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The change in net unrealized gains (losses) on available-for-sale investment securities reported in
accumulated other comprehensive income (loss) was as follows as of and for the years ended December 31:

(d) Fixed Maturity Securities

(Amounts in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of changes in accounting:

Stranded tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition and measurement of financial assets and liabilities, net of taxes

of $—, $— and $18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cumulative effect of changes in accounting . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unrealized gains (losses) arising during the period:

Unrealized gains (losses) on investment securities . . . . . . . . . . . . . . . . . . . . . .
Adjustment to DAC (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to PVFP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to sales inducements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
Adjustment to benefit reserves and policyholder contract balances (2)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in unrealized gains (losses) on investment securities . . . . . . . . . .
Reclassification adjustments to net investment (gains) losses, net of taxes of $100,
$17 and $5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: change in net unrealized investment gains (losses) attributable to

2020

2019

2018

$ 1,456

$

595 $ 1,085

—

—
—

—

—
—

189

(25)
164

3,950
122
(1)
(5)
(2,629)
(305)

1,132

4,980
(956)
(49)
(32)
(2,800)
(233)

(3,327)
1,182
69
34
1,208
181

910

(653)

(374)

758

(62)

848

(18)

(671)

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(13)

(17)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,214

$ 1,456 $

595

(1)

(2)

See note 6 for additional information.
See note 9 for additional information.

Amounts reclassified out of accumulated other comprehensive income (loss) to net investment gains (losses)

include realized gains (losses) on sales of securities, which are determined on a specific identification basis.

As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit

losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:

(Amounts in millions)

Fixed maturity securities:

U.S. government, agencies and government-

sponsored enterprises . . . . . . . . . . . . . . . . . . . . . .

$ 3,401

$ 1,404

$—

Amortized

Gross

unrealized

unrealized

gains

Gross

losses

Allowance

for credit

losses

cost or

cost

Fair

value

State and political subdivisions . . . . . . . . . . . . . . . .

Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .

2,627

1,420

4,244

2,549

7,843

5,147

3,207

1,375

2,466

1,722

1,200

395

899

1,190

2,470

712

1,082

970

549

356

520

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . .

30,148

5,989

(23)

544

144

970

367

1,307

1,324

620

232

535

285

304

45

84

209

357

113

229

159

68

41

90

246

211

231

56

(1)

(5)

(2)

(16)

(2)

(1)

—

—

—

—

—

(2)

—

(1)

(6)

(1)

—

—

(1)

(1)

(1)

—

(11)

—

(13)

(4)

$—

—

—

$ 4,805

3,170

1,559

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(1)

(1)

—

—

(3)

5,212

2,900

9,148

6,470

3,827

1,607

3,001

2,007

1,502

440

36,114

983

1,398

2,820

824

1,311

1,129

616

396

609

1,828

11,914

1,909

2,974

3,345

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,582

Total non-U.S. corporate . . . . . . . . . . . . . . . . .

10,330

1,596

Residential mortgage-backed . . . . . . . . . . . . . . . . . .

Commercial mortgage-backed . . . . . . . . . . . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . .

1,698

2,759

3,293

Total available-for-sale fixed maturity

securities . . . . . . . . . . . . . . . . . . . . . . . .

$55,676

$10,175

$ (57)

$ (4)

$65,790

224

225

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The change in net unrealized gains (losses) on available-for-sale investment securities reported in

accumulated other comprehensive income (loss) was as follows as of and for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,456

$

595

$ 1,085

Cumulative effect of changes in accounting:

Stranded tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognition and measurement of financial assets and liabilities, net of taxes

of $—, $— and $18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total cumulative effect of changes in accounting . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

—

—

—

189

(25)

164

Unrealized gains (losses) arising during the period:

Unrealized gains (losses) on investment securities . . . . . . . . . . . . . . . . . . . . . .

Adjustment to DAC (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustment to PVFP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustment to sales inducements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,950

122

(1)

(5)

4,980

(956)

(49)

(32)

Adjustment to benefit reserves and policyholder contract balances (2)

. . . . . . .

(2,629)

(2,800)

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(305)

(233)

(3,327)

1,182

69

34

1,208

181

Change in unrealized gains (losses) on investment securities . . . . . . . . . .

1,132

910

(653)

Reclassification adjustments to net investment (gains) losses, net of taxes of $100,

$17 and $5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: change in net unrealized investment gains (losses) attributable to

(374)

758

(62)

848

(18)

(671)

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(13)

(17)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,214

$ 1,456

$

595

(1)

(2)

See note 6 for additional information.

See note 9 for additional information.

Amounts reclassified out of accumulated other comprehensive income (loss) to net investment gains (losses)

include realized gains (losses) on sales of securities, which are determined on a specific identification basis.

(d) Fixed Maturity Securities

As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit

losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:

(Amounts in millions)

Fixed maturity securities:

Amortized
cost or
cost

Gross
unrealized
gains

Gross
unrealized
losses

Allowance
for credit
losses

Fair
value

U.S. government, agencies and government-

sponsored enterprises . . . . . . . . . . . . . . . . . . . . . .
State and political subdivisions . . . . . . . . . . . . . . . .
Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . .
U.S. corporate:

$ 3,401
2,627
1,420

$ 1,404
544
144

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Consumer—non-cyclical
Technology and communications . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,244
2,549
7,843
5,147
3,207
1,375
2,466
1,722
1,200
395

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . .

30,148

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Consumer—non-cyclical
Technology and communications . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

899
1,190
2,470
712
1,082
970
549
356
520
1,582

970
367
1,307
1,324
620
232
535
285
304
45

5,989

84
209
357
113
229
159
68
41
90
246

Total non-U.S. corporate . . . . . . . . . . . . . . . . .

10,330

1,596

Residential mortgage-backed . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed . . . . . . . . . . . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . .

1,698
2,759
3,293

211
231
56

Total available-for-sale fixed maturity

$—

(1)
(5)

(2)
(16)
(2)
(1)

—
—
—
—

(2)

—

(23)

—

(1)
(6)
(1)

—
—

(1)
(1)
(1)

—

(11)

—
(13)
(4)

$—
—
—

$ 4,805
3,170
1,559

—
—
—
—
—
—
—
—
—
—

—

—
—

(1)

—
—
—
—
—
—
—

(1)

—

(3)

—

5,212
2,900
9,148
6,470
3,827
1,607
3,001
2,007
1,502
440

36,114

983
1,398
2,820
824
1,311
1,129
616
396
609
1,828

11,914

1,909
2,974
3,345

securities . . . . . . . . . . . . . . . . . . . . . . . .

$55,676

$10,175

$ (57)

$ (4)

$65,790

224

225

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

As of December 31, 2019, the amortized cost or cost, gross unrealized gains (losses) and fair value of our

fixed maturity securities classified as available-for-sale were as follows:

(Amounts in millions)

Fixed maturity securities:

Gross unrealized gains

Gross unrealized losses

Amortized
cost or
cost

Not other-than-
temporarily
impaired

Other-than-
temporarily
impaired

Not other-than-
temporarily
impaired

Other-than-
temporarily
impaired

Fair
value

$ 952
355
117

$—
—
—

$—

(2)
(2)

$— $ 5,025
2,747
—
1,350
—

U.S. government, agencies and

government-sponsored
enterprises . . . . . . . . . . . . . . . . . . . . $ 4,073
2,394
1,235

State and political subdivisions . . . . . .
. . . . . . . . . . . . .
Non-U.S. government
U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . .
Consumer—non-cyclical . . . . . . .
Technology and

communications . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Industrial
Capital goods . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Other

4,322
2,404
6,977
4,909

2,883
1,271
2,345
1,590
1,320
292

675
303
798
796

363
125
367
172
187
30

Total U.S. corporate . . . . . . . . . . . 28,313

3,816

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . .
Consumer—non-cyclical . . . . . . .
Technology and

communications . . . . . . . . . . . .
Industrial
. . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Other

779
1,140
2,087
631

1,010
896
565
373
557
1,431

50
179
232
55

128
92
40
24
73
188

Total non-U.S. corporate . . . . . . .

9,469

1,061

—
—
—
—

—
—
—
—
—
—

—

—
—
—
—

—
—
—
—
—
—

—

Residential mortgage-backed . . . . . . . .
Commercial mortgage-backed . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . .

2,057
2,897
3,262

199
137
30

15
—
—

Total available-for-sale fixed

—

(8)
(1)
(4)

(1)

—

(1)
(2)
(1)

—

(18)

—
—
—

(2)

—
—
—
—

(1)
(2)

(5)

(1)
(8)
(7)

—
—
—
—

—
—
—
—
—
—

—

—
—
—
—

—
—
—
—
—
—

—

—
—
—

4,997
2,699
7,774
5,701

3,245
1,396
2,711
1,760
1,506
322

32,111

829
1,319
2,319
684

1,138
988
605
397
629
1,617

10,525

2,270
3,026
3,285

maturity securities . . . . . . $53,700

$6,667

$ 15

$ (43)

$— $60,339

226

227

The following table presents the gross unrealized losses and fair values of our fixed maturity securities for

which an allowance for credit losses has not been recorded, aggregated by investment type and length of time

that individual fixed maturity securities have been in a continuous unrealized loss position, as of December 31,

Less than 12 months

12 months or more

Gross

Gross

Total

Gross

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

2020:

(Dollar amounts in millions)

Description of Securities

Fixed maturity securities:

State and political

subdivisions . . . . . . . . . . $

Non-U.S. government

. . . .

U.S. corporate . . . . . . . . . .

Non-U.S. corporate . . . . . .

Commercial mortgage-

backed . . . . . . . . . . . . . .

Other asset-backed . . . . . . .

28

135

345

145

227

238

$ (1)

(5)

(20)

(4)

(11)

(2)

6

$— $—

13 —

—

— $

—

59

32

34

60

33

6

1

207

(3)

(1)

(1)

(2)

28

135

378

151

228

445

$ (1)

(5)

(23)

(5)

(12)

(4)

6

13

63

33

35

108

Total for fixed maturity

securities in an unrealized loss

% Below cost:

Total for fixed maturity

securities in an unrealized loss

Total for fixed maturity

securities in an unrealized loss

position . . . . . . . . . . . . . . . . . . $1,118

$(43)

204

$247

$ (7)

54

$1,365

$(50)

258

<20% Below cost . . . . . . . . $1,108

$(36)

20%-50% Below cost . . . . .

10

(7)

202

2

$246

$ (6)

1

(1)

$1,354

$(42)

11

(8)

255

3

position

$1,118

$(43)

Investment grade . . . . . . . . . . . . $ 943

Below investment grade . . . . . . .

175

$(24)

(19)

204

171

33

$247

$ (7)

$207

$ (2)

40

(5)

$1,365

$(50)

$1,150

215

$(26)

(24)

258

219

39

position . . . . . . . . . . . . . . . . . . $1,118

$(43)

204

$247

$ (7)

54

$1,365

$(50)

258

4

1

1

48

53

1

54

48

6

As of December 31, 2019, the amortized cost or cost, gross unrealized gains (losses) and fair value of our

fixed maturity securities classified as available-for-sale were as follows:

Gross unrealized gains

Gross unrealized losses

Amortized

Not other-than-

cost or

cost

temporarily

impaired

Other-than-

temporarily

impaired

Not other-than-

temporarily

impaired

Other-than-

temporarily

impaired

Fair

value

(Amounts in millions)

Fixed maturity securities:

U.S. government, agencies and

government-sponsored

enterprises . . . . . . . . . . . . . . . . . . . . $ 4,073

$ 952

$—

$—

$— $ 5,025

Total U.S. corporate . . . . . . . . . . . 28,313

3,816

Non-U.S. corporate:

State and political subdivisions . . . . . .

Non-U.S. government

. . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . .

Consumer—non-cyclical . . . . . . .

Technology and

communications . . . . . . . . . . . .

Industrial

. . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . .

2,394

1,235

4,322

2,404

6,977

4,909

2,883

1,271

2,345

1,590

1,320

292

Utilities . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . .

Consumer—non-cyclical . . . . . . .

779

1,140

2,087

631

Technology and

communications . . . . . . . . . . . .

1,010

Industrial

. . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . .

896

565

373

557

Other

. . . . . . . . . . . . . . . . . . . . . .

1,431

Total non-U.S. corporate . . . . . . .

9,469

Residential mortgage-backed . . . . . . . .

Commercial mortgage-backed . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . .

2,057

2,897

3,262

Total available-for-sale fixed

355

117

675

303

798

796

363

125

367

172

187

30

50

179

232

55

128

92

40

24

73

188

1,061

199

137

30

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

15

—

—

(2)

(2)

(8)

(1)

(4)

(1)

(1)

(2)

(1)

—

(18)

—

—

—

—

—

—

—

(2)

(1)

(2)

(5)

(1)

(8)

(7)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

2,747

1,350

4,997

2,699

7,774

5,701

3,245

1,396

2,711

1,760

1,506

322

32,111

829

1,319

2,319

684

1,138

988

605

397

629

1,617

10,525

2,270

3,026

3,285

maturity securities . . . . . . $53,700

$6,667

$ 15

$ (43)

$— $60,339

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table presents the gross unrealized losses and fair values of our fixed maturity securities for

which an allowance for credit losses has not been recorded, aggregated by investment type and length of time
that individual fixed maturity securities have been in a continuous unrealized loss position, as of December 31,
2020:

Less than 12 months

12 months or more

Fair
value

Gross
unrealized
losses

Number of
securities

Fair
value

Gross
unrealized
losses

Number of
securities

Fair
value

Total

Gross
unrealized
losses

Number of
securities

(Dollar amounts in millions)

Description of Securities
Fixed maturity securities:
State and political

subdivisions . . . . . . . . . . $

Non-U.S. government
. . . .
U.S. corporate . . . . . . . . . .
Non-U.S. corporate . . . . . .
Commercial mortgage-

backed . . . . . . . . . . . . . .
Other asset-backed . . . . . . .

28
135
345
145

227
238

$ (1)
(5)
(20)
(4)

(11)
(2)

— $
—

$— $—
—

6
13 —
33
59
6
32

34
60

1
207

(3)
(1)

(1)
(2)

4
1

1
48

28
135
378
151

228
445

$ (1)
(5)
(23)
(5)

(12)
(4)

6
13
63
33

35
108

Total for fixed maturity

securities in an unrealized loss
position . . . . . . . . . . . . . . . . . . $1,118

% Below cost:

$(43)

204

$247

$ (7)

54

$1,365

$(50)

258

<20% Below cost . . . . . . . . $1,108
10
20%-50% Below cost . . . . .

$(36)
(7)

202
2

$246
1

$ (6)
(1)

Total for fixed maturity

securities in an unrealized loss
position

$1,118

$(43)

Investment grade . . . . . . . . . . . . $ 943
175
Below investment grade . . . . . . .

$(24)
(19)

204

171
33

$247

$ (7)

$207
40

$ (2)
(5)

53
1

54

48
6

$1,354
11

$(42)
(8)

255
3

$1,365

$(50)

$1,150
215

$(26)
(24)

258

219
39

Total for fixed maturity

securities in an unrealized loss
position . . . . . . . . . . . . . . . . . . $1,118

$(43)

204

$247

$ (7)

54

$1,365

$(50)

258

226

227

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following table presents the gross unrealized losses and fair values of our corporate securities for which

an allowance for credit losses has not been recorded, aggregated by investment type and length of time that
individual investment securities have been in a continuous unrealized loss position, based on industry, as of
December 31, 2020:

Less than 12 months

12 months or more

Gross
unrealized
losses

Fair
value

Number of
securities

Fair
value

Gross
unrealized
losses

Number of
securities

Fair
value

Total

Gross
unrealized
losses

Number of
securities

(Dollar amounts in millions)

Description of Securities
U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . $ 49
Energy . . . . . . . . . . . . . . . . . . 106
Finance and insurance . . . . . . 128
16
Consumer—non-cyclical . . . .
46
Transportation . . . . . . . . . . . .

$ (2)
(13)
(2)
(1)
(2)

Subtotal, U.S. corporate

securities . . . . . . . . . . . . . . 345

(20)

Non-U.S. corporate:

Energy . . . . . . . . . . . . . . . . . .
66
Consumer—non-cyclical . . . . —
31
Capital goods . . . . . . . . . . . . .
15
Consumer—cyclical
. . . . . . .
33
Transportation . . . . . . . . . . . .

Subtotal, non-U.S. corporate

securities . . . . . . . . . . . . . . 145

(1)

—

(1)
(1)
(1)

(4)

9
19
15
5
11

59

10
—

8
6
8

$— $—

33
—
—
—

(3)

—
—
—

—

4
—
—
—

$ 49
139
128
16
46

$ (2)
(16)
(2)
(1)
(2)

33

(3)

4

378

(23)

6

—

—
—
—

—

(1)

—
—
—

32

6

(1)

1

—

—
—
—

1

5

66
6
31
15
33

151

(1)
(1)
(1)
(1)
(1)

(5)

$529

$(28)

Total for corporate securities in an

unrealized loss position

$490

$ (24)

91

$ 39

$ (4)

9
23
15
5
11

63

10
1
8
6
8

33

96

We did not recognize an allowance for credit losses on securities in an unrealized loss position included in

the tables above. Based on a qualitative and quantitative review of the issuers of the securities, we believe the
decline in fair value is largely due to recent market volatility and is not indicative of credit losses. The issuers
continue to make timely principal and interest payments. For all securities in an unrealized loss position without
an allowance for credit losses, we expect to recover the amortized cost based on our estimate of the amount and
timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell
these securities prior to recovering our amortized cost.

228

229

The following table presents the gross unrealized losses and fair values of our fixed maturity securities,

aggregated by investment type and length of time that individual fixed maturity securities have been in a

continuous unrealized loss position, as of December 31, 2019:

Less than 12 months

12 months or more

Gross

Gross

Total

Gross

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

(Dollar amounts in millions)

Description of Securities

Fixed maturity securities:

State and political

Non-U.S. government . . . . .

U.S. corporate . . . . . . . . . . .

Non-U.S. corporate . . . . . . .

Residential mortgage-

91

224

123

79

Commercial mortgage-

backed . . . . . . . . . . . . . . .

Other asset-backed . . . . . . .

381

532

Total for fixed maturity

securities in an unrealized loss

% Below cost:

Total for fixed maturity

securities in an unrealized loss

subdivisions . . . . . . . . . . $

$ (2)

$— $—

— $

14

27

12

51

97

(2)

(5)

(1)

(1)

(5)

(2)

20 —

—

(13)

(4)

302

62

14

439

(3)

(5)

—

33

7

—

3

115

91

224

425

141

22

395

971

$ (2)

(2)

(18)

(5)

(1)

(8)

(7)

14

20

60

19

10

54

212

backed . . . . . . . . . . . . . . .

22

10 —

—

position . . . . . . . . . . . . . . . . . . $1,452

$ (18)

231

$817

$ (25)

158

$2,269

$(43)

389

<20% Below cost

. . . . . . . . $1,452

$ (18)

20%-50% Below cost . . . . . —

—

231

—

$807

$ (20)

10

(5)

155

3

$2,259

$(38)

10

(5)

386

3

position . . . . . . . . . . . . . . . . . . $1,452

$ (18)

Investment grade . . . . . . . . . . . . . $1,408

$ (14)

Below investment grade . . . . . . .

44

(4)

231

223

8

$817

$ (25)

$702

115

$ (15)

(10)

158

145

13

$2,269

$(43)

$2,110

159

$(29)

(14)

389

368

21

Total for fixed maturity

securities in an unrealized loss

position . . . . . . . . . . . . . . . . . . $1,452

$ (18)

231

$817

$ (25)

158

$2,269

$(43)

389

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table presents the gross unrealized losses and fair values of our corporate securities for which

an allowance for credit losses has not been recorded, aggregated by investment type and length of time that

individual investment securities have been in a continuous unrealized loss position, based on industry, as of

The following table presents the gross unrealized losses and fair values of our fixed maturity securities,

aggregated by investment type and length of time that individual fixed maturity securities have been in a
continuous unrealized loss position, as of December 31, 2019:

December 31, 2020:

(Dollar amounts in millions)

Description of Securities

U.S. corporate:

Less than 12 months

12 months or more

Gross

Gross

Total

Gross

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

Consumer—non-cyclical . . . . —

—

6

(1)

securities . . . . . . . . . . . . . . 345

(20)

33

(3)

378

(23)

Utilities . . . . . . . . . . . . . . . . . $ 49

Energy . . . . . . . . . . . . . . . . . . 106

$ (2)

(13)

$— $—

33

(3)

Finance and insurance . . . . . . 128

Consumer—non-cyclical . . . .

Transportation . . . . . . . . . . . .

16

46

Subtotal, U.S. corporate

Non-U.S. corporate:

Energy . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . .

Consumer—cyclical

. . . . . . .

Transportation . . . . . . . . . . . .

Subtotal, non-U.S. corporate

66

31

15

33

Total for corporate securities in an

(2)

(1)

(2)

(1)

(1)

(1)

(1)

(4)

9

19

15

5

11

59

10

—

8

6

8

—

—

—

—

—

—

—

—

—

—

—

—

—

—

$ 49

139

128

16

46

$ (2)

(16)

(2)

(1)

(2)

66

6

31

15

33

(1)

(1)

(1)

(1)

(1)

(5)

4

—

—

—

—

—

—

—

—

4

1

1

5

9

23

15

5

11

63

10

1

8

6

8

33

96

securities . . . . . . . . . . . . . . 145

32

6

(1)

151

unrealized loss position

$490

$ (24)

91

$ 39

$ (4)

$529

$(28)

We did not recognize an allowance for credit losses on securities in an unrealized loss position included in

the tables above. Based on a qualitative and quantitative review of the issuers of the securities, we believe the

decline in fair value is largely due to recent market volatility and is not indicative of credit losses. The issuers

continue to make timely principal and interest payments. For all securities in an unrealized loss position without

an allowance for credit losses, we expect to recover the amortized cost based on our estimate of the amount and

timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell

these securities prior to recovering our amortized cost.

Less than 12 months

12 months or more

Fair
value

Gross
unrealized
losses

Number of
securities

Fair
value

Gross
unrealized
losses

Number of
securities

Fair
value

Total

Gross
unrealized
losses

Number of
securities

(Dollar amounts in millions)

Description of Securities
Fixed maturity securities:
State and political

subdivisions . . . . . . . . . . $

Non-U.S. government . . . . .
U.S. corporate . . . . . . . . . . .
Non-U.S. corporate . . . . . . .
Residential mortgage-

91
224
123
79

$ (2)
(2)
(5)
(1)

backed . . . . . . . . . . . . . . .

22

Commercial mortgage-

backed . . . . . . . . . . . . . . .
Other asset-backed . . . . . . .

381
532

(1)

(5)
(2)

14
20 —
302
27
62
12

$— $—
—
(13)
(4)

— $
—
33
7

10 —

—

51
97

14
439

(3)
(5)

—

3
115

91
224
425
141

22

395
971

$ (2)
(2)
(18)
(5)

(1)

(8)
(7)

14
20
60
19

10

54
212

Total for fixed maturity

securities in an unrealized loss
position . . . . . . . . . . . . . . . . . . $1,452

% Below cost:

$ (18)

231

$817

$ (25)

158

$2,269

$(43)

389

. . . . . . . . $1,452
<20% Below cost
20%-50% Below cost . . . . . —

$ (18)
—

231
—

$807
10

$ (20)
(5)

155
3

$2,259
10

$(38)
(5)

386
3

Total for fixed maturity

securities in an unrealized loss
position . . . . . . . . . . . . . . . . . . $1,452

Investment grade . . . . . . . . . . . . . $1,408
44
Below investment grade . . . . . . .

Total for fixed maturity

securities in an unrealized loss
position . . . . . . . . . . . . . . . . . . $1,452

$ (18)

$ (14)
(4)

231

223
8

$817

$ (25)

$702
115

$ (15)
(10)

158

145
13

$2,269

$(43)

$2,110
159

$(29)
(14)

389

368
21

$ (18)

231

$817

$ (25)

158

$2,269

$(43)

389

228

229

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following table presents the gross unrealized losses and fair values of our corporate securities,

aggregated by investment type and length of time that individual investment securities have been in a continuous
unrealized loss position, based on industry, as of December 31, 2019:

Less than 12 months

12 months or more

Gross
unrealized
losses

Fair
value

Number of
securities

Fair
value

Gross
unrealized
losses

Number of
securities

Fair
value

Total

Gross
unrealized
losses

Number of
securities

(Dollar amounts in millions)

Description of Securities
U.S. corporate:

Energy . . . . . . . . . . . . . . . . . . . . $ 54
Finance and insurance . . . . . . . . —
34
Consumer—non-cyclical
Technology and

. . . . .

communications . . . . . . . . . . —
Capital goods . . . . . . . . . . . . . .
35
Consumer—cyclical . . . . . . . . . —
Transportation . . . . . . . . . . . . . . —

$ (3)
—

(1)

—

(1)

—
—

10
—
9

$ 80
34
93

$ (5)
(1)
(3)

—

—
—

18
8 —
54
23

(1)

—

(2)
(1)

10
4
9

—

2

6
2

$134
34
127

$ (8)
(1)
(4)

18
35
54
23

(1)
(1)
(2)
(1)

Subtotal, U.S. corporate

securities . . . . . . . . . . . . . . . . 123

(5)

27

302

(13)

33

425

(18)

Non-U.S. corporate:

Consumer—non-cyclical
. . . . . —
Transportation . . . . . . . . . . . . . . —
79
Other . . . . . . . . . . . . . . . . . . . . .

Subtotal, non-U.S. corporate

securities . . . . . . . . . . . . . . . .

79

—
—

(1)

(1)

—
—
12

12

31
25
6

62

(2)
(1)
(1)

(4)

3
3
1

7

31
25
85

141

(2)
(1)
(2)

(5)

Total for corporate securities in an

unrealized loss position . . . . . . . . . $202

$ (6)

39

$364

$ (17)

40

$566

$(23)

20
4
18

2
8
6
2

60

3
3
13

19

79

The scheduled maturity distribution of fixed maturity securities as of December 31, 2020 is set forth below.

Actual maturities may differ from contractual maturities because issuers of securities may have the right to call
or prepay obligations with or without call or prepayment penalties.

(Amounts in millions)

Due one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through five years . . . . . . . . . . . . . . . . .
Due after five years through ten years . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized
cost or
cost

$ 1,425
9,863
13,285
23,353

47,926
1,698
2,759
3,293

Fair
value

$ 1,447
10,586
15,177
30,352

57,562
1,909
2,974
3,345

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$55,676

$65,790

As of December 31, 2020, securities issued by finance and insurance, consumer—non-cyclical, utilities and

technology and communications industry groups represented approximately 25%, 15%, 13% and 11%,

respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group

comprised more than 10% of our investment portfolio.

As of December 31, 2020, we did not hold any fixed maturity securities in any single issuer, other than

securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.

As of December 31, 2020 and 2019, securities of $46 million and $44 million, respectively, were on deposit

with various state government insurance departments in order to comply with relevant insurance regulations.

(e) Commercial Mortgage Loans

Our mortgage loans are collateralized by commercial properties, including multi-family residential

buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments,

amortization and allowance for credit losses.

We diversify our commercial mortgage loans by both property type and geographic region. The following

tables set forth the distribution across property type and geographic region for commercial mortgage loans as of

December 31:

(Amounts in millions)

Property type:

2020

2019

Carrying

value

% of

total

Carrying

value

% of

total

36% $2,590

37%

Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Apartments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mixed use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,442

1,638

1,567

529

286

312

24

23

8

4

5

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,774

100% 6,980

100%

Unamortized balance of loan origination fees . . . . . . . . . . .

Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(31)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,743

$6,963

24

23

8

4

4

1,670

1,632

541

281

266

(4)

(13)

230

231

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table presents the gross unrealized losses and fair values of our corporate securities,

aggregated by investment type and length of time that individual investment securities have been in a continuous

unrealized loss position, based on industry, as of December 31, 2019:

Less than 12 months

12 months or more

Gross

Gross

Total

Gross

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

Fair

value

unrealized

Number of

losses

securities

Capital goods . . . . . . . . . . . . . .

35

(1)

8 —

—

—

(Dollar amounts in millions)

Description of Securities

U.S. corporate:

Energy . . . . . . . . . . . . . . . . . . . . $ 54

$ (3)

Finance and insurance . . . . . . . . —

Consumer—non-cyclical

. . . . .

34

—

(1)

Technology and

communications . . . . . . . . . . —

Consumer—cyclical . . . . . . . . . —

Transportation . . . . . . . . . . . . . . —

Subtotal, U.S. corporate

Non-U.S. corporate:

Consumer—non-cyclical

. . . . . —

Transportation . . . . . . . . . . . . . . —

Other . . . . . . . . . . . . . . . . . . . . .

79

Subtotal, non-U.S. corporate

securities . . . . . . . . . . . . . . . .

79

Total for corporate securities in an

$ 80

$ (5)

10

$134

$ (8)

10

—

9

—

—

—

—

—

12

12

—

—

—

—

—

(1)

(1)

34

93

18

54

23

31

25

6

62

(1)

(3)

(1)

(2)

(1)

(2)

(1)

(1)

(4)

4

9

2

6

2

3

3

1

7

34

127

18

35

54

23

31

25

85

141

(1)

(4)

(1)

(1)

(2)

(1)

(2)

(1)

(2)

(5)

securities . . . . . . . . . . . . . . . . 123

(5)

27

302

(13)

33

425

(18)

unrealized loss position . . . . . . . . . $202

$ (6)

39

$364

$ (17)

40

$566

$(23)

20

4

18

2

8

6

2

60

3

3

13

19

79

The scheduled maturity distribution of fixed maturity securities as of December 31, 2020 is set forth below.

Actual maturities may differ from contractual maturities because issuers of securities may have the right to call

or prepay obligations with or without call or prepayment penalties.

(Amounts in millions)

Due one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,425

$ 1,447

Due after one year through five years . . . . . . . . . . . . . . . . .

Due after five years through ten years . . . . . . . . . . . . . . . . .

Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized

cost or

cost

9,863

13,285

23,353

47,926

1,698

2,759

3,293

Fair

value

10,586

15,177

30,352

57,562

1,909

2,974

3,345

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$55,676

$65,790

As of December 31, 2020, securities issued by finance and insurance, consumer—non-cyclical, utilities and

technology and communications industry groups represented approximately 25%, 15%, 13% and 11%,
respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group
comprised more than 10% of our investment portfolio.

As of December 31, 2020, we did not hold any fixed maturity securities in any single issuer, other than

securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.

As of December 31, 2020 and 2019, securities of $46 million and $44 million, respectively, were on deposit

with various state government insurance departments in order to comply with relevant insurance regulations.

(e) Commercial Mortgage Loans

Our mortgage loans are collateralized by commercial properties, including multi-family residential

buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments,
amortization and allowance for credit losses.

We diversify our commercial mortgage loans by both property type and geographic region. The following
tables set forth the distribution across property type and geographic region for commercial mortgage loans as of
December 31:

(Amounts in millions)

Property type:
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mixed use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

Carrying
value

% of
total

Carrying
value

% of
total

$2,442
1,638
1,567
529
286
312

36% $2,590
1,670
24
1,632
23
541
8
281
4
266
5

37%
24
23
8
4
4

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,774

100% 6,980

100%

Unamortized balance of loan origination fees . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(31)

(4)
(13)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,743

$6,963

230

231

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

indicate risk associated with the loan. A lower debt-to-value indicates that our loan value is more likely to be

recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is

based on “normalized” annual income of the property compared to the payments required under the terms of the

loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or

late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This

ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with

the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt

service coverage ratio is not used without considering other factors associated with the borrower, such as the

borrower’s liquidity or access to other resources that may result in our expectation that the borrower will

continue to make the future scheduled payments.

The following tables set forth commercial mortgage loans by year of origination and credit quality indicator

as of December 31, 2020:

(Amounts in millions)

Debt-to-value:

2020

2019

2018

2017

2016

2015 and

prior

Total

0% - 50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 60

$ 24

$ 78

$154

$147

$2,182

$2,645

51% - 60% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61% - 75% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50

431

76% - 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Greater than 100% . . . . . . . . . . . . . . . . . . . . . . . . . . —

321

530

299

270

36 —

164

152

11

—

— —

705

366

33

2

1,628

2,396

103

2

Total amortized cost . . . . . . . . . . . . . . . . . . . . .

$541

$783

$965

$723

$474

$3,288

$6,774

Debt service coverage ratio:

Less than 1.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

$

$

$ 27

$ 10

$— $ 168

$ 216

1.00 - 1.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.26 - 1.50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.51 - 2.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Greater than 2.00 . . . . . . . . . . . . . . . . . . . . . . . . . . .

54

204

446

234

42

60

342

269

25

74

252

123

279

333

977

1,531

526

992

2,590

2,450

Total amortized cost . . . . . . . . . . . . . . . . . . . . .

$541

$783

$965

$723 $474

$3,288

$6,774

89

647

23

—

8

68

241

294

172

3

58

80

279

121

(Amounts in millions)

2020

2019

Carrying
value

%
of
total

Carrying
value

%
of
total

Geographic region:
South Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Middle Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mountain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West North Central
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East North Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West South Central
New England . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East South Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,711
1,510
994
781
467
441
423
260
187

25% $1,715
1,673
22
992
15
753
12
488
7
455
6
433
6
257
4
214
3

25%
24
14
11
7
6
6
4
3

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,774

100% 6,980

100%

Unamortized balance of loan origination fees . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(31)

(4)
(13)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,743

$6,963

As of December 31, 2020 and 2019, all of our commercial mortgage loans were current. For a discussion of

our policy related to placing commercial mortgage loans on non-accrual status, see note 2. As of December 31,
2020 and 2019, we had no commercial mortgage loans on non-accrual status.

During the years ended December 31, 2020 and 2019, we did not have any modifications or extensions that

were considered troubled debt restructurings.

The following table sets forth the allowance for credit losses related to commercial mortgage loans as of or

for the years ended December 31:

(Amounts in millions)

Allowance for credit losses:

2020

2019

2018

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting . . . . . . . . . . . . . . . .
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13
16
2

—
—

$

9

4

—

—
—

$

9

—
—
—
—

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 31

$ 13

$

9

In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying

loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans
can be evaluated by reviewing both the debt-to-value and debt service coverage ratio to understand both the
probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the
underlying property for an amount that would enable us to recover our unpaid principal balance in the event of
default by the borrower. The average debt-to-value ratio is based on our most recent estimate of the fair value for
the underlying property which is evaluated at least annually and updated more frequently if necessary to better

232

233

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

indicate risk associated with the loan. A lower debt-to-value indicates that our loan value is more likely to be
recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is
based on “normalized” annual income of the property compared to the payments required under the terms of the
loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or
late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This
ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with
the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt
service coverage ratio is not used without considering other factors associated with the borrower, such as the
borrower’s liquidity or access to other resources that may result in our expectation that the borrower will
continue to make the future scheduled payments.

The following tables set forth commercial mortgage loans by year of origination and credit quality indicator

as of December 31, 2020:

(Amounts in millions)

Debt-to-value:

2020

2019

2018

2017

2016

2015 and
prior

Total

$ 60
0% - 50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
51% - 60% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61% - 75% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
431
76% - 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Greater than 100% . . . . . . . . . . . . . . . . . . . . . . . . . . —

$ 24
89
647
23
—

$ 78
321
530

$154
299
270
36 —
—
—

$147
164
152
11
—

$2,182
705
366
33
2

$2,645
1,628
2,396
103
2

Total amortized cost . . . . . . . . . . . . . . . . . . . . .

$541

$783

$965

$723

$474

$3,288

$6,774

Debt service coverage ratio:

Less than 1.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
1.00 - 1.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.26 - 1.50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.51 - 2.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Greater than 2.00 . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3
58
80
279
121

$

8
68
241
294
172

$ 27
54
204
446
234

$ 10
42
60
342
269

$— $ 168
279
333
977
1,531

25
74
252
123

$ 216
526
992
2,590
2,450

Total amortized cost . . . . . . . . . . . . . . . . . . . . .

$541

$783

$965

$723

$474

$3,288

$6,774

(Amounts in millions)

Geographic region:

South Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,711

1,510

25% $1,715

25%

Middle Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mountain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

West North Central

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

East North Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

West South Central

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New England . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

East South Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

Carrying

value

%

of

total

Carrying

value

%

of

total

994

781

467

441

423

260

187

22

15

12

7

6

6

4

3

24

14

11

7

6

6

4

3

1,673

992

753

488

455

433

257

214

(4)

(13)

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,774

100% 6,980

100%

Unamortized balance of loan origination fees . . . . . . . . . . . .

Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(31)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,743

$6,963

As of December 31, 2020 and 2019, all of our commercial mortgage loans were current. For a discussion of

our policy related to placing commercial mortgage loans on non-accrual status, see note 2. As of December 31,

2020 and 2019, we had no commercial mortgage loans on non-accrual status.

During the years ended December 31, 2020 and 2019, we did not have any modifications or extensions that

were considered troubled debt restructurings.

The following table sets forth the allowance for credit losses related to commercial mortgage loans as of or

for the years ended December 31:

(Amounts in millions)

Allowance for credit losses:

2020

2019

2018

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13

$

$

9

Cumulative effect of change in accounting . . . . . . . . . . . . . . . .

Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

2

—

—

9

4

—

—

—

—

—

—

—

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 31

$ 13

$

9

In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying

loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans

can be evaluated by reviewing both the debt-to-value and debt service coverage ratio to understand both the

probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the

underlying property for an amount that would enable us to recover our unpaid principal balance in the event of

default by the borrower. The average debt-to-value ratio is based on our most recent estimate of the fair value for

the underlying property which is evaluated at least annually and updated more frequently if necessary to better

232

233

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following tables set forth the debt-to-value of commercial mortgage loans by property type as of

The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by

December 31:

(Amounts in millions)

Property type:

0% - 50% 51% - 60% 61% - 75% 76% - 100%

than 100% Total

2020

Greater

Retail . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments . . . . . . . . . . . . . . . . . . . . .
Mixed use . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 913
798
523
199
112
100

Total amortized cost

. . . . . . . . . . . . . .

$2,645

$ 639
351
431
86
47
74

$1,628

$ 859
456
595
238
127
121

$2,396

$ 29
33
18
6

—
17

$ 103

$

2

—
—
—
—
—

$

2

$2,442
1,638
1,567
529
286
312

$6,774

% of total . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%

24%

35%

2%

— %

100%

% of total

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average debt service coverage

ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.40

1.83

1.61

1.49

0.64

1.97

(Amounts in millions)

Property type:

0% - 50% 51% - 60% 61% - 75% 76% - 100%

than 100% Total

2019

Greater

Retail . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments . . . . . . . . . . . . . . . . . . . . .
Mixed use . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 986
808
529
211
104
56

Total recorded investment . . . . . . . . . .

$2,694

$ 579
337
380
110
70
69

$1,545

$1,025
525
723
220
107
141

$2,741

$—
—
—
—
—
—

$—

$—
—
—
—
—
—

$—

$2,590
1,670
1,632
541
281
266

$6,980

% of total . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%

22%

39%

— %

— %

100%

% of total

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average debt service coverage

ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.32

1.81

1.55

—

—

1.90

Weighted-average debt-to-value . . . . . . . . . .

7%

61%

18%

63%

41%

58%

31% 100%

41%

54%

234

property type as of December 31:

(Amounts in millions)

Property type:

Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . .

Office . . . . . . . . . . . . . . . . . . . . . . . . . . .

Apartments . . . . . . . . . . . . . . . . . . . . . . .

Mixed use . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 55

21

101

9

5

25

Less than 1.00

1.00 - 1.25

1.26 - 1.50

1.51 - 2.00

Greater

than 2.00

Total

$169

$483

$ 969

$ 766

$2,442

616

634

228

115

28

773

563

142

113

93

1,638

1,567

529

286

312

Total amortized cost . . . . . . . . . . . . . . . .

$216

$992

$2,590

$2,450

$6,774

Weighted-average debt-to-value . . . . . . . . . .

3%

57%

8%

62%

38%

57%

36% 100%

44%

53%

Less than 1.00

1.00 - 1.25

1.26 - 1.50

1.51 - 2.00

Greater

than 2.00

Total

Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 68

$141

$ 596

$1,148

$ 637

$2,590

(Amounts in millions)

Property type:

Industrial . . . . . . . . . . . . . . . . . . . . . . . . .

Office . . . . . . . . . . . . . . . . . . . . . . . . . . .

Apartments . . . . . . . . . . . . . . . . . . . . . . .

Mixed use . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

658

751

175

107

31

716

471

189

117

34

1,670

1,632

541

281

266

Total recorded investment

. . . . . . . . . . .

$190

$1,280

$2,870

$2,164

$6,980

2020

143

170

126

29

41

15%

62%

2019

221

277

129

37

20

85

99

24

24

125

$526

51

89

32

16

147

$476

(f) Limited Partnerships or Similar Entities

Limited partnerships are accounted for at fair value when our partnership interest is considered minor

(generally less than 3% ownership in the limited partnerships) and we exercise no influence over operating and

financial policies. If our ownership percentage exceeds that threshold, limited partnerships are accounted for

using the equity method of accounting. In applying either method, we use financial information provided by the

investee generally on a one-to-three month lag. However, for limited partnerships measured at fair value, we

consider whether an adjustment to the estimated fair value is necessary when the measurement date is not aligned

with our reporting date.

24

44

16

4

34

3%

59%

235

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following tables set forth the debt-to-value of commercial mortgage loans by property type as of

The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by

property type as of December 31:

(Amounts in millions)

Property type:

Less than 1.00

1.00 - 1.25

1.26 - 1.50

1.51 - 2.00

Greater
than 2.00

Total

2020

% of total . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%

24%

35%

2%

— %

100%

% of total

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average debt service coverage

ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.40

1.83

1.61

1.49

0.64

1.97

Weighted-average debt-to-value . . . . . . . . . .

3%

57%

8%

62%

Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments . . . . . . . . . . . . . . . . . . . . . . .
Mixed use . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total amortized cost . . . . . . . . . . . . . . . .

$ 55
21
101
9
5
25

$216

$169
85
99
24
24
125

$526

$ 969
616
634
228
115
28

$ 766
773
563
142
113
93

$2,442
1,638
1,567
529
286
312

$2,590

$2,450

$6,774

38%

57%

36% 100%

44%

53%

$483
143
170
126
29
41

$992

15%

62%

2019

(Amounts in millions)

Property type:

Less than 1.00

1.00 - 1.25

1.26 - 1.50

1.51 - 2.00

Greater
than 2.00

Total

Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . . .
Apartments . . . . . . . . . . . . . . . . . . . . . . .
Mixed use . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total recorded investment

. . . . . . . . . . .

$ 68
24
44
16
4
34

$190

$141
51
89
32
16
147

$476

$ 596
221
277
129
37
20

$1,280

$1,148
658
751
175
107
31

$ 637
716
471
189
117
34

$2,590
1,670
1,632
541
281
266

$2,870

$2,164

$6,980

December 31:

(Amounts in millions)

Property type:

0% - 50% 51% - 60% 61% - 75% 76% - 100%

than 100% Total

2020

Greater

Retail . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 913

$ 639

$ 859

$ 29

$

2

Industrial . . . . . . . . . . . . . . . . . . . . . . .

Office . . . . . . . . . . . . . . . . . . . . . . . . . .

Apartments . . . . . . . . . . . . . . . . . . . . .

Mixed use . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . .

798

523

199

112

100

351

431

86

47

74

456

595

238

127

121

33

18

6

—

17

$2,442

1,638

1,567

529

286

312

—

—

—

—

—

Total amortized cost

. . . . . . . . . . . . . .

$2,645

$1,628

$2,396

$ 103

$

2

$6,774

0% - 50% 51% - 60% 61% - 75% 76% - 100%

than 100% Total

2019

(Amounts in millions)

Property type:

Retail . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 986

$ 579

$1,025

$—

Industrial . . . . . . . . . . . . . . . . . . . . . . .

Office . . . . . . . . . . . . . . . . . . . . . . . . . .

Apartments . . . . . . . . . . . . . . . . . . . . .

Mixed use . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . .

808

529

211

104

56

337

380

110

70

69

525

723

220

107

141

—

—

—

—

—

Greater

$—

—

—

—

—

—

$2,590

1,670

1,632

541

281

266

Total recorded investment . . . . . . . . . .

$2,694

$1,545

$2,741

$—

$—

$6,980

% of total . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%

22%

39%

— %

— %

100%

% of total

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average debt service coverage

ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.32

1.81

1.55

—

—

1.90

Weighted-average debt-to-value . . . . . . . . . .

3%

59%

7%

61%

18%

63%

41%

58%

31% 100%

41%

54%

(f) Limited Partnerships or Similar Entities

Limited partnerships are accounted for at fair value when our partnership interest is considered minor
(generally less than 3% ownership in the limited partnerships) and we exercise no influence over operating and
financial policies. If our ownership percentage exceeds that threshold, limited partnerships are accounted for
using the equity method of accounting. In applying either method, we use financial information provided by the
investee generally on a one-to-three month lag. However, for limited partnerships measured at fair value, we
consider whether an adjustment to the estimated fair value is necessary when the measurement date is not aligned
with our reporting date.

234

235

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Investments in limited partnerships or similar entities are generally considered VIEs when the equity group

lacks sufficient financial control. Generally, these investments are limited partner or non-managing member
equity investments in a widely held fund that is sponsored and managed by a reputable asset manager. We are not
the primary beneficiary of any VIE investment in a limited partnership or similar entity. As of December 31,
2020 and 2019, the total carrying value of these investments was $1,018 million and $616 million, respectively.
Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. We
have not contributed, and do not plan to contribute, any additional financial or other support outside of what is
contractually obligated.

(5) Derivative Instruments

Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange
rates and other asset and liability prices. We use derivative instruments to mitigate or reduce some of these risks.
We have established policies for managing each of these risks, including prohibitions on derivatives market-
making and other speculative derivatives activities. These policies require the use of derivative instruments in
concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce
risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and
are denoted as “derivatives not designated as hedges” in the following disclosures. For derivatives that meet the
accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted
as “derivatives designated as hedges,” which include cash flow hedges.

The following table sets forth our positions in derivative instruments as of December 31:

(Amounts in millions)

sheet classification

2020

2019

sheet classification

2020

2019

Derivative assets

Derivative liabilities

Fair value

Fair value

Balance

Balance

Interest rate swaps . . . . . . . . . . . . . Other invested assets

$468

$197 Other liabilities

$ 23

$ 10

Foreign currency swaps . . . . . . . . . Other invested assets

1

4 Other liabilities

2 —

Derivatives designated as hedges

Cash flow hedges:

Total cash flow hedges . . . . . . . . .

Total derivatives designated as

hedges . . . . . . . . . . . . . . . . . . . .

Derivatives not designated as hedges

Equity index options . . . . . . . . . . . . . . . Other invested assets

81 Other liabilities —

Financial futures . . . . . . . . . . . . . . . . . . Other invested assets —

— Other liabilities —

Other foreign currency contracts . . . . . . Other invested assets

8 Other liabilities

1

GMWB embedded derivatives . . . . . . .

Fixed index annuity embedded

derivatives . . . . . . . . . . . . . . . . . . . . .

Indexed universal life embedded

derivatives . . . . . . . . . . . . . . . . . . . . .

Total derivatives not designated as

hedges . . . . . . . . . . . . . . . . . . . .

Total derivatives . . . . . . . . . . . . . .

Reinsurance

recoverable (1)

Other assets

Reinsurance

recoverable

Policyholder

Policyholder

Policyholder

20

account balances (2) 379

323

—

—

account balances (3) 399

452

account balances (4)

26

19

144

109

$613

$310

805

795

$830

$805

(1) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

(2) Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of

reinsurance.

(3) Represents the embedded derivatives associated with our fixed index annuity liabilities.

(4) Represents the embedded derivatives associated with our indexed universal life liabilities.

The fair value of derivative positions presented above was not offset by the respective collateral amounts

received or provided under these agreements.

469

201

469

201

63

55

26

—

—

25

25

10

10

—

—

1

236

237

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Investments in limited partnerships or similar entities are generally considered VIEs when the equity group

lacks sufficient financial control. Generally, these investments are limited partner or non-managing member

equity investments in a widely held fund that is sponsored and managed by a reputable asset manager. We are not

the primary beneficiary of any VIE investment in a limited partnership or similar entity. As of December 31,

2020 and 2019, the total carrying value of these investments was $1,018 million and $616 million, respectively.

Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. We

have not contributed, and do not plan to contribute, any additional financial or other support outside of what is

contractually obligated.

(5) Derivative Instruments

Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange

rates and other asset and liability prices. We use derivative instruments to mitigate or reduce some of these risks.

We have established policies for managing each of these risks, including prohibitions on derivatives market-

making and other speculative derivatives activities. These policies require the use of derivative instruments in

concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce

risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and

are denoted as “derivatives not designated as hedges” in the following disclosures. For derivatives that meet the

accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted

as “derivatives designated as hedges,” which include cash flow hedges.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table sets forth our positions in derivative instruments as of December 31:

(Amounts in millions)

Derivatives designated as hedges
Cash flow hedges:

Derivative assets

Derivative liabilities

Fair value

Fair value

Balance
sheet classification

2020

2019

Balance
sheet classification

2020

2019

Interest rate swaps . . . . . . . . . . . . . Other invested assets
Foreign currency swaps . . . . . . . . . Other invested assets

$468
1

$197 Other liabilities
4 Other liabilities

$ 23

$ 10
2 —

Total cash flow hedges . . . . . . . . .

Total derivatives designated as

hedges . . . . . . . . . . . . . . . . . . . .

469

201

469

201

25

25

Derivatives not designated as hedges
Equity index options . . . . . . . . . . . . . . . Other invested assets
63
Financial futures . . . . . . . . . . . . . . . . . . Other invested assets —
55
Other foreign currency contracts . . . . . . Other invested assets

10

10

—
—

1

GMWB embedded derivatives . . . . . . .
Fixed index annuity embedded

derivatives . . . . . . . . . . . . . . . . . . . . .

Indexed universal life embedded

derivatives . . . . . . . . . . . . . . . . . . . . .

Total derivatives not designated as
hedges . . . . . . . . . . . . . . . . . . . .

Total derivatives . . . . . . . . . . . . . .

81 Other liabilities —
— Other liabilities —

8 Other liabilities

1

Policyholder

Reinsurance
recoverable (1)

26

20

account balances (2) 379

323

Policyholder

Other assets
Reinsurance
recoverable

—

—

—

—

account balances (3) 399

452

Policyholder

account balances (4)

26

19

144

109

$613

$310

805

795

$830

$805

(1) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
(2) Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of

reinsurance.

(3) Represents the embedded derivatives associated with our fixed index annuity liabilities.
(4) Represents the embedded derivatives associated with our indexed universal life liabilities.

The fair value of derivative positions presented above was not offset by the respective collateral amounts

received or provided under these agreements.

236

237

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The activity associated with derivative instruments can generally be measured by the change in notional
value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded
derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the
number of policies. The following tables represent activity associated with derivative instruments as of the dates
indicated:

(Notional in millions)

Derivatives designated as hedges
Cash flow hedges:

Measurement

December 31,
2019

Additions

Maturities/
terminations

December 31,
2020

Interest rate swaps . . . . . . . . . . . . . . . . . .
Foreign currency swaps . . . . . . . . . . . . . .

Notional
Notional

$ 8,968
110

$ 1,844
17

Total cash flow hedges . . . . . . . . . . . . . . .

Total derivatives designated as hedges . .

Derivatives not designated as hedges
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . .
Equity index options . . . . . . . . . . . . . . . . . . . . .
Financial futures . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign currency contracts . . . . . . . . . . .

Notional
Notional
Notional
Notional

Total derivatives not designated as

hedges . . . . . . . . . . . . . . . . . . . . . . . . . .

9,078

9,078

4,674
2,451
1,182
628

1,861

1,861

—
2,053
5,516
7,080

$ (2,634)

—

(2,634)

(2,634)

—
(2,504)
(5,594)
(5,937)

$ 8,178
127

8,305

8,305

4,674
2,000
1,104
1,771

8,935

14,649

(14,035)

9,549

Total derivatives . . . . . . . . . . . . . . . . . . . .

$18,013

$16,510

$(16,669)

$17,854

(Number of policies)

Derivatives not designated as hedges
GMWB embedded derivatives . . . . . . . . . . . . .
Fixed index annuity embedded derivatives . . .
Indexed universal life embedded

Measurement

December 31,
2019

Additions

Maturities/
terminations

December 31,
2020

Policies
Policies

25,623
15,441

—
—

—

(1,910)
(2,663)

23,713
12,778

(42)

842

derivatives . . . . . . . . . . . . . . . . . . . . . . . . . .

Policies

884

Cash Flow Hedges

Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these
instruments are recorded as a component of OCI. We designate and account for the following as cash flow
hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert
floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate
liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign
currency cash flow exposure of foreign currency denominated investments; (iv) forward starting interest rate
swaps to hedge against changes in interest rates associated with future fixed rate bond purchases and/or interest
income; and (v) other instruments to hedge the cash flows of various forecasted transactions.

238

239

The following table provides information about the pre-tax income effects of cash flow hedges for the year

ended December 31, 2020:

Gain (loss)

recognized

in OCI

Gain (loss)

net income

from OCI

reclassified into

Classification of gain (loss)

Gain (loss)

recognized in

net income

Classification of gain

(loss) recognized in

net income

(Amounts in millions)

Interest rate swaps

hedging assets . . . . . . .

$482

$196

Interest rate swaps

Interest rate swaps

hedging assets . . . . . . .

—

hedging liabilities . . . . .

(38)

Foreign currency

swaps . . . . . . . . . . . . . .

(5)

12

—

—

Total . . . . . . . . . . . . .

$439

$208

hedging assets . . . . . . .

$456

$164

hedging assets . . . . . . .

—

6

(Amounts in millions)

Interest rate swaps

Interest rate swaps

Interest rate swaps

Foreign currency

Foreign currency

hedging liabilities . . . . .

(36)

swaps . . . . . . . . . . . . . .

(2)

swaps . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . .

$418

$170

—

—

—

reclassified into net

income

Net investment

income

Net investment

gains (losses)

Interest expense

Net investment

income

reclassified into

net income

Net investment

income

Net investment

gains (losses)

Interest expense

Net investment

income

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

$—

—

—

—

$—

$—

—

—

—

2

2

$

The following table provides information about the pre-tax income effects of cash flow hedges for the year

ended December 31, 2019:

Gain (loss)

recognized

in OCI

Gain (loss)

net income

from OCI

reclassified into

Classification of gain (loss)

Gain (loss)

recognized in

net income

Classification of gain

(loss) recognized in

net income

The activity associated with derivative instruments can generally be measured by the change in notional

value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded

derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the

number of policies. The following tables represent activity associated with derivative instruments as of the dates

Measurement

2019

Additions

December 31,

Maturities/

terminations

December 31,

2020

indicated:

(Notional in millions)

Derivatives designated as hedges

Cash flow hedges:

Interest rate swaps . . . . . . . . . . . . . . . . . .

Foreign currency swaps . . . . . . . . . . . . . .

Notional

Notional

Total cash flow hedges . . . . . . . . . . . . . . .

Total derivatives designated as hedges . .

Derivatives not designated as hedges

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . .

Equity index options . . . . . . . . . . . . . . . . . . . . .

Financial futures . . . . . . . . . . . . . . . . . . . . . . . .

Other foreign currency contracts . . . . . . . . . . .

Notional

Notional

Notional

Notional

$ 8,968

$ 1,844

$ (2,634)

$ 8,178

110

9,078

9,078

4,674

2,451

1,182

628

17

1,861

1,861

—

2,053

5,516

7,080

—

(2,634)

(2,634)

—

(2,504)

(5,594)

(5,937)

127

8,305

8,305

4,674

2,000

1,104

1,771

Total derivatives not designated as

hedges . . . . . . . . . . . . . . . . . . . . . . . . . .

8,935

14,649

(14,035)

9,549

Total derivatives . . . . . . . . . . . . . . . . . . . .

$18,013

$16,510

$(16,669)

$17,854

(Number of policies)

Derivatives not designated as hedges

Measurement

2019

Additions

December 31,

Maturities/

terminations

December 31,

2020

GMWB embedded derivatives . . . . . . . . . . . . .

Fixed index annuity embedded derivatives . . .

Policies

Policies

25,623

15,441

(1,910)

(2,663)

23,713

12,778

Indexed universal life embedded

derivatives . . . . . . . . . . . . . . . . . . . . . . . . . .

Policies

884

(42)

842

—

—

—

Cash Flow Hedges

Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these

instruments are recorded as a component of OCI. We designate and account for the following as cash flow

hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert

floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate

liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign

currency cash flow exposure of foreign currency denominated investments; (iv) forward starting interest rate

swaps to hedge against changes in interest rates associated with future fixed rate bond purchases and/or interest

income; and (v) other instruments to hedge the cash flows of various forecasted transactions.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table provides information about the pre-tax income effects of cash flow hedges for the year

ended December 31, 2020:

Gain (loss)
recognized
in OCI

Gain (loss)
reclassified into
net income
from OCI

Classification of gain (loss)
reclassified into net
income

Gain (loss)
recognized in
net income

Classification of gain
(loss) recognized in
net income

(Amounts in millions)

Interest rate swaps

hedging assets . . . . . . .

$482

$196

Interest rate swaps

hedging assets . . . . . . .

—

Interest rate swaps

hedging liabilities . . . . .

(38)

Foreign currency

swaps . . . . . . . . . . . . . .

(5)

12

—

—

Total . . . . . . . . . . . . .

$439

$208

Net investment
income
Net investment
gains (losses)

Interest expense
Net investment
income

Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)

$—

—

—

—

$—

The following table provides information about the pre-tax income effects of cash flow hedges for the year

ended December 31, 2019:

Gain (loss)
recognized
in OCI

Gain (loss)
reclassified into
net income
from OCI

Classification of gain (loss)
reclassified into
net income

Gain (loss)
recognized in
net income

Classification of gain
(loss) recognized in
net income

(Amounts in millions)

Interest rate swaps

Net investment
income
Net investment
gains (losses)

Interest expense
Net investment
income
Net investment
gains (losses)

Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)

$—

—

—

—

2

2

$

hedging assets . . . . . . .

$456

$164

Interest rate swaps

hedging assets . . . . . . .

—

6

Interest rate swaps

hedging liabilities . . . . .

(36)

Foreign currency

swaps . . . . . . . . . . . . . .

(2)

Foreign currency

swaps . . . . . . . . . . . . . .

—

—

—

—

Total . . . . . . . . . . . . .

$418

$170

238

239

ended December 31, 2018:

(Amounts in millions)

Interest rate swaps

Gain (loss)
recognized
in OCI

Gain (loss)
reclassified into
net income
from OCI

Classification of gain (loss)
reclassified into net
income

Gain (loss)
recognized in
net income

Classification of gain
(loss) recognized in
net income

hedging assets . . . . . . .

$(261)

$153

Interest rate swaps

hedging assets . . . . . . .

—

Interest rate swaps

hedging liabilities . . . . .

Foreign currency

swaps . . . . . . . . . . . . . .

16

4

9

—

—

Total . . . . . . . . . . . . .

$(241)

$162

Net investment
income
Net investment
gains (losses)

Interest expense
Net investment
income

Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)
Net investment
gains (losses)

$—

—

—

—

$—

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table provides information about the pre-tax income effects of cash flow hedges for the year

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

equity return swaps, interest rate swaps and financial futures to mitigate the risks associated with liabilities that

have guaranteed minimum benefits, fixed index annuities and indexed universal life; (iii) foreign currency

forward contracts to mitigate currency risk associated with non-functional currency investments held by certain

foreign subsidiaries; and (iv) foreign currency options and forward contracts to mitigate currency risk associated

with future dividends, cash payments to AXA under a promissory note reported as discontinued operations and/

or other cash flows from certain foreign subsidiaries to our holding company. Additionally, we provide GMWBs

on certain variable annuities that are required to be bifurcated as embedded derivatives. We also offer fixed index

annuity and indexed universal life insurance products and have reinsurance agreements with certain features that

are required to be bifurcated as embedded derivatives.

The following table provides the pre-tax gain (loss) recognized in net income for the effects of derivatives

not designated as hedges for the years ended December 31:

(Amounts in millions)

2020

2019

2018

in net income

Classification of gain (loss) recognized

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(11)

$ (3)

$

3

Equity index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity return swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Other foreign currency contracts . . . . . . . . . . . . . . . . . . . .

GMWB embedded derivatives . . . . . . . . . . . . . . . . . . . . . .

Fixed index annuity embedded derivatives . . . . . . . . . . . .

Indexed universal life embedded derivatives . . . . . . . . . . .

4

2

38

(28)

(51)

17

43

(64)

—

(8)

38

(90)

4

(34)

26

(4)

4

(54)

15

13

Total derivatives not designated as hedges . . . . . . . .

$ (29) $ (80) $(31)

Net investment gains (losses)

Net investment gains (losses)

Net investment gains (losses)

Netinvestment gains (losses)

Netinvestment gains (losses)

Net investment gains (losses)

Net investment gains (losses)

Netinvestment gains (losses)

Derivative Counterparty Credit Risk

Most of our derivative arrangements with counterparties require the posting of collateral upon meeting

certain net exposure thresholds. The following table presents additional information about derivative assets and

liabilities subject to an enforceable master netting arrangement as of December 31:

2020

2019

Derivative

assets (1)

Derivative

liabilities (1)

Net

derivatives

Derivative

assets (1)

Derivative

liabilities (1)

Net

derivatives

(Amounts in millions)

Amounts presented in the balance sheet:

Gross amounts offset in the balance

sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Net amounts presented in the balance

sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .

587

Gross amounts not offset in the balance sheet:

Financial instruments(2)

. . . . . . . . . . . . . . .

Collateral received . . . . . . . . . . . . . . . . . . .

Collateral pledged . . . . . . . . . . . . . . . . . . .

Over collateralization . . . . . . . . . . . . . . . . . . . . .

(20)

(408)

—

2

—

26

(20)

—

(505)

499

—

561

—

(408)

505

(497)

—

291

(7)

(179)

—

18

—

11

(7)

—

(405)

401

—

280

—

(179)

405

(383)

Net amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 161

$ —

$ 161

$ 123

$ —

$ 123

(1)

Included $1 million of accruals on derivatives classified as other assets as of December 31, 2019 and does not include

amounts related to embedded derivatives as of December 31, 2020 and 2019.

(2) Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with

the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset

and net liability position for each counterparty.

The following table provides a reconciliation of current period changes, net of applicable income taxes, for

these designated derivatives presented in the separate component of stockholders’ equity labeled “derivatives
qualifying as hedges,” for the years ended December 31:

(Amounts in millions)

Derivatives qualifying as effective accounting hedges as of January 1 . . . . . . . . . . . . .
Cumulative effect of changes in accounting:

Stranded tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes to the hedge accounting model, net of deferred taxes of $—, $— and

$(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total cumulative effect of changes in accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

2018

$2,002

$1,781

$2,065

—

—

—

—

—

—

12

2

14

Current period increases (decreases) in fair value, net of deferred taxes of $(95),

$(87) and $50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to net (income), net of deferred taxes of $73, $60 and $58 . . . . . . . . .

344
(135)

331
(110)

(194)
(104)

Derivatives qualifying as effective accounting hedges as of December 31 . . . . . . . . . .

$2,211

$2,002

$1,781

Gross amounts recognized . . . . . . . . . . . . .

$ 587

$ 26

$ 561

$ 291

$ 11

$ 280

The total of derivatives designated as cash flow hedges of $2,211 million, net of taxes, recorded in
stockholders’ equity as of December 31, 2020 is expected to be reclassified to net income in the future,
concurrently with and primarily offsetting changes in interest expense and interest income on floating rate
instruments and interest income on future fixed rate bond purchases. Of this amount, $131 million, net of taxes,
is expected to be reclassified to net income in the next 12 months. Actual amounts may vary from this amount as
a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are
expected to occur by 2057. During the years ended December 31, 2020, 2019 and 2018, we reclassified
$15 million, $5 million and $9 million, respectively, to net income in connection with forecasted transactions that
were no longer considered probable of occurring.

Derivatives Not Designated As Hedges

We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps and financial

futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) equity index options,

240

241

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table provides information about the pre-tax income effects of cash flow hedges for the year

ended December 31, 2018:

Gain (loss)

recognized

in OCI

Gain (loss)

net income

from OCI

reclassified into

Classification of gain (loss)

Gain (loss)

recognized in

net income

Classification of gain

(loss) recognized in

net income

(Amounts in millions)

Interest rate swaps

Interest rate swaps

hedging assets . . . . . . .

$(261)

$153

hedging assets . . . . . . .

—

Interest rate swaps

hedging liabilities . . . . .

Foreign currency

swaps . . . . . . . . . . . . . .

16

4

9

—

—

Total . . . . . . . . . . . . .

$(241)

$162

reclassified into net

income

Net investment

income

Net investment

gains (losses)

Interest expense

Net investment

income

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

Net investment

gains (losses)

$—

—

—

—

$—

The following table provides a reconciliation of current period changes, net of applicable income taxes, for

these designated derivatives presented in the separate component of stockholders’ equity labeled “derivatives

qualifying as hedges,” for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Derivatives qualifying as effective accounting hedges as of January 1 . . . . . . . . . . . . .

$2,002

$1,781

$2,065

Cumulative effect of changes in accounting:

Stranded tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes to the hedge accounting model, net of deferred taxes of $—, $— and

$(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total cumulative effect of changes in accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

—

—

—

12

2

14

Current period increases (decreases) in fair value, net of deferred taxes of $(95),

$(87) and $50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reclassification to net (income), net of deferred taxes of $73, $60 and $58 . . . . . . . . .

344

(135)

331

(110)

(194)

(104)

Derivatives qualifying as effective accounting hedges as of December 31 . . . . . . . . . .

$2,211

$2,002

$1,781

The total of derivatives designated as cash flow hedges of $2,211 million, net of taxes, recorded in

stockholders’ equity as of December 31, 2020 is expected to be reclassified to net income in the future,

concurrently with and primarily offsetting changes in interest expense and interest income on floating rate

instruments and interest income on future fixed rate bond purchases. Of this amount, $131 million, net of taxes,

is expected to be reclassified to net income in the next 12 months. Actual amounts may vary from this amount as

a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are

expected to occur by 2057. During the years ended December 31, 2020, 2019 and 2018, we reclassified

$15 million, $5 million and $9 million, respectively, to net income in connection with forecasted transactions that

were no longer considered probable of occurring.

Derivatives Not Designated As Hedges

We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps and financial

futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) equity index options,

equity return swaps, interest rate swaps and financial futures to mitigate the risks associated with liabilities that
have guaranteed minimum benefits, fixed index annuities and indexed universal life; (iii) foreign currency
forward contracts to mitigate currency risk associated with non-functional currency investments held by certain
foreign subsidiaries; and (iv) foreign currency options and forward contracts to mitigate currency risk associated
with future dividends, cash payments to AXA under a promissory note reported as discontinued operations and/
or other cash flows from certain foreign subsidiaries to our holding company. Additionally, we provide GMWBs
on certain variable annuities that are required to be bifurcated as embedded derivatives. We also offer fixed index
annuity and indexed universal life insurance products and have reinsurance agreements with certain features that
are required to be bifurcated as embedded derivatives.

The following table provides the pre-tax gain (loss) recognized in net income for the effects of derivatives

not designated as hedges for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Classification of gain (loss) recognized
in net income

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity return swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
38
Other foreign currency contracts . . . . . . . . . . . . . . . . . . . .
(28)
GMWB embedded derivatives . . . . . . . . . . . . . . . . . . . . . .
(51)
Fixed index annuity embedded derivatives . . . . . . . . . . . .
17
Indexed universal life embedded derivatives . . . . . . . . . . .

$(11)
4
2

$ (3)
43
(64)
—
(8)
38
(90)
4

$

3
(34)
26
(4)
4
(54)
15
13

Total derivatives not designated as hedges . . . . . . . .

$ (29) $ (80) $(31)

Net investment gains (losses)
Net investment gains (losses)
Net investment gains (losses)
Netinvestment gains (losses)
Netinvestment gains (losses)
Net investment gains (losses)
Net investment gains (losses)
Netinvestment gains (losses)

Derivative Counterparty Credit Risk

Most of our derivative arrangements with counterparties require the posting of collateral upon meeting
certain net exposure thresholds. The following table presents additional information about derivative assets and
liabilities subject to an enforceable master netting arrangement as of December 31:

(Amounts in millions)

Amounts presented in the balance sheet:

Gross amounts recognized . . . . . . . . . . . . .
Gross amounts offset in the balance

Derivative
assets (1)

2020
Derivative
liabilities (1)

Net
derivatives

Derivative
assets (1)

2019
Derivative
liabilities (1)

Net
derivatives

$ 587

$ 26

$ 561

$ 291

$ 11

$ 280

sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Net amounts presented in the balance

sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .

587

Gross amounts not offset in the balance sheet:

Financial instruments(2)
. . . . . . . . . . . . . . .
Collateral received . . . . . . . . . . . . . . . . . . .
Collateral pledged . . . . . . . . . . . . . . . . . . .
Over collateralization . . . . . . . . . . . . . . . . . . . . .

(20)
(408)
—

2

—

26

(20)
—
(505)
499

—

561

—
(408)
505
(497)

—

291

(7)
(179)
—

18

—

11

(7)

—
(405)
401

—

280

—
(179)
405
(383)

Net amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 161

$ —

$ 161

$ 123

$ —

$ 123

(1)

Included $1 million of accruals on derivatives classified as other assets as of December 31, 2019 and does not include
amounts related to embedded derivatives as of December 31, 2020 and 2019.

(2) Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with
the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset
and net liability position for each counterparty.

240

241

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(6) Deferred Acquisition Costs

(7) Intangible Assets

The following table presents the activity impacting DAC as of and for the years ended December 31:

The following table presents our intangible assets as of December 31:

(Amounts in millions)

Unamortized balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization, net of interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unamortized balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated effect of net unrealized investment (gains) losses . . . . . . . . . . .

2020

2019

2018

$ 3,280
4
15
(448)

2,851
(1,322)

$ 3,630
—
27
(377)

3,280
(1,444)

$3,868
(4)
42
(276)

3,630
(488)

Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,529

$ 1,836

$3,142

We regularly review DAC to determine if it is recoverable from future income. In 2020, we recorded a DAC
impairment of $63 million in our universal life insurance products due principally to lower future estimated gross
profits. As of December 31, 2020, all of our other businesses had sufficient future income and therefore the
related DAC was recoverable. In 2019 and 2018, we performed loss recognition testing and determined the
related DAC was recoverable. See note 9 for additional information related to loss recognition testing.

In the fourth quarter of 2020, as part of our annual review of assumptions, we increased DAC amortization

by $48 million in our universal and term universal life insurance products predominantly due to changes in
expected gross profits driven mostly by lower projected cost of insurance assessments on our universal life
insurance products and a model refinement in our term universal life insurance product related to persistency and
grace period timing.

In the fourth quarter of 2019, as part of our annual review of assumptions, we increased DAC amortization

by $58 million in our universal and term universal life insurance products reflecting updated assumptions
primarily related to the lower interest rate environment.

As of December 31, 2020, 2019 and 2018, shadow accounting adjustments reduced the DAC balance by

$1.3 billion, $1.4 billion and $0.5 billion, respectively, with an offsetting amount recorded in other
comprehensive income (loss). The higher amounts recorded for the years ended December 31, 2020 and 2019
were primarily due to the decline in interest rates increasing unrealized investment gains. The majority of the
shadow accounting adjustments as of December 31, 2020 and 2019 were recorded in our long-term care
insurance business, which reduced its DAC balance to zero in each year. As of December 31, 2020 and 2019, our
long-term care insurance business recorded shadow accounting adjustments of $1.0 billion and $1.1 billion,
respectively, out of the total shadow accounting adjustments recorded of $1.3 billion and $1.4 billion,
respectively. There was no impact to net income related to our shadow accounting adjustments. See note 2 for
further information related to shadow accounting adjustments.

2020

2019

Gross

carrying

amount

Accumulated

amortization

Gross

carrying

amount

Accumulated

amortization

(Amounts in millions)

PVFP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,065

$(1,992)

$2,066

$(1,992)

Capitalized software . . . . . . . . . . . . . . . . . . . . . . . .

Deferred sales inducements to contractholders . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

464

284

187

(387)

(274)

(147)

487

288

138

(403)

(258)

(130)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,000

$(2,800)

$2,979

$(2,783)

Amortization expense related to PVFP, capitalized software and other intangible assets for the years ended

December 31, 2020, 2019 and 2018 was $44 million, $64 million and $72 million, respectively. Amortization

expense related to deferred sales inducements of $16 million, $15 million and $22 million, respectively, for the

years ended December 31, 2020, 2019 and 2018 was included in benefits and other changes in policy reserves.

Present Value of Future Profits

(Amounts in millions)

The following table presents the activity in PVFP as of and for the years ended December 31:

Unamortized balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 154

$ 170

$ 187

Interest accreted at 5.19%, 5.56% and 5.60% . . . . . . . . . . . . . . . . . . . . .

Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unamortized balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated effect of net unrealized investment (gains) losses . . . . . .

2020

2019

2018

8

(8)

154

(81)

9

(25)

154

(80)

10

(27)

170

(31)

Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 73

$ 74

$ 139

We regularly review our assumptions and periodically test PVFP for recoverability in a manner similar to

our treatment of DAC. As of December 31, 2020, 2019 and 2018 we believe all of our businesses have sufficient

future income and therefore the related PVFP is recoverable.

The percentage of the December 31, 2020 PVFP balance net of interest accretion, before the effect of

unrealized investment gains or losses, estimated to be amortized over each of the next five years is as follows:

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.8%

4.3%

4.3%

4.2%

3.9%

Amortization expense for PVFP in future periods will be affected by acquisitions, dispositions, net

investment gains (losses) or other factors affecting the ultimate amount of gross profits realized from certain

lines of business. Similarly, future amortization expense for other intangibles will depend on future acquisitions,

dispositions and other business transactions.

242

243

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(6) Deferred Acquisition Costs

(7) Intangible Assets

The following table presents the activity impacting DAC as of and for the years ended December 31:

The following table presents our intangible assets as of December 31:

(Amounts in millions)

2020

2019

2018

Unamortized balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,280

$ 3,630

$3,868

Impact of foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Costs deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

15

Amortization, net of interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(448)

—

27

(377)

Unamortized balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated effect of net unrealized investment (gains) losses . . . . . . . . . . .

2,851

(1,322)

3,280

(1,444)

Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,529

$ 1,836

$3,142

(4)

42

(276)

3,630

(488)

We regularly review DAC to determine if it is recoverable from future income. In 2020, we recorded a DAC

impairment of $63 million in our universal life insurance products due principally to lower future estimated gross

profits. As of December 31, 2020, all of our other businesses had sufficient future income and therefore the

related DAC was recoverable. In 2019 and 2018, we performed loss recognition testing and determined the

related DAC was recoverable. See note 9 for additional information related to loss recognition testing.

In the fourth quarter of 2020, as part of our annual review of assumptions, we increased DAC amortization

by $48 million in our universal and term universal life insurance products predominantly due to changes in

expected gross profits driven mostly by lower projected cost of insurance assessments on our universal life

insurance products and a model refinement in our term universal life insurance product related to persistency and

grace period timing.

In the fourth quarter of 2019, as part of our annual review of assumptions, we increased DAC amortization

by $58 million in our universal and term universal life insurance products reflecting updated assumptions

primarily related to the lower interest rate environment.

As of December 31, 2020, 2019 and 2018, shadow accounting adjustments reduced the DAC balance by

$1.3 billion, $1.4 billion and $0.5 billion, respectively, with an offsetting amount recorded in other

comprehensive income (loss). The higher amounts recorded for the years ended December 31, 2020 and 2019

were primarily due to the decline in interest rates increasing unrealized investment gains. The majority of the

shadow accounting adjustments as of December 31, 2020 and 2019 were recorded in our long-term care

insurance business, which reduced its DAC balance to zero in each year. As of December 31, 2020 and 2019, our

long-term care insurance business recorded shadow accounting adjustments of $1.0 billion and $1.1 billion,

respectively, out of the total shadow accounting adjustments recorded of $1.3 billion and $1.4 billion,

respectively. There was no impact to net income related to our shadow accounting adjustments. See note 2 for

further information related to shadow accounting adjustments.

(Amounts in millions)

PVFP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software . . . . . . . . . . . . . . . . . . . . . . . .
Deferred sales inducements to contractholders . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross
carrying
amount

$2,065
464
284
187

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,000

2020

2019

Accumulated
amortization

$(1,992)
(387)
(274)
(147)

$(2,800)

Gross
carrying
amount

$2,066
487
288
138

$2,979

Accumulated
amortization

$(1,992)
(403)
(258)
(130)

$(2,783)

Amortization expense related to PVFP, capitalized software and other intangible assets for the years ended

December 31, 2020, 2019 and 2018 was $44 million, $64 million and $72 million, respectively. Amortization
expense related to deferred sales inducements of $16 million, $15 million and $22 million, respectively, for the
years ended December 31, 2020, 2019 and 2018 was included in benefits and other changes in policy reserves.

Present Value of Future Profits

The following table presents the activity in PVFP as of and for the years ended December 31:

(Amounts in millions)

Unamortized balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest accreted at 5.19%, 5.56% and 5.60% . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unamortized balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated effect of net unrealized investment (gains) losses . . . . . .

2020

2019

2018

$ 154
8
(8)

154
(81)

$ 170
9
(25)

154
(80)

$ 187
10
(27)

170
(31)

Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 73

$ 74

$ 139

We regularly review our assumptions and periodically test PVFP for recoverability in a manner similar to

our treatment of DAC. As of December 31, 2020, 2019 and 2018 we believe all of our businesses have sufficient
future income and therefore the related PVFP is recoverable.

The percentage of the December 31, 2020 PVFP balance net of interest accretion, before the effect of
unrealized investment gains or losses, estimated to be amortized over each of the next five years is as follows:

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.8%
4.3%
4.3%
4.2%
3.9%

Amortization expense for PVFP in future periods will be affected by acquisitions, dispositions, net
investment gains (losses) or other factors affecting the ultimate amount of gross profits realized from certain
lines of business. Similarly, future amortization expense for other intangibles will depend on future acquisitions,
dispositions and other business transactions.

242

243

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(8) Reinsurance

We reinsure a portion of our policy risks to other insurance companies in order to reduce our ultimate

losses, diversify our exposures and provide capital flexibility. We also assume certain policy risks written by
other insurance companies. Reinsurance accounting is followed for assumed and ceded transactions when there is
adequate insurance risk transfer. Otherwise, the deposit method of accounting is followed.

Reinsurance does not relieve us from our obligations to policyholders. In the event that the reinsurers are

unable to meet their obligations, we remain liable for the reinsured claims. We monitor both the financial
condition of individual reinsurers and risk concentrations arising from similar geographic regions, activities and
economic characteristics of reinsurers to lessen the risk of default by such reinsurers. Other than the relationship
discussed below with Union Fidelity Life Insurance Company (“UFLIC”), we do not have significant
concentrations of reinsurance with any one reinsurer that could have a material impact on our financial position.

U.S. Life Insurance Companies

As of December 31, 2020, the maximum amount of individual ordinary life insurance normally retained by

us on any one individual life policy was $5 million.

We have several significant reinsurance transactions (“Reinsurance Transactions”) with UFLIC, an affiliate

of our former parent, General Electric Company (“GE”). In the Reinsurance Transactions, we ceded to UFLIC
in-force blocks of structured settlements issued prior to 2004, substantially all of our in-force blocks of variable
annuities issued prior to 2004 and a block of long-term care insurance policies that we reinsured in 2000 from
legal entities now a part of Brighthouse Life Insurance Company. Although we remain directly liable under these
contracts and policies as the ceding insurer, the Reinsurance Transactions have the effect of transferring the
financial results of the reinsured blocks to UFLIC. To secure the payment of its obligations to us under the
reinsurance agreements governing the Reinsurance Transactions, UFLIC has established trust accounts to
maintain an aggregate amount of assets with a statutory book value at least equal to the statutory general account
reserves attributable to the reinsured business less an amount required to be held in certain claims-paying
accounts. A trustee administers the trust accounts and we are permitted to withdraw from the trust accounts
amounts due to us pursuant to the terms of the reinsurance agreements that are not otherwise paid by UFLIC. In
addition, pursuant to a Capital Maintenance Agreement, GE is obligated to maintain sufficient capital in UFLIC
to maintain UFLIC’s risk-based capital (“RBC”) at not less than 150% of its company action level, as defined by
the National Association of Insurance Commissioners (“NAIC”).

As of December 31, 2020 and 2019, we had a reinsurance recoverable of $13,415 million and

$13,752 million, respectively, with UFLIC.

Under the terms of certain reinsurance agreements that our life insurance subsidiaries have with external

parties, we pledged assets in either separate portfolios or in trust for the benefit of external reinsurers. These
assets support the reserves ceded to those external reinsurers. We have pledged fixed maturity securities and
commercial mortgage loans of $13,188 million and $873 million, respectively, as of December 31, 2020 and
$11,874 million and $938 million, respectively, as of December 31, 2019 in connection with these reinsurance
agreements. However, we maintain the ability to substitute these pledged assets for other qualified collateral, and
may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default
and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following table sets forth net domestic life insurance in-force as of December 31:

(Amounts in millions)

2020

2019

2018

Direct life insurance in-force . . . . . . . . . . . . . . . . . .

$ 509,670

$ 555,252

$ 594,472

Amounts assumed from other companies . . . . . . . .

624

673

729

Amounts ceded to other companies (1) . . . . . . . . . . .

(458,999)

(500,965)

(537,590)

Net life insurance in-force . . . . . . . . . . . . . . . . . . . .

$ 51,295

$ 54,960

$ 57,611

Percentage of amount assumed to net

. . . . . . . . . . .

1%

1%

1%

(1)

Includes amounts accounted for under the deposit method.

Mortgage Insurance

We reinsure a portion of our U.S. mortgage insurance risk in order to obtain credit towards the financial

requirements of the government-sponsored enterprise (“GSE”) private mortgage insurer eligibility requirements

(“PMIERs”). The transactions are structured as excess of loss coverage where both the attachment and

detachment points of the ceded risk tier are within the PMIERs capital requirements at inception. Each

reinsurance treaty has a term of 10 years and grants to Genworth a unilateral right to commute prior to the full

term, subject to certain performance triggers.

On October 22, 2020, our U.S. mortgage insurance business obtained $350 million of excess of loss

reinsurance coverage from Triangle Re 2020-1 Ltd. (“Triangle Re 2020”) on a portfolio of existing mortgage

insurance policies written from January 2020 through August 2020. In connection with entering into the

reinsurance agreement with Triangle Re 2020, we concluded that the risk transfer requirements for reinsurance

accounting were met as Triangle Re 2020 is assuming significant insurance risk and a reasonable possibility of

significant loss. Triangle Re 2020 is a VIE and special purpose insurer domiciled in Bermuda and financed the

reinsurance coverage by issuing mortgage insurance-linked notes to unaffiliated investors. The notes are

non-recourse to us and our affiliates. The excess of loss reinsurance coverage is fully collateralized by a

reinsurance trust account which requires funds received by the trust to be invested in eligible investments in

accordance with the reinsurance trust agreement. The collateralized trust serves to cover reinsurance obligations

if losses exceed our first loss tier. For the reinsurance coverage, we retain the first layer of aggregate losses up to

$522 million. Triangle Re 2020 provides 67% reinsurance coverage for losses above our retained first layer up to

$350 million.

On November 25, 2019, our U.S. mortgage insurance business obtained $303 million of excess of loss

reinsurance coverage with Triangle Re 2019-1 Ltd. (“Triangle Re 2019”), on a portfolio of existing mortgage

insurance policies written from January 2019 through September 2019. The excess of loss reinsurance coverage

is fully collateralized by a reinsurance trust agreement that provides that the trust assets may only be invested in

(i) money market funds; (ii) U.S. Treasury securities; and (iii) uninvested cash. In connection with entering into

the reinsurance agreement with Triangle Re 2019, we concluded that the risk transfer requirements for

reinsurance accounting were met as Triangle Re 2019 is assuming significant insurance risk and a reasonable

possibility of significant loss. Triangle Re 2019 is a VIE and special purpose insurer domiciled in Bermuda. For

the reinsurance coverage, we retain the first layer of aggregate losses up to $237 million. Triangle Re 2019 and

other reinsurers provide 95% reinsurance coverage for losses above our retained first layer up to $713 million of

total losses. We are responsible for losses on the portfolio above the reinsurance coverage amount of

$713 million.

In our mortgage insurance business in Australia, all of the reinsurance treaties are on an excess of loss basis

that are designed to attach under stress loss events. As of December 31, 2020, our Australian mortgage insurance

business had five excess of loss treaties, all with a one-year base term with options to extend for five to nine

244

245

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(8) Reinsurance

We reinsure a portion of our policy risks to other insurance companies in order to reduce our ultimate

losses, diversify our exposures and provide capital flexibility. We also assume certain policy risks written by

other insurance companies. Reinsurance accounting is followed for assumed and ceded transactions when there is

adequate insurance risk transfer. Otherwise, the deposit method of accounting is followed.

Reinsurance does not relieve us from our obligations to policyholders. In the event that the reinsurers are

unable to meet their obligations, we remain liable for the reinsured claims. We monitor both the financial

condition of individual reinsurers and risk concentrations arising from similar geographic regions, activities and

economic characteristics of reinsurers to lessen the risk of default by such reinsurers. Other than the relationship

discussed below with Union Fidelity Life Insurance Company (“UFLIC”), we do not have significant

concentrations of reinsurance with any one reinsurer that could have a material impact on our financial position.

U.S. Life Insurance Companies

As of December 31, 2020, the maximum amount of individual ordinary life insurance normally retained by

us on any one individual life policy was $5 million.

We have several significant reinsurance transactions (“Reinsurance Transactions”) with UFLIC, an affiliate

of our former parent, General Electric Company (“GE”). In the Reinsurance Transactions, we ceded to UFLIC

in-force blocks of structured settlements issued prior to 2004, substantially all of our in-force blocks of variable

annuities issued prior to 2004 and a block of long-term care insurance policies that we reinsured in 2000 from

legal entities now a part of Brighthouse Life Insurance Company. Although we remain directly liable under these

contracts and policies as the ceding insurer, the Reinsurance Transactions have the effect of transferring the

financial results of the reinsured blocks to UFLIC. To secure the payment of its obligations to us under the

reinsurance agreements governing the Reinsurance Transactions, UFLIC has established trust accounts to

maintain an aggregate amount of assets with a statutory book value at least equal to the statutory general account

reserves attributable to the reinsured business less an amount required to be held in certain claims-paying

accounts. A trustee administers the trust accounts and we are permitted to withdraw from the trust accounts

amounts due to us pursuant to the terms of the reinsurance agreements that are not otherwise paid by UFLIC. In

addition, pursuant to a Capital Maintenance Agreement, GE is obligated to maintain sufficient capital in UFLIC

to maintain UFLIC’s risk-based capital (“RBC”) at not less than 150% of its company action level, as defined by

the National Association of Insurance Commissioners (“NAIC”).

As of December 31, 2020 and 2019, we had a reinsurance recoverable of $13,415 million and

$13,752 million, respectively, with UFLIC.

Under the terms of certain reinsurance agreements that our life insurance subsidiaries have with external

parties, we pledged assets in either separate portfolios or in trust for the benefit of external reinsurers. These

assets support the reserves ceded to those external reinsurers. We have pledged fixed maturity securities and

commercial mortgage loans of $13,188 million and $873 million, respectively, as of December 31, 2020 and

$11,874 million and $938 million, respectively, as of December 31, 2019 in connection with these reinsurance

agreements. However, we maintain the ability to substitute these pledged assets for other qualified collateral, and

may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default

and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table sets forth net domestic life insurance in-force as of December 31:

(Amounts in millions)

2020

2019

2018

Direct life insurance in-force . . . . . . . . . . . . . . . . . .
Amounts assumed from other companies . . . . . . . .
Amounts ceded to other companies (1) . . . . . . . . . . .

$ 509,670
624
(458,999)

$ 555,252
673
(500,965)

$ 594,472
729
(537,590)

Net life insurance in-force . . . . . . . . . . . . . . . . . . . .

$ 51,295

$ 54,960

$ 57,611

Percentage of amount assumed to net

. . . . . . . . . . .

1%

1%

1%

(1)

Includes amounts accounted for under the deposit method.

Mortgage Insurance

We reinsure a portion of our U.S. mortgage insurance risk in order to obtain credit towards the financial
requirements of the government-sponsored enterprise (“GSE”) private mortgage insurer eligibility requirements
(“PMIERs”). The transactions are structured as excess of loss coverage where both the attachment and
detachment points of the ceded risk tier are within the PMIERs capital requirements at inception. Each
reinsurance treaty has a term of 10 years and grants to Genworth a unilateral right to commute prior to the full
term, subject to certain performance triggers.

On October 22, 2020, our U.S. mortgage insurance business obtained $350 million of excess of loss
reinsurance coverage from Triangle Re 2020-1 Ltd. (“Triangle Re 2020”) on a portfolio of existing mortgage
insurance policies written from January 2020 through August 2020. In connection with entering into the
reinsurance agreement with Triangle Re 2020, we concluded that the risk transfer requirements for reinsurance
accounting were met as Triangle Re 2020 is assuming significant insurance risk and a reasonable possibility of
significant loss. Triangle Re 2020 is a VIE and special purpose insurer domiciled in Bermuda and financed the
reinsurance coverage by issuing mortgage insurance-linked notes to unaffiliated investors. The notes are
non-recourse to us and our affiliates. The excess of loss reinsurance coverage is fully collateralized by a
reinsurance trust account which requires funds received by the trust to be invested in eligible investments in
accordance with the reinsurance trust agreement. The collateralized trust serves to cover reinsurance obligations
if losses exceed our first loss tier. For the reinsurance coverage, we retain the first layer of aggregate losses up to
$522 million. Triangle Re 2020 provides 67% reinsurance coverage for losses above our retained first layer up to
$350 million.

On November 25, 2019, our U.S. mortgage insurance business obtained $303 million of excess of loss

reinsurance coverage with Triangle Re 2019-1 Ltd. (“Triangle Re 2019”), on a portfolio of existing mortgage
insurance policies written from January 2019 through September 2019. The excess of loss reinsurance coverage
is fully collateralized by a reinsurance trust agreement that provides that the trust assets may only be invested in
(i) money market funds; (ii) U.S. Treasury securities; and (iii) uninvested cash. In connection with entering into
the reinsurance agreement with Triangle Re 2019, we concluded that the risk transfer requirements for
reinsurance accounting were met as Triangle Re 2019 is assuming significant insurance risk and a reasonable
possibility of significant loss. Triangle Re 2019 is a VIE and special purpose insurer domiciled in Bermuda. For
the reinsurance coverage, we retain the first layer of aggregate losses up to $237 million. Triangle Re 2019 and
other reinsurers provide 95% reinsurance coverage for losses above our retained first layer up to $713 million of
total losses. We are responsible for losses on the portfolio above the reinsurance coverage amount of
$713 million.

In our mortgage insurance business in Australia, all of the reinsurance treaties are on an excess of loss basis
that are designed to attach under stress loss events. As of December 31, 2020, our Australian mortgage insurance
business had five excess of loss treaties, all with a one-year base term with options to extend for five to nine

244

245

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

reinsurance recoverables. The following table sets forth A.M. Best Company, Inc.’s (“A.M. Best”) credit ratings

related to our reinsurance recoverables, gross of the allowance for credit losses, as of December 31, 2020:

(Amounts in millions)

Credit rating:

Collateralized

Non-collateralized

Total

A++ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

A+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not rated . . . . . . . . . . . . . . . . . . . . . . . . . .

1,437

19

—

13,419

$ 519

1,343

45

1

81

Total reinsurance recoverable . . . . .

$14,875

$1,989

$

519

2,780

64

1

13,500

$16,864

In March 2019, upon UFLIC’s request, A.M. Best withdrew UFLIC’s credit rating. There was no impact to

us from this action as UFLIC has trust accounts and a guarantee from its parent, as discussed above, and is

sufficiently collateralized. Accordingly, the reinsurance recoverable with UFLIC is fully collectible and no

allowance for credit losses was recorded as of December 31, 2020.

Reinsurance recoverables are considered past due when contractual payments have not been received from

the reinsurer by the required payment date. Claims submitted for payment are generally due in less than one year.

As of December 31, 2020, we did not have any reinsurance recoverables past due, except for Scottish Re US Inc.

(“Scottish Re”), a reinsurance company domiciled in Delaware. On March 6, 2019, Scottish Re was ordered into

receivership for the purposes of rehabilitation by the Court of Chancery of the State of Delaware. The proposed

Plan of Rehabilitation of Scottish Re was filed on June 30, 2020; however, we expect a revised Plan of

Rehabilitation to be filed by March 16, 2021 with any objections required to be submitted by April 15, 2021. We

do not know what deadlines will be imposed related to the Court of Chancery’s consideration of the proposed

plan and no hearing date has been scheduled. As of December 31, 2020, amounts past due related to Scottish Re

were $19 million, all of which was included in the allowance for credit losses. We will continue to monitor the

plan of rehabilitation and expected recovery of the claims balance.

years, with an aggregate coverage limit of AUD$800 million. On January 1, 2021, our mortgage insurance
business in Australia renewed its five excess of loss reinsurance treaties with the same base term, extension
options and aggregate coverage limit.

Premiums Written and Earned

The following table sets forth the effects of reinsurance on premiums written and earned for the years ended

December 31:

(Amounts in millions)

Direct:

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
Accident and health insurance (1)
. . . . . . . . . . .
Mortgage insurance . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total direct
Assumed:

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . ..
Accident and health insurance (1)
. . . . . . . . . . .
Mortgage insurance . . . . . . . . . . . . . . . . . . . . ..
Total assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ceded:

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
Accident and health insurance (1)
. . . . . . . . . . .
Mortgage insurance . . . . . . . . . . . . . . . . . . . . . .
Total ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percentage of amount assumed to net . . . . . . . . . . . .

Written

2019

2020

2018

2020

Earned

2019

2018

$

795
2,836
1,346
4,977

$

846
2,792
1,157
4,795

$

881
2,775
1,092
4,748

$

795
2,860
1,342
4,997

$

846
2,821
1,239
4,906

$

881
2,800
1,194
4,875

1
313
5
319

1
321
5
327

1
328
7
336

2
322
6
330

1
326
8
335

1
332
11
344

(558)
(550)
(97)
(1,205)
$ 4,091

(569)
(557)
(64)
(1,190)
$ 3,932

(576)
(566)
(85)
(1,227)
$ 3,857

(559)
(562)
(96)
(1,217)
$ 4,110

(569)
(564)
(71)
(1,204)
$ 4,037

(576)
(571)
(78)
(1,225)
$ 3,994

8%

8%

9%

(1) Accident and health insurance is comprised almost entirely of our long-term care insurance products.

Reinsurance recoveries recognized as a reduction of benefits and other changes in policy reserves amounted

to $2,649 million, $2,751 million and $2,696 million during 2020, 2019 and 2018, respectively.

Allowance for Credit Losses on Reinsurance Recoverables

The following table sets forth the changes in the allowance for credit losses related to reinsurance

recoverables as of or for the year ended December 31, 2020:

(Amounts in millions)

Allowance for credit losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting . . . . . . . . . . . . . .
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

$—
40
5

—
—

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 45

As discussed in note 2, our policy for evaluating and measuring the allowance for credit losses related to
reinsurance recoverables utilizes the reinsurer’s credit rating, updated quarterly, to assess the credit quality of

246

247

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

years, with an aggregate coverage limit of AUD$800 million. On January 1, 2021, our mortgage insurance

business in Australia renewed its five excess of loss reinsurance treaties with the same base term, extension

reinsurance recoverables. The following table sets forth A.M. Best Company, Inc.’s (“A.M. Best”) credit ratings
related to our reinsurance recoverables, gross of the allowance for credit losses, as of December 31, 2020:

(Amounts in millions)

Credit rating:

Collateralized

Non-collateralized

Total

A++ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Not rated . . . . . . . . . . . . . . . . . . . . . . . . . .

Total reinsurance recoverable . . . . .

$ —
1,437
19
—
13,419

$14,875

$ 519
1,343
45
1
81

$1,989

$

519
2,780
64
1
13,500

$16,864

In March 2019, upon UFLIC’s request, A.M. Best withdrew UFLIC’s credit rating. There was no impact to

us from this action as UFLIC has trust accounts and a guarantee from its parent, as discussed above, and is
sufficiently collateralized. Accordingly, the reinsurance recoverable with UFLIC is fully collectible and no
allowance for credit losses was recorded as of December 31, 2020.

Reinsurance recoverables are considered past due when contractual payments have not been received from

the reinsurer by the required payment date. Claims submitted for payment are generally due in less than one year.
As of December 31, 2020, we did not have any reinsurance recoverables past due, except for Scottish Re US Inc.
(“Scottish Re”), a reinsurance company domiciled in Delaware. On March 6, 2019, Scottish Re was ordered into
receivership for the purposes of rehabilitation by the Court of Chancery of the State of Delaware. The proposed
Plan of Rehabilitation of Scottish Re was filed on June 30, 2020; however, we expect a revised Plan of
Rehabilitation to be filed by March 16, 2021 with any objections required to be submitted by April 15, 2021. We
do not know what deadlines will be imposed related to the Court of Chancery’s consideration of the proposed
plan and no hearing date has been scheduled. As of December 31, 2020, amounts past due related to Scottish Re
were $19 million, all of which was included in the allowance for credit losses. We will continue to monitor the
plan of rehabilitation and expected recovery of the claims balance.

options and aggregate coverage limit.

Premiums Written and Earned

The following table sets forth the effects of reinsurance on premiums written and earned for the years ended

Written

2019

Earned

2019

2020

2018

2020

2018

December 31:

(Amounts in millions)

Direct:

Assumed:

Ceded:

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Accident and health insurance (1)

. . . . . . . . . . .

Mortgage insurance . . . . . . . . . . . . . . . . . . . . . .

Total direct

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

795

2,836

1,346

4,977

$

846

2,792

1,157

4,795

$

881

2,775

1,092

4,748

$

795

2,860

1,342

4,997

$

846

2,821

1,239

4,906

$

881

2,800

1,194

4,875

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . ..

Accident and health insurance (1)

. . . . . . . . . . .

Mortgage insurance . . . . . . . . . . . . . . . . . . . . ..

Total assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

313

1

5

319

321

1

5

327

328

1

7

336

322

2

6

330

326

1

8

335

1

332

11

344

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . .

Accident and health insurance (1)

. . . . . . . . . . .

Mortgage insurance . . . . . . . . . . . . . . . . . . . . . .

(558)

(550)

(97)

(569)

(557)

(64)

(576)

(566)

(85)

(559)

(562)

(96)

(569)

(564)

(71)

(576)

(571)

(78)

Total ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,205)

(1,190)

(1,227)

(1,217)

(1,204)

(1,225)

Net premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,091

$ 3,932

$ 3,857

$ 4,110

$ 4,037

$ 3,994

Percentage of amount assumed to net . . . . . . . . . . . .

8%

8%

9%

(1) Accident and health insurance is comprised almost entirely of our long-term care insurance products.

Reinsurance recoveries recognized as a reduction of benefits and other changes in policy reserves amounted

to $2,649 million, $2,751 million and $2,696 million during 2020, 2019 and 2018, respectively.

Allowance for Credit Losses on Reinsurance Recoverables

The following table sets forth the changes in the allowance for credit losses related to reinsurance

recoverables as of or for the year ended December 31, 2020:

(Amounts in millions)

Allowance for credit losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—

Cumulative effect of change in accounting . . . . . . . . . . . . . .

Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 45

2020

40

5

—

—

As discussed in note 2, our policy for evaluating and measuring the allowance for credit losses related to

reinsurance recoverables utilizes the reinsurer’s credit rating, updated quarterly, to assess the credit quality of

246

247

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(9) Insurance Reserves

Future Policy Benefits

The following table sets forth our recorded liabilities and the major assumptions underlying our future

policy benefits as of December 31:

(Amounts in millions)

Mortality/
morbidity
assumption

Interest rate
assumption

2020

2019

Long-term care insurance contracts . . . . . . . . . . . . . . . . . . . . . .
Structured settlements with life contingencies . . . . . . . . . . . . .
Annuity contracts with life contingencies . . . . . . . . . . . . . . . . .
Traditional life insurance contracts . . . . . . . . . . . . . . . . . . . . . .
Supplementary contracts with life contingencies . . . . . . . . . . .

(a)

(b)

(b)

(c)

(b)

3.75% - 7.50% $28,770
8,240
1.00% - 8.00%
3,252
1.00% - 8.00%
2,101
3.00% - 7.50%
332
1.00% - 8.00%

$26,170
8,398
3,281
2,205
330

Total future policy benefits . . . . . . . . . . . . . . . . . . . . . . . .

$42,695

$40,384

(a)

The 1983 Individual Annuitant Mortality Table or the 2000 U.S. Annuity Table, or the 1983 Group
Annuitant Mortality Table or the 1994 Group Annuitant Mortality Table and company experience.
(b) Assumptions for limited-payment contracts come from either the U.S. Population Table, the 1983 Group

(c)

Annuitant Mortality Table, the 1983 Individual Annuitant Mortality Table, the Annuity 2000 Mortality
Table or the 2012 Individual Annuity Reserving Table.
Principally modifications based on company experience of the Society of Actuaries 1965-70 or 1975-80
Select and the Ultimate Tables, the 1941, 1958, 1980 and 2001 Commissioner’s Standard Ordinary Tables,
the 1980 Commissioner’s Extended Term table and (IA) Standard Table 1996 (modified).

We regularly review our assumptions and perform loss recognition testing at least annually. Due to the
premium deficiencies that existed in previous years, we perform loss recognition testing on our fixed immediate
annuity products more frequently than annually. The 2020 test did not result in a premium deficiency and
therefore our liability for future policy benefits was sufficient. However, our 2019 and 2018 loss recognition
testing resulted in premium deficiencies of $39 million and $22 million, respectively, in our fixed immediate
annuity products. The premium deficiencies were primarily driven by the low interest rate environment. The
liability for future policy benefits for our fixed immediate annuity products represents our current best estimate;
however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting
any variety of new and adverse trends, could result in further increases in the related future policy benefit
reserves for these products.

Our long-term care insurance products are among the products tested in connection with our annual loss
recognition testing. The 2020 and 2019 tests did not result in a premium deficiency and therefore our liability for
future policy benefits was sufficient. The liability for future policy benefits for our long-term care insurance
business represents our current best estimate; however, there may be future adjustments to this estimate and
related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could possibly be
significant and result in further increases in the related future policy benefit reserves for this business by an
amount that could be material to our results of operations and financial condition and liquidity.

As of December 31, 2020 and 2019, we accrued future policy benefit reserves of $625 million and

$323 million, respectively, in our consolidated balance sheets for profits followed by losses in our long-term care
insurance business. The present value of expected future losses was approximately $2.1 billion and $2.0 billion
as of December 31, 2020 and 2019, respectively. As of December 31, 2020, we estimate a factor of
approximately 76% of those profits on our long-term care insurance block, excluding the acquired block, will be

accrued in the future to offset estimated future losses during later periods. In 2019, we estimated a factor of

approximately 80% to ratably accrue additional future policy benefits. The decrease in the factor was mostly

driven by higher actual profits in 2020 resulting in a larger increase in accrued future policy benefits for profits

followed by losses. This decrease was partially offset by the updated profit pattern from our annual review of

assumptions completed in the fourth quarter of 2020, as well as updates to our future in-force rate actions. There

may be future adjustments to this estimate reflecting any variety of new and adverse trends that could result in

increases to future policy benefit reserves for our profits followed by losses accrual, and such future increases

could possibly be material to our results of operations and financial condition and liquidity.

Policyholder Account Balances

(Amounts in millions)

The following table sets forth our recorded liabilities for policyholder account balances as of December 31:

Annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,273

$ 9,375

Funding agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Structured settlements without life contingencies . . . . . . . . .

Supplementary contracts without life contingencies . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total investment contracts . . . . . . . . . . . . . . . . . . . . . .

Universal and term universal life insurance contracts . . . . .

2020

2019

300

1,114

576

13

10,276

11,227

253

1,219

606

13

11,466

10,751

Total policyholder account balances . . . . . . . . . . . . . . .

$21,503

$22,217

In the fourth quarter of 2020, as part of our annual review of assumptions, we decreased our liability for

policyholder account balances by $118 million in our term universal and universal life insurance products

primarily due to a model refinement in our term universal life insurance product related to persistency and grace

period timing and from lower projected cost of insurance assessments on our universal life insurance products.

Other assumption updates mostly focused on long-term trends in mortality, persistency and interest rates. In the

fourth quarter of 2019, as part of our annual review of assumptions, we increased our liability for policyholder

account balances by $72 million in our universal and term universal life insurance products due principally to the

lower interest rate environment.

Certain of our U.S. life insurance companies are members of the Federal Home Loan Bank (the “FHLB”)

system in their respective regions. As of December 31, 2020 and 2019, we held $42 million and $43 million,

respectively, of FHLB common stock related to those memberships which was included in equity securities. We

have outstanding funding agreements with the FHLBs and had a letter of credit related to one FHLB which was

terminated in 2019. The FHLBs have been granted a lien on certain of our invested assets to collateralize our

obligations; however, we maintain the ability to substitute these pledged assets for other qualified collateral, and

may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default

and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of

default by us, the FHLB’s recovery on the collateral is limited to the amount of our funding agreement liabilities

to the FHLB. These funding agreements as of December 31, 2020 and 2019 were collateralized by fixed maturity

securities with a fair value of $1,309 million and $608 million, respectively. The amount of funding agreements

outstanding with the FHLBs was $421 million and $441 million, respectively, as of December 31, 2020 and 2019

which was included in policyholder account balances. Included in the amount of funding agreements outstanding

with the FHLBs as of December 31, 2020 and 2019 are FHLB agreements entered into by our universal life

insurance business of $121 million and $188 million, respectively, which were included in universal and term

universal life insurance contracts in the table above.

248

249

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(9) Insurance Reserves

Future Policy Benefits

policy benefits as of December 31:

(Amounts in millions)

The following table sets forth our recorded liabilities and the major assumptions underlying our future

Mortality/

morbidity

assumption

Interest rate

assumption

Long-term care insurance contracts . . . . . . . . . . . . . . . . . . . . . .

Structured settlements with life contingencies . . . . . . . . . . . . .

Annuity contracts with life contingencies . . . . . . . . . . . . . . . . .

Traditional life insurance contracts . . . . . . . . . . . . . . . . . . . . . .

Supplementary contracts with life contingencies . . . . . . . . . . .

(a)

(b)

(b)

(c)

(b)

1.00% - 8.00%

1.00% - 8.00%

3.00% - 7.50%

1.00% - 8.00%

3.75% - 7.50% $28,770

$26,170

Total future policy benefits . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

8,240

3,252

2,101

332

8,398

3,281

2,205

330

$42,695

$40,384

(a)

The 1983 Individual Annuitant Mortality Table or the 2000 U.S. Annuity Table, or the 1983 Group

Annuitant Mortality Table or the 1994 Group Annuitant Mortality Table and company experience.

(b) Assumptions for limited-payment contracts come from either the U.S. Population Table, the 1983 Group

Annuitant Mortality Table, the 1983 Individual Annuitant Mortality Table, the Annuity 2000 Mortality

Table or the 2012 Individual Annuity Reserving Table.

(c)

Principally modifications based on company experience of the Society of Actuaries 1965-70 or 1975-80

Select and the Ultimate Tables, the 1941, 1958, 1980 and 2001 Commissioner’s Standard Ordinary Tables,

the 1980 Commissioner’s Extended Term table and (IA) Standard Table 1996 (modified).

We regularly review our assumptions and perform loss recognition testing at least annually. Due to the

premium deficiencies that existed in previous years, we perform loss recognition testing on our fixed immediate

annuity products more frequently than annually. The 2020 test did not result in a premium deficiency and

therefore our liability for future policy benefits was sufficient. However, our 2019 and 2018 loss recognition

testing resulted in premium deficiencies of $39 million and $22 million, respectively, in our fixed immediate

annuity products. The premium deficiencies were primarily driven by the low interest rate environment. The

liability for future policy benefits for our fixed immediate annuity products represents our current best estimate;

however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting

any variety of new and adverse trends, could result in further increases in the related future policy benefit

reserves for these products.

Our long-term care insurance products are among the products tested in connection with our annual loss

recognition testing. The 2020 and 2019 tests did not result in a premium deficiency and therefore our liability for

future policy benefits was sufficient. The liability for future policy benefits for our long-term care insurance

business represents our current best estimate; however, there may be future adjustments to this estimate and

related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could possibly be

significant and result in further increases in the related future policy benefit reserves for this business by an

amount that could be material to our results of operations and financial condition and liquidity.

As of December 31, 2020 and 2019, we accrued future policy benefit reserves of $625 million and

$323 million, respectively, in our consolidated balance sheets for profits followed by losses in our long-term care

insurance business. The present value of expected future losses was approximately $2.1 billion and $2.0 billion

as of December 31, 2020 and 2019, respectively. As of December 31, 2020, we estimate a factor of

approximately 76% of those profits on our long-term care insurance block, excluding the acquired block, will be

accrued in the future to offset estimated future losses during later periods. In 2019, we estimated a factor of
approximately 80% to ratably accrue additional future policy benefits. The decrease in the factor was mostly
driven by higher actual profits in 2020 resulting in a larger increase in accrued future policy benefits for profits
followed by losses. This decrease was partially offset by the updated profit pattern from our annual review of
assumptions completed in the fourth quarter of 2020, as well as updates to our future in-force rate actions. There
may be future adjustments to this estimate reflecting any variety of new and adverse trends that could result in
increases to future policy benefit reserves for our profits followed by losses accrual, and such future increases
could possibly be material to our results of operations and financial condition and liquidity.

Policyholder Account Balances

The following table sets forth our recorded liabilities for policyholder account balances as of December 31:

(Amounts in millions)

Annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funding agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Structured settlements without life contingencies . . . . . . . . .
Supplementary contracts without life contingencies . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total investment contracts . . . . . . . . . . . . . . . . . . . . . .
Universal and term universal life insurance contracts . . . . .

2020

2019

$ 8,273
300
1,114
576
13

10,276
11,227

$ 9,375
253
1,219
606
13

11,466
10,751

Total policyholder account balances . . . . . . . . . . . . . . .

$21,503

$22,217

In the fourth quarter of 2020, as part of our annual review of assumptions, we decreased our liability for

policyholder account balances by $118 million in our term universal and universal life insurance products
primarily due to a model refinement in our term universal life insurance product related to persistency and grace
period timing and from lower projected cost of insurance assessments on our universal life insurance products.
Other assumption updates mostly focused on long-term trends in mortality, persistency and interest rates. In the
fourth quarter of 2019, as part of our annual review of assumptions, we increased our liability for policyholder
account balances by $72 million in our universal and term universal life insurance products due principally to the
lower interest rate environment.

Certain of our U.S. life insurance companies are members of the Federal Home Loan Bank (the “FHLB”)

system in their respective regions. As of December 31, 2020 and 2019, we held $42 million and $43 million,
respectively, of FHLB common stock related to those memberships which was included in equity securities. We
have outstanding funding agreements with the FHLBs and had a letter of credit related to one FHLB which was
terminated in 2019. The FHLBs have been granted a lien on certain of our invested assets to collateralize our
obligations; however, we maintain the ability to substitute these pledged assets for other qualified collateral, and
may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default
and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of
default by us, the FHLB’s recovery on the collateral is limited to the amount of our funding agreement liabilities
to the FHLB. These funding agreements as of December 31, 2020 and 2019 were collateralized by fixed maturity
securities with a fair value of $1,309 million and $608 million, respectively. The amount of funding agreements
outstanding with the FHLBs was $421 million and $441 million, respectively, as of December 31, 2020 and 2019
which was included in policyholder account balances. Included in the amount of funding agreements outstanding
with the FHLBs as of December 31, 2020 and 2019 are FHLB agreements entered into by our universal life
insurance business of $121 million and $188 million, respectively, which were included in universal and term
universal life insurance contracts in the table above.

248

249

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Shadow Accounting Adjustments

As of December 31, 2020 and 2019, we accrued future policy benefit reserves of $4.5 billion and
$2.6 billion, respectively, with an offsetting amount recorded in other comprehensive income (loss) related to
shadow accounting adjustments. The higher amounts accrued for the year ended December 31, 2020 were
primarily due to the decline in interest rates increasing unrealized investment gains. The majority of the shadow
accounting adjustments as of December 31, 2020 were recorded in our long-term care insurance business, which
comprised $3.7 billion out of the total $4.5 billion accrued. In addition, as of December 31, 2020 and 2019, we
accrued policyholder account balances of $1.4 billion and $0.7 billion, respectively, in our universal and term
universal life insurance products with an offsetting amount recorded in other comprehensive income (loss)
related to shadow accounting adjustments. There was no impact to net income (loss) related to our shadow
accounting adjustments. See note 2 for further information related to shadow accounting adjustments.

Certain Non-Traditional Long-Duration Contracts

The following table sets forth information about our variable annuity products with death and living benefit

(Amounts in millions)

2020

2019

guarantees as of December 31:

(Dollar amounts in millions)

2020

2019

Account values with death benefit guarantees (net of reinsurance):

Standard death benefits (return of net deposits) account value . . . . . . . . . . . . .
Net amount at risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average attained age of contractholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enhanced death benefits (ratchet, rollup) account value . . . . . . . . . . . . . . . . .
Net amount at risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average attained age of contractholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,611
2
$
76
$1,350
$ 105
76

$2,008
2
$
76
$1,986
$ 115
75

Account values with living benefit guarantees:

GMWBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed annuitization benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,999
$ 998

$2,106
$1,030

Variable annuity contracts may contain more than one death or living benefit; therefore, the amounts listed
above are not mutually exclusive. Substantially all of our variable annuity contracts have some form of GMDB.

As of December 31, 2020 and 2019, our total liability associated with variable annuity contracts with

minimum guarantees was approximately $4,668 million and $4,738 million, respectively. Account value
decreased from 2019 principally driven by the continued runoff of these products. The liability, net of
reinsurance, for our variable annuity contracts with GMDB and guaranteed annuitization benefits was
$128 million and $114 million as of December 31, 2020 and 2019, respectively.

The contracts underlying the lifetime benefits such as GMWB and guaranteed annuitization benefits are
considered “in the money” if the contractholder’s benefit base, or the protected value, is greater than the account
value. As of December 31, 2020 and 2019, our exposure related to GMWB and guaranteed annuitization benefit
contracts that were considered “in the money” was $669 million and $715 million, respectively. For GMWBs
and guaranteed annuitization benefits, the only way the contractholder can monetize the excess of the benefit
base over the account value of the contract is through lifetime withdrawals or lifetime income payments after
annuitization.

250

251

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Account balances of variable annuity contracts with death or living benefit guarantees were invested in

separate account investment options as follows as of December 31:

(Amounts in millions)

2020

2019

Balanced funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,343

1,016

304

216

$2,446

1,079

385

84

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,879

$3,994

(10) Liability for Policy and Contract Claims

The following table sets forth our liability for policy and contract claims as of December 31:

Liability for policy and contract claims for insurance lines

other than short-duration contracts:

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . .

$10,518

$10,239

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Runoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,920

10,509

Liability for policy and contract claims related to short-

duration contracts:

U.S. Mortgage Insurance segment

. . . . . . . . . . . . . . . .

Australia Mortgage Insurance segment . . . . . . . . . . . . .

Other mortgage insurance businesses . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liability for policy and contract claims . . . . . . . . . . . .

$11,817

$10,958

378

12

12

555

331

11

897

248

13

9

233

208

8

449

The liability for policy and contract claims represents our current best estimate; however, there may be

future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and

adverse trends, could be significant, and result in increases in reserves by an amount that could be material to our

results of operations and financial condition and liquidity. In addition, loss reserves recorded on new

delinquencies in our U.S. mortgage insurance business have a high degree of estimation, particularly due to the

level of uncertainty regarding whether borrowers in forbearance will ultimately cure or result in a claim payment.

The increase in the liability for policy and contract claims in 2020 of $322 million in our U.S. mortgage

insurance business was principally attributable to a significant increase in the number of new delinquencies

driven largely by borrower forbearance resulting from COVID-19. In addition, existing reserves were

strengthened by $65 million in 2020 primarily driven by deterioration of early cure emergence patterns impacting

claim frequency and severity. The liability for policy and contract claims also increased $279 million in our long-

term care insurance business in 2020 as discussed further below.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Shadow Accounting Adjustments

As of December 31, 2020 and 2019, we accrued future policy benefit reserves of $4.5 billion and

$2.6 billion, respectively, with an offsetting amount recorded in other comprehensive income (loss) related to

shadow accounting adjustments. The higher amounts accrued for the year ended December 31, 2020 were

primarily due to the decline in interest rates increasing unrealized investment gains. The majority of the shadow

accounting adjustments as of December 31, 2020 were recorded in our long-term care insurance business, which

comprised $3.7 billion out of the total $4.5 billion accrued. In addition, as of December 31, 2020 and 2019, we

accrued policyholder account balances of $1.4 billion and $0.7 billion, respectively, in our universal and term

universal life insurance products with an offsetting amount recorded in other comprehensive income (loss)

related to shadow accounting adjustments. There was no impact to net income (loss) related to our shadow

accounting adjustments. See note 2 for further information related to shadow accounting adjustments.

Certain Non-Traditional Long-Duration Contracts

guarantees as of December 31:

(Dollar amounts in millions)

Account values with death benefit guarantees (net of reinsurance):

Standard death benefits (return of net deposits) account value . . . . . . . . . . . . .

$2,611

$2,008

Net amount at risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Average attained age of contractholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Enhanced death benefits (ratchet, rollup) account value . . . . . . . . . . . . . . . . .

Net amount at risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Average attained age of contractholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Account values with living benefit guarantees:

2020

2019

2

76

$1,350

$ 105

76

$

2

76

$1,986

$ 115

75

GMWBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Guaranteed annuitization benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,999

$ 998

$2,106

$1,030

Variable annuity contracts may contain more than one death or living benefit; therefore, the amounts listed

above are not mutually exclusive. Substantially all of our variable annuity contracts have some form of GMDB.

As of December 31, 2020 and 2019, our total liability associated with variable annuity contracts with

minimum guarantees was approximately $4,668 million and $4,738 million, respectively. Account value

decreased from 2019 principally driven by the continued runoff of these products. The liability, net of

reinsurance, for our variable annuity contracts with GMDB and guaranteed annuitization benefits was

$128 million and $114 million as of December 31, 2020 and 2019, respectively.

The contracts underlying the lifetime benefits such as GMWB and guaranteed annuitization benefits are

considered “in the money” if the contractholder’s benefit base, or the protected value, is greater than the account

value. As of December 31, 2020 and 2019, our exposure related to GMWB and guaranteed annuitization benefit

contracts that were considered “in the money” was $669 million and $715 million, respectively. For GMWBs

and guaranteed annuitization benefits, the only way the contractholder can monetize the excess of the benefit

base over the account value of the contract is through lifetime withdrawals or lifetime income payments after

annuitization.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Account balances of variable annuity contracts with death or living benefit guarantees were invested in

separate account investment options as follows as of December 31:

(Amounts in millions)

Balanced funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

$2,343
1,016
304
216

$2,446
1,079
385
84

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,879

$3,994

(10) Liability for Policy and Contract Claims

The following table sets forth our liability for policy and contract claims as of December 31:

The following table sets forth information about our variable annuity products with death and living benefit

(Amounts in millions)

2020

2019

Liability for policy and contract claims for insurance lines

other than short-duration contracts:

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . .
Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Runoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,518
378
12
12

$10,239
248
13
9

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,920

10,509

Liability for policy and contract claims related to short-

duration contracts:

U.S. Mortgage Insurance segment
. . . . . . . . . . . . . . . .
Australia Mortgage Insurance segment . . . . . . . . . . . . .
Other mortgage insurance businesses . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

555
331
11

897

233
208
8

449

Total liability for policy and contract claims . . . . . . . . . . . .

$11,817

$10,958

The liability for policy and contract claims represents our current best estimate; however, there may be
future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and
adverse trends, could be significant, and result in increases in reserves by an amount that could be material to our
results of operations and financial condition and liquidity. In addition, loss reserves recorded on new
delinquencies in our U.S. mortgage insurance business have a high degree of estimation, particularly due to the
level of uncertainty regarding whether borrowers in forbearance will ultimately cure or result in a claim payment.

The increase in the liability for policy and contract claims in 2020 of $322 million in our U.S. mortgage

insurance business was principally attributable to a significant increase in the number of new delinquencies
driven largely by borrower forbearance resulting from COVID-19. In addition, existing reserves were
strengthened by $65 million in 2020 primarily driven by deterioration of early cure emergence patterns impacting
claim frequency and severity. The liability for policy and contract claims also increased $279 million in our long-
term care insurance business in 2020 as discussed further below.

250

251

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

In 2019, the liability for policy and contract claims increased $723 million in our long-term care insurance

business. The increase was primarily attributable to new claims as a result of the aging of the in-force block,

including higher frequency and severity of new claims, partially offset by favorable development on prior year

IBNR claims in 2019. We completed our annual review of assumptions and methodologies in the third quarter of

2019 and did not make any significant changes, other than routine updates.

In 2019, the favorable development of $219 million related to insured events of prior years was primarily

attributable to favorable development on prior year IBNR claims and favorable experience on pending claims

that did not become an active claim.

In 2018, the liability for policy and contract claims increased $968 million in our long-term care insurance

business largely from new claims as a result of the aging of the in-force block, as well as the completion of our

annual review of assumptions and methodologies in the fourth quarter of 2018 which increased reserves by

$308 million and increased reinsurance recoverables by $17 million. Based on this review, we updated several

assumptions and methodologies, including benefit utilization rates, claim termination rates and other

assumptions. In connection with updating our benefit utilization rate assumption, we increased later duration

utilization assumptions for claims with lifetime benefits. The increase was also attributable to higher severity and

frequency of new claims and higher utilization of available benefits in 2018.

In 2018, the incurred amount of $130 million related to insured events of prior years increased largely as a

result of the completion of our annual review of our long-term care insurance claim reserves, as described above,

which resulted in recording higher reserves of $231 million, net of reinsurance recoverables of $18 million.

Long-term care insurance

The following table sets forth changes in the liability for policy and contract claims for our long-term care

insurance business for the dates indicated:

(Amounts in millions)

2020

2019

2018

Beginning balance as of January 1 . . . . . . . . . . . . . . . . . . .
Less reinsurance recoverables . . . . . . . . . . . . . . . . . . . . . .

$10,239
(2,283)

$ 9,516
(2,262)

$ 8,548
(2,292)

Net balance as of January 1 . . . . . . . . . . . . . . . . . . . .

7,956

7,254

6,256

Incurred related to insured events of:

Current year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total incurred . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paid related to insured events of:

Current year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest on liability for policy and contract claims . . . . . . .

Net balance as of December 31 . . . . . . . . . . . . . . . . .
Add reinsurance recoverables . . . . . . . . . . . . . . . . . . . . . . .

2,595
(398)

2,197

(189)
(2,118)

(2,307)

412

8,258
2,260

2,717
(219)

2,498

2,548
130

2,678

(205)
(1,975)

(201)
(1,814)

(2,180)

(2,015)

384

7,956
2,283

335

7,254
2,262

Ending balance as of December 31 . . . . . . . . . . . . . . . . . . .

$10,518

$10,239

$ 9,516

The increase in the liability for policy and contract claims of $279 million in our long-term care insurance
business was primarily attributable to higher new claims and claim severity as a result of the aging of the in-force
block. Given our assumption that COVID-19 has temporarily decreased the number of new claims submitted,
incurred but not reported (“IBNR”) reserves were strengthened by $108 million, partially offsetting the favorable
development on IBNR claims. Additionally, we recorded a $91 million increase to claim reserves, reflecting our
assumption that COVID-19 has accelerated mortality experience on the most vulnerable claimants, leaving the
remaining claim population less likely to terminate compared to the pre-pandemic average population. These
increases were partially offset by higher claim terminations driven mostly by higher mortality and a $38 million
net favorable impact from changes in assumptions and methodologies associated with our annual claim reserve
review completed in the fourth quarter of 2020. The favorable impact from our annual claims reserve review
primarily related to assumption updates to claim terminations and claim incidence based on our current long-term
view of these assumptions. The COVID-19 impacts to our long-term care insurance business are not currently
expected to be indicative of future trends or loss performance.

In 2020, the favorable development of $398 million related to insured events of prior years was primarily
attributable to favorable claim terminations mostly attributable to higher mortality, favorable development on
prior year IBNR claims and favorable experience on pending claims that did not become an active claim. These
decreases were partially offset by unfavorable impacts from changes in assumptions and methodologies
associated with our annual claim reserve review completed in the fourth quarter of 2020 and from higher reserves
of $101 million to account for changes to incidence and mortality experience driven by COVID-19, which we
believe are temporary.

252

253

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

In 2019, the liability for policy and contract claims increased $723 million in our long-term care insurance

business. The increase was primarily attributable to new claims as a result of the aging of the in-force block,
including higher frequency and severity of new claims, partially offset by favorable development on prior year
IBNR claims in 2019. We completed our annual review of assumptions and methodologies in the third quarter of
2019 and did not make any significant changes, other than routine updates.

In 2019, the favorable development of $219 million related to insured events of prior years was primarily
attributable to favorable development on prior year IBNR claims and favorable experience on pending claims
that did not become an active claim.

In 2018, the liability for policy and contract claims increased $968 million in our long-term care insurance
business largely from new claims as a result of the aging of the in-force block, as well as the completion of our
annual review of assumptions and methodologies in the fourth quarter of 2018 which increased reserves by
$308 million and increased reinsurance recoverables by $17 million. Based on this review, we updated several
assumptions and methodologies, including benefit utilization rates, claim termination rates and other
assumptions. In connection with updating our benefit utilization rate assumption, we increased later duration
utilization assumptions for claims with lifetime benefits. The increase was also attributable to higher severity and
frequency of new claims and higher utilization of available benefits in 2018.

In 2018, the incurred amount of $130 million related to insured events of prior years increased largely as a

result of the completion of our annual review of our long-term care insurance claim reserves, as described above,
which resulted in recording higher reserves of $231 million, net of reinsurance recoverables of $18 million.

Long-term care insurance

The following table sets forth changes in the liability for policy and contract claims for our long-term care

insurance business for the dates indicated:

(Amounts in millions)

2020

2019

2018

Beginning balance as of January 1 . . . . . . . . . . . . . . . . . . .

$10,239

$ 9,516

$ 8,548

Less reinsurance recoverables . . . . . . . . . . . . . . . . . . . . . .

(2,283)

(2,262)

(2,292)

Net balance as of January 1 . . . . . . . . . . . . . . . . . . . .

7,956

7,254

6,256

Incurred related to insured events of:

Current year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total incurred . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paid related to insured events of:

Current year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest on liability for policy and contract claims . . . . . . .

Net balance as of December 31 . . . . . . . . . . . . . . . . .

Add reinsurance recoverables . . . . . . . . . . . . . . . . . . . . . . .

2,595

(398)

2,197

(189)

(2,118)

(2,307)

412

8,258

2,260

2,717

(219)

2,498

2,548

130

2,678

(205)

(1,975)

(201)

(1,814)

(2,180)

(2,015)

384

7,956

2,283

335

7,254

2,262

Ending balance as of December 31 . . . . . . . . . . . . . . . . . . .

$10,518

$10,239

$ 9,516

The increase in the liability for policy and contract claims of $279 million in our long-term care insurance

business was primarily attributable to higher new claims and claim severity as a result of the aging of the in-force

block. Given our assumption that COVID-19 has temporarily decreased the number of new claims submitted,

incurred but not reported (“IBNR”) reserves were strengthened by $108 million, partially offsetting the favorable

development on IBNR claims. Additionally, we recorded a $91 million increase to claim reserves, reflecting our

assumption that COVID-19 has accelerated mortality experience on the most vulnerable claimants, leaving the

remaining claim population less likely to terminate compared to the pre-pandemic average population. These

increases were partially offset by higher claim terminations driven mostly by higher mortality and a $38 million

net favorable impact from changes in assumptions and methodologies associated with our annual claim reserve

review completed in the fourth quarter of 2020. The favorable impact from our annual claims reserve review

primarily related to assumption updates to claim terminations and claim incidence based on our current long-term

view of these assumptions. The COVID-19 impacts to our long-term care insurance business are not currently

expected to be indicative of future trends or loss performance.

In 2020, the favorable development of $398 million related to insured events of prior years was primarily

attributable to favorable claim terminations mostly attributable to higher mortality, favorable development on

prior year IBNR claims and favorable experience on pending claims that did not become an active claim. These

decreases were partially offset by unfavorable impacts from changes in assumptions and methodologies

associated with our annual claim reserve review completed in the fourth quarter of 2020 and from higher reserves

of $101 million to account for changes to incidence and mortality experience driven by COVID-19, which we

believe are temporary.

252

253

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

U.S. Mortgage Insurance segment

The following table sets forth information about incurred claims, net of reinsurance, as well as cumulative

number of reported delinquencies and the total of IBNR liabilities plus expected development on reported claims
included within the net incurred claims amounts for our U.S. Mortgage Insurance segment as of December 31,
2020. The information about the incurred claims development for the years ended December 31, 2011 to 2019
and the historical reported delinquencies as of December 31, 2019 and prior are presented as supplementary
information.

(Dollar
amounts
in millions)

Accident
year (1)

Incurred claims and allocated claim adjustment expenses, net of reinsurance

For the years ended December 31,

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Unaudited

Total of IBNR
liabilities
including
expected
development
on reported
claims as of
December 31,
2020

Number of
reported
delinquencies (2)

2011 . . . . . $910 $931 $913 $929 $938 $939 $939 $939 $938 $ 939
666
667
668
673
666
671
2012 . . . . . — 718
675
671
381
382
384
381
392
2013 . . . . . — — 475
407
387
258
259
261
259
2014 . . . . . — — — 328
288
269
180
181
187
180
208
2015 . . . . . — — — — 235
136
137
138
2016 . . . . . — — — — — 198
160
105
102
2017 . . . . . — — — — — — 171
121
84
2018 . . . . . — — — — — — — 117
84
111
2019 . . . . . — — — — — — — — 106
365
2020 . . . . . — — — — — — — — —

$—
—
—
—
—

1
1
1
1
19

69,314
48,575
34,412
26,726
21,724
19,158
19,497
14,779
15,710
38,863

Total incurred . . . $3,227

(1) Represents the year in which first monthly mortgage payments have been missed by the borrower.
(2) Represents reported and outstanding delinquencies less actual cures as of December 31 for each respective

accident year.

The following table sets forth paid claims development, net of reinsurance, for our U.S. Mortgage Insurance

segment for the year ended December 31, 2020. The information about paid claims development for the years

ended December 31, 2011 to 2019 is presented as supplementary information.

(Amounts in millions)

Accident year (1)

Cumulative paid claims and allocated claim adjustment expenses, net of reinsurance

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Unaudited

2011 . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65

$497

$722

$816

$874

$906

$927

$935

$937

$ 939

2012 . . . . . . . . . . . . . . . . . . . . . . . . . —

92

2013 . . . . . . . . . . . . . . . . . . . . . . . . . —

2014 . . . . . . . . . . . . . . . . . . . . . . . . . —

2015 . . . . . . . . . . . . . . . . . . . . . . . . . —

2016 . . . . . . . . . . . . . . . . . . . . . . . . . —

2017 . . . . . . . . . . . . . . . . . . . . . . . . . —

2018 . . . . . . . . . . . . . . . . . . . . . . . . . —

2019 . . . . . . . . . . . . . . . . . . . . . . . . . —

2020 . . . . . . . . . . . . . . . . . . . . . . . . . —

—

—

—

—

—

—

—

—

391

44

—

—

—

—

—

—

—

532

202

22

—

—

—

—

—

—

602

297

127

12

—

—

—

—

—

634

340

195

85

10

—

—

—

—

650

362

233

145

64

6

—

—

—

658

372

247

167

110

46

3

—

—

662

375

253

173

124

77

32

2

—

663

376

254

175

127

87

48

18

1

Total paid . . . . . . .

$2,688

Total incurred . . . .

$3,227

Total paid . . . . . . .

2,688

All outstanding liabilities before 2011 . . . . . . .

16

Liability for policy and contract claims . . . . . .

$

555

(1) Represents the year in which first monthly mortgage payments have been missed by the borrower.

The following table sets forth our average payout of incurred claims by age for our U.S. Mortgage Insurance

segment as of December 31, 2020:

Years

1

2

3

4

5

6

7

8

9

10

Average annual percentage payout of incurred claims by age

Unaudited

Percentage of payout . . . . . . . . . . . . . . . . .

6.6% 37.6% 26.8% 11.1% 4.6% 2.3% 1.2% 0.5% 0.2% 0.1%

254

255

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

U.S. Mortgage Insurance segment

The following table sets forth information about incurred claims, net of reinsurance, as well as cumulative

number of reported delinquencies and the total of IBNR liabilities plus expected development on reported claims

included within the net incurred claims amounts for our U.S. Mortgage Insurance segment as of December 31,

2020. The information about the incurred claims development for the years ended December 31, 2011 to 2019

and the historical reported delinquencies as of December 31, 2019 and prior are presented as supplementary

information.

(Dollar

amounts

in millions)

Accident

year (1)

Total of IBNR

liabilities

including

expected

development

on reported

claims as of

December 31,

Number of

reported

delinquencies (2)

Incurred claims and allocated claim adjustment expenses, net of reinsurance

For the years ended December 31,

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2020

Unaudited

2011 . . . . . $910 $931 $913 $929 $938 $939 $939 $939 $938 $ 939

$—

2012 . . . . . — 718

675

2013 . . . . . — — 475

671

407

2014 . . . . . — — — 328

673

392

288

2015 . . . . . — — — — 235

671

387

269

208

2016 . . . . . — — — — — 198

668

384

261

187

160

2017 . . . . . — — — — — — 171

667

382

259

181

138

121

2018 . . . . . — — — — — — — 117

2019 . . . . . — — — — — — — — 106

2020 . . . . . — — — — — — — — —

666

381

258

180

136

102

84

666

381

259

180

137

105

84

111

365

—

—

—

—

1

1

1

1

19

Total incurred . . . $3,227

69,314

48,575

34,412

26,726

21,724

19,158

19,497

14,779

15,710

38,863

(1) Represents the year in which first monthly mortgage payments have been missed by the borrower.

(2) Represents reported and outstanding delinquencies less actual cures as of December 31 for each respective

accident year.

The following table sets forth paid claims development, net of reinsurance, for our U.S. Mortgage Insurance

segment for the year ended December 31, 2020. The information about paid claims development for the years
ended December 31, 2011 to 2019 is presented as supplementary information.

(Amounts in millions)

Accident year (1)

Cumulative paid claims and allocated claim adjustment expenses, net of reinsurance

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

$ 65
2011 . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . —
2013 . . . . . . . . . . . . . . . . . . . . . . . . . —
2014 . . . . . . . . . . . . . . . . . . . . . . . . . —
2015 . . . . . . . . . . . . . . . . . . . . . . . . . —
2016 . . . . . . . . . . . . . . . . . . . . . . . . . —
2017 . . . . . . . . . . . . . . . . . . . . . . . . . —
2018 . . . . . . . . . . . . . . . . . . . . . . . . . —
2019 . . . . . . . . . . . . . . . . . . . . . . . . . —
2020 . . . . . . . . . . . . . . . . . . . . . . . . . —

$497
92
—
—
—
—
—
—
—
—

$722
391
44
—
—
—
—
—
—
—

Unaudited

$816
532
202
22
—
—
—
—
—
—

$874
602
297
127
12
—
—
—
—
—

$906
634
340
195
85
10
—
—
—
—

$927
650
362
233
145
64
6

—
—
—

$935
658
372
247
167
110
46
3

—
—

$937
662
375
253
173
124
77
32
2

—

$ 939
663
376
254
175
127
87
48
18
1

Total paid . . . . . . .

$2,688

Total incurred . . . .
Total paid . . . . . . .
All outstanding liabilities before 2011 . . . . . . .

$3,227
2,688
16

Liability for policy and contract claims . . . . . .

$

555

(1) Represents the year in which first monthly mortgage payments have been missed by the borrower.

The following table sets forth our average payout of incurred claims by age for our U.S. Mortgage Insurance

segment as of December 31, 2020:

Years

1

2

3

4

5

6

7

8

9

10

Average annual percentage payout of incurred claims by age

Unaudited

Percentage of payout . . . . . . . . . . . . . . . . .

6.6% 37.6% 26.8% 11.1% 4.6% 2.3% 1.2% 0.5% 0.2% 0.1%

254

255

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Australia Mortgage Insurance segment

The following table sets forth information about incurred claims, net of reinsurance, as well as cumulative

number of reported delinquencies and the total of IBNR liabilities plus expected development on reported claims
included within the net incurred claims amounts for our Australia Mortgage Insurance segment as of
December 31, 2020. The information about the incurred claims development for the years ended December 31,
2011 to 2019 and the historical reported delinquencies as of December 31, 2019 and prior are presented as
supplementary information.

(Dollar
amounts
in
millions) (1)

Accident
year (2)

Incurred claims and allocated claim adjustment expenses, net of reinsurance

For the years ended December 31,

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Total of
IBNR
liabilities
including
expected
development
on reported
claims as of
December 31,
2020

Number of
reported
delinquencies (3)

$133
2011 . . .
$ 70
2012 . . . —
66
2013 . . . — —
2014 . . . — —
2015 . . . — —
2016 . . . — —
2017 . . . — —
2018 . . . — —
2019 . . . — —
2020 . . . — —

$130
105
62
—
—
—
—
—
—
—

Unaudited

$125 $123 $121
86
89
64
70
70
82
104
69
95
—
—
—
—
—
—
—
—
—

93
81
59
—
—
—
—
—
—

$120
86
60
65
87
127
90
—
—
—

$120
86
61
63
84
114
123
87
—
—

$120
86
61
63
83
108
105
107
106
—

$128
93
70
75
103
129
114
107
93
81

Total incurred . . . .

$993

$ 3
2
3
5
6
13
12
17
47
49

2,574
2,102
1,781
1,713
1,787
2,080
1,821
1,903
2,298
1,392

(1) Amounts translated into U.S. dollars at the average foreign exchange rates for the year ended December 31,

(3)

Includes foreign currency translation.

2020.

(2) Represents the year in which first monthly mortgage payments have been missed by the borrower.
(3) Represents outstanding delinquencies plus paid claims as of December 31, 2020 for each respective accident

The following table sets forth our average payout of incurred claims by age for our Australia Mortgage

Insurance segment as of December 31, 2020:

year.

The following table sets forth paid claims development, net of reinsurance, for our Australia Mortgage

Insurance segment for the year ended December 31, 2020. The information about paid claims development for

the years ended December 31, 2011 to December 31, 2019 is presented as supplementary information:

(Amounts in millions) (1)

Accident year (2)

Cumulative paid claims and allocated claim adjustment expenses, net of

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

reinsurance

Unaudited

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

4

$ 67

$110

$118

$120

$120

$120

$120

$120

$ 121

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

11

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

—

—

—

—

—

—

—

—

61

9

—

—

—

—

—

—

—

78

35

6

—

—

—

—

—

—

82

51

26

4

—

—

—

—

—

83

57

46

28

6

—

—

—

—

84

59

58

65

51

9

—

—

—

85

60

61

76

85

49

11

—

—

86

60

61

79

95

76

46

14

—

103

86

62

64

84

85

67

40

5

$993

717

35

20

Total paid . . . . . .

$717

Total incurred . . .

Total paid . . . . . .

Other (3) . . . . . . . .

All outstanding liabilities before 2011 . . . .

Liability for policy and contract claims . . .

$331

(1) Amounts translated into U.S. dollars at the average foreign exchange rates for the year ended December 31,

2020.

(2) Represents the year in which first monthly mortgage payments have been missed by the borrower.

Years

1

2

3

4

5

6

7

8

9

10

Average annual percentage payout of incurred claims, by age

Unaudited

Percentage of payout . . . . . . . . . . . . . . . . . .

8.4% 35.5% 25.8% 8.9% 2.9% 1.6% 1.2% 1.1% 0.5% 0.6%

(11) Employee Benefit Plans

(a) Pension and Retiree Health and Life Insurance Benefit Plans

Essentially all of our employees are enrolled in a qualified defined contribution pension plan. The plan is

100% funded by Genworth. We make annual contributions to each employee’s pension plan account based on the

256

257

Australia Mortgage Insurance segment

The following table sets forth information about incurred claims, net of reinsurance, as well as cumulative

number of reported delinquencies and the total of IBNR liabilities plus expected development on reported claims

included within the net incurred claims amounts for our Australia Mortgage Insurance segment as of

December 31, 2020. The information about the incurred claims development for the years ended December 31,

2011 to 2019 and the historical reported delinquencies as of December 31, 2019 and prior are presented as

supplementary information.

Total of

IBNR

liabilities

including

expected

development

on reported

claims as of

December 31,

Incurred claims and allocated claim adjustment expenses, net of reinsurance

For the years ended December 31,

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2020

delinquencies (3)

Unaudited

2011 . . .

$ 70

$133

$130

$125 $123

$121

$120

$120

$120

$128

$ 3

2012 . . . —

2013 . . . —

2014 . . . —

2015 . . . —

2016 . . . —

2017 . . . —

2018 . . . —

2019 . . . —

2020 . . . —

66

—

—

—

—

—

—

—

—

105

62

—

—

—

—

—

—

—

93

81

59

—

—

—

—

—

—

89

70

82

69

—

—

—

—

—

86

64

70

104

95

—

—

—

—

86

60

65

87

127

90

—

—

—

86

61

63

84

114

123

87

—

—

86

61

63

83

108

105

107

106

—

93

70

75

103

129

114

107

93

81

Total incurred . . . .

$993

2

3

5

6

13

12

17

47

49

Number of

reported

2,574

2,102

1,781

1,713

1,787

2,080

1,821

1,903

2,298

1,392

(1) Amounts translated into U.S. dollars at the average foreign exchange rates for the year ended December 31,

(Dollar

amounts

in

millions) (1)

Accident

year (2)

2020.

year.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table sets forth paid claims development, net of reinsurance, for our Australia Mortgage
Insurance segment for the year ended December 31, 2020. The information about paid claims development for
the years ended December 31, 2011 to December 31, 2019 is presented as supplementary information:

(Amounts in millions) (1)

Accident year (2)

Cumulative paid claims and allocated claim adjustment expenses, net of
reinsurance

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Unaudited

4

$

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

$ 67
11
—
—
—
—
—
—
—
—

$110
61
9

—
—
—
—
—
—
—

$118
78
35
6

—
—
—
—
—
—

$120
82
51
26
4

—
—
—
—
—

$120
83
57
46
28
6

—
—
—
—

$120
84
59
58
65
51
9

—
—
—

$120
85
60
61
76
85
49
11
—
—

$120
86
60
61
79
95
76
46
14
—

$ 121
86
62
64
84
103
85
67
40
5

Total paid . . . . . .

$717

Total incurred . . .
Total paid . . . . . .
Other (3) . . . . . . . .
All outstanding liabilities before 2011 . . . .

Liability for policy and contract claims . . .

$993
717
35
20

$331

(1) Amounts translated into U.S. dollars at the average foreign exchange rates for the year ended December 31,

2020.

(2) Represents the year in which first monthly mortgage payments have been missed by the borrower.
(3)

Includes foreign currency translation.

(2) Represents the year in which first monthly mortgage payments have been missed by the borrower.

(3) Represents outstanding delinquencies plus paid claims as of December 31, 2020 for each respective accident

The following table sets forth our average payout of incurred claims by age for our Australia Mortgage

Insurance segment as of December 31, 2020:

Years

1

2

3

4

5

6

7

8

9

10

Average annual percentage payout of incurred claims, by age

Unaudited

Percentage of payout . . . . . . . . . . . . . . . . . .

8.4% 35.5% 25.8% 8.9% 2.9% 1.6% 1.2% 1.1% 0.5% 0.6%

(11) Employee Benefit Plans

(a) Pension and Retiree Health and Life Insurance Benefit Plans

Essentially all of our employees are enrolled in a qualified defined contribution pension plan. The plan is
100% funded by Genworth. We make annual contributions to each employee’s pension plan account based on the

256

257

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

employee’s age, service and eligible pay. Employees are vested in the plan after three years of service. As of
December 31, 2020 and 2019, we recorded a liability related to these benefits of $11 million and $12 million,
respectively.

In addition, certain employees also participate in non-qualified defined contribution plans and in qualified
and non-qualified defined benefit pension plans. The plan assets, projected benefit obligation and accumulated
benefit obligation liabilities of these plans were not material to our consolidated financial statements individually
or in the aggregate. As of December 31, 2020 and 2019, we recorded a liability related to these plans of
$69 million and $58 million, respectively, which we accrued in other liabilities in the consolidated balance
sheets. In 2020 and 2019, we recognized a decrease of $8 million and $4 million, respectively, in OCI, excluding
amounts related to our Canada mortgage insurance business which was classified as held for sale prior to the
fourth quarter of 2019.

We provide retiree health benefits to domestic employees hired prior to January 1, 2005 who meet certain
service requirements. Under this plan, retirees over 65 years of age receive a subsidy towards the purchase of a
Medigap policy, and retirees under 65 years of age receive medical benefits similar to our employees’ medical
benefits. In December 2009, we announced that eligibility for retiree medical benefits would be limited to
associates who were within 10 years of retirement eligibility as of January 1, 2010. This resulted in a negative
plan amendment which will be amortized over the average future service of the participants. We also provide
retiree life and long-term care insurance benefits. The plans are funded as claims are incurred. As of
December 31, 2020 and 2019, the accumulated postretirement benefit obligation associated with these benefits
was $77 million and $71 million, respectively, which we accrued in other liabilities in the consolidated balance
sheets. In 2020 and 2019, we recognized a decrease of $6 million and $5 million, respectively, in OCI, excluding
amounts related to our Canada mortgage insurance business which was classified as held for sale prior to the
fourth quarter of 2019.

Our cost associated with our pension, retiree health and life insurance benefit plans was $18 million,

$19 million and $18 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(b) Savings Plans

Our domestic employees participate in qualified and non-qualified defined contribution savings plans that

allow employees to contribute a portion of their pay to the plan on a pre-tax basis. We make matching
contributions equal to 100% of the first 4% of pay deferred by an employee and 50% of the next 2% of pay
deferred by an employee so that our matching contribution does not exceed 5% of an employee’s pay. Employees
do not vest immediately in Genworth matching contributions but fully vest in the matching contributions after
two complete years of service. One option available to employees in the defined contribution savings plan is the
ClearCourse® variable annuity option offered by certain of our life insurance subsidiaries. The amount of
deposits recorded by our life insurance subsidiaries in 2020 and 2019 in relation to this plan option was less than
$1 million for each year.

Prior to January 2021, employees also had the option of purchasing a fund which invests primarily in

Genworth stock as part of the defined contribution savings plan. We had contracted with Newport Trust
Company (“Newport”) to act as an independent fiduciary and investment manager with respect to Genworth
stock in the defined contribution savings plan. On January 8, 2021, Newport froze the fund due to uncertainty
around the closing of the China Oceanwide transaction and the feasibility of executing other strategic plans.
Accordingly, future investments or transfers into the fund are no longer permitted.

Our cost associated with these plans was $13 million, $13 million and $12 million for the years ended

December 31, 2020, 2019 and 2018, respectively.

(c) Health and Welfare Benefits for Active Employees

We provide health and welfare benefits to our employees, including health, life, disability, dental and long-

term care insurance, among others. Our long-term care insurance is provided through our group long-term care

insurance products. The premiums recorded by this business related to these benefits were insignificant during

2020, 2019 and 2018.

(12) Borrowings and Other Financings

(a) Long-Term Borrowings

The following table sets forth total long-term borrowings as of December 31:

(Amounts in millions)

Genworth Holdings

2020

2019

7.70% Senior Notes, due 2020 . . . . . . . . . . . . . . . . . . . . .

$ —

$ 397

7.20% Senior Notes, due 2021 . . . . . . . . . . . . . . . . . . . . .

7.625% Senior Notes, due 2021 . . . . . . . . . . . . . . . . . . . .

4.90% Senior Notes, due 2023 . . . . . . . . . . . . . . . . . . . . .

4.80% Senior Notes, due 2024 . . . . . . . . . . . . . . . . . . . . .

6.50% Senior Notes, due 2034 . . . . . . . . . . . . . . . . . . . . .

Floating Rate Junior Subordinated Notes, due 2066 . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,693

3,174

Bond consent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred borrowing charges . . . . . . . . . . . . . . . . . . . . . . .

(19)

(9)

(25)

(12)

Total Genworth Holdings . . . . . . . . . . . . . . . . . . . . . . . . .

2,665

3,137

Genworth Mortgage Holdings, Inc.

6.50% Senior Notes, due 2025 . . . . . . . . . . . . . . . . . . . . .

Deferred borrowing charges . . . . . . . . . . . . . . . . . . . . . . .

Total Genworth Mortgage Holdings, Inc. . . . . . . . . . . . . .

Genworth Financial Mortgage Insurance Pty Limited

Floating Rate Junior Subordinated Notes, due 2025 . . . . .

Floating Rate Junior Subordinated Notes, due 2030 . . . . .

Deferred borrowing charges . . . . . . . . . . . . . . . . . . . . . . .

Total Genworth Financial Mortgage Insurance Pty

Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

145

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,548

$3,277

338

660

400

400

297

598

750

(12)

738

—

146

(1)

382

701

399

400

297

598

—

—

—

140

—

—

140

Genworth Holdings

Long-Term Senior Notes

On January 21, 2020, Genworth Holdings early redeemed $397 million of its 7.70% senior notes originally

scheduled to mature in June 2020 for a pre-tax loss of $9 million. The senior notes were fully redeemed with a

258

259

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

employee’s age, service and eligible pay. Employees are vested in the plan after three years of service. As of

December 31, 2020 and 2019, we recorded a liability related to these benefits of $11 million and $12 million,

Our cost associated with these plans was $13 million, $13 million and $12 million for the years ended

December 31, 2020, 2019 and 2018, respectively.

respectively.

In addition, certain employees also participate in non-qualified defined contribution plans and in qualified

and non-qualified defined benefit pension plans. The plan assets, projected benefit obligation and accumulated

benefit obligation liabilities of these plans were not material to our consolidated financial statements individually

or in the aggregate. As of December 31, 2020 and 2019, we recorded a liability related to these plans of

$69 million and $58 million, respectively, which we accrued in other liabilities in the consolidated balance

sheets. In 2020 and 2019, we recognized a decrease of $8 million and $4 million, respectively, in OCI, excluding

amounts related to our Canada mortgage insurance business which was classified as held for sale prior to the

fourth quarter of 2019.

We provide retiree health benefits to domestic employees hired prior to January 1, 2005 who meet certain

service requirements. Under this plan, retirees over 65 years of age receive a subsidy towards the purchase of a

Medigap policy, and retirees under 65 years of age receive medical benefits similar to our employees’ medical

benefits. In December 2009, we announced that eligibility for retiree medical benefits would be limited to

associates who were within 10 years of retirement eligibility as of January 1, 2010. This resulted in a negative

plan amendment which will be amortized over the average future service of the participants. We also provide

retiree life and long-term care insurance benefits. The plans are funded as claims are incurred. As of

December 31, 2020 and 2019, the accumulated postretirement benefit obligation associated with these benefits

was $77 million and $71 million, respectively, which we accrued in other liabilities in the consolidated balance

sheets. In 2020 and 2019, we recognized a decrease of $6 million and $5 million, respectively, in OCI, excluding

amounts related to our Canada mortgage insurance business which was classified as held for sale prior to the

fourth quarter of 2019.

Our cost associated with our pension, retiree health and life insurance benefit plans was $18 million,

$19 million and $18 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(b) Savings Plans

Our domestic employees participate in qualified and non-qualified defined contribution savings plans that

allow employees to contribute a portion of their pay to the plan on a pre-tax basis. We make matching

contributions equal to 100% of the first 4% of pay deferred by an employee and 50% of the next 2% of pay

deferred by an employee so that our matching contribution does not exceed 5% of an employee’s pay. Employees

do not vest immediately in Genworth matching contributions but fully vest in the matching contributions after

two complete years of service. One option available to employees in the defined contribution savings plan is the

ClearCourse® variable annuity option offered by certain of our life insurance subsidiaries. The amount of

deposits recorded by our life insurance subsidiaries in 2020 and 2019 in relation to this plan option was less than

$1 million for each year.

Prior to January 2021, employees also had the option of purchasing a fund which invests primarily in

Genworth stock as part of the defined contribution savings plan. We had contracted with Newport Trust

Company (“Newport”) to act as an independent fiduciary and investment manager with respect to Genworth

stock in the defined contribution savings plan. On January 8, 2021, Newport froze the fund due to uncertainty

around the closing of the China Oceanwide transaction and the feasibility of executing other strategic plans.

Accordingly, future investments or transfers into the fund are no longer permitted.

(c) Health and Welfare Benefits for Active Employees

We provide health and welfare benefits to our employees, including health, life, disability, dental and long-

term care insurance, among others. Our long-term care insurance is provided through our group long-term care
insurance products. The premiums recorded by this business related to these benefits were insignificant during
2020, 2019 and 2018.

(12) Borrowings and Other Financings

(a) Long-Term Borrowings

The following table sets forth total long-term borrowings as of December 31:

(Amounts in millions)

Genworth Holdings

7.70% Senior Notes, due 2020 . . . . . . . . . . . . . . . . . . . . .
7.20% Senior Notes, due 2021 . . . . . . . . . . . . . . . . . . . . .
7.625% Senior Notes, due 2021 . . . . . . . . . . . . . . . . . . . .
4.90% Senior Notes, due 2023 . . . . . . . . . . . . . . . . . . . . .
4.80% Senior Notes, due 2024 . . . . . . . . . . . . . . . . . . . . .
6.50% Senior Notes, due 2034 . . . . . . . . . . . . . . . . . . . . .
Floating Rate Junior Subordinated Notes, due 2066 . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond consent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred borrowing charges . . . . . . . . . . . . . . . . . . . . . . .

Total Genworth Holdings . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

$ —
338
660
400
400
297
598

2,693
(19)
(9)

2,665

$ 397
382
701
399
400
297
598

3,174
(25)
(12)

3,137

Genworth Mortgage Holdings, Inc.

6.50% Senior Notes, due 2025 . . . . . . . . . . . . . . . . . . . . .
Deferred borrowing charges . . . . . . . . . . . . . . . . . . . . . . .

Total Genworth Mortgage Holdings, Inc. . . . . . . . . . . . . .

Genworth Financial Mortgage Insurance Pty Limited

Floating Rate Junior Subordinated Notes, due 2025 . . . . .
Floating Rate Junior Subordinated Notes, due 2030 . . . . .
Deferred borrowing charges . . . . . . . . . . . . . . . . . . . . . . .

750
(12)

738

—
146
(1)

Total Genworth Financial Mortgage Insurance Pty

Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

145

—
—

—

140
—
—

140

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,548

$3,277

258

259

Genworth Holdings

Long-Term Senior Notes

On January 21, 2020, Genworth Holdings early redeemed $397 million of its 7.70% senior notes originally

scheduled to mature in June 2020 for a pre-tax loss of $9 million. The senior notes were fully redeemed with a

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

cash payment of $409 million, comprised of the outstanding principal balance, accrued interest and a make-
whole premium of $9 million.

As of December 31, 2020, Genworth Holdings had outstanding five series of fixed rate senior notes with

varying interest rates between 4.80% and 7.625% and maturity dates between 2021 and 2034. The senior
notes are Genworth Holdings’ direct, unsecured obligations and rank equally in right of payment with all of its
existing and future unsecured and unsubordinated obligations. Genworth Financial provides a full and
unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior notes and the holders of the
senior notes, on an unsecured unsubordinated basis, of the full and punctual payment of the principal of,
premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes, and
the full and punctual payment of all other amounts payable by Genworth Holdings under the senior notes
indenture in respect of such senior notes. We have the option to redeem all or a portion of each series of senior
notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of
the present value of the remaining scheduled payments of principal and interest discounted at the then-current
treasury rate plus an applicable spread.

Genworth Holdings paid its 7.20% senior notes with a principal balance of $338 million at maturity on
February 16, 2021. During the year ended December 31, 2020, Genworth Holdings also repurchased $84 million
principal amount of its senior notes with 2021 maturity dates for a pre-tax gain of $4 million and paid accrued
interest thereon.

Long-Term Junior Subordinated Notes

As of December 31, 2020, Genworth Holdings had outstanding floating rate junior notes having an

aggregate principal amount of $598 million, with an annual interest rate equal to three-month LIBOR plus
2.0025% payable quarterly, until the notes mature in November 2066 (“2066 Notes”). Subject to certain
conditions, Genworth Holdings has the right, on one or more occasions, to defer the payment of interest on the
2066 Notes during any period of up to 10 years without giving rise to an event of default and without permitting
acceleration under the terms of the 2066 Notes. Genworth Holdings will not be required to settle deferred interest
payments until it has deferred interest for five years or made a payment of current interest. In the event of our
bankruptcy, holders will have a limited claim for deferred interest.

Genworth Holdings may redeem the 2066 Notes on November 15, 2036, the “scheduled redemption date,”

but only to the extent that it has received net proceeds from the sale of certain qualifying capital securities.
Genworth Holdings may redeem the 2066 Notes in whole or in part at their principal amount plus accrued and
unpaid interest to the date of redemption.

The 2066 Notes will be subordinated to all existing and future senior, subordinated and junior subordinated

debt of Genworth Holdings, except for any future debt that by its terms is not superior in right of payment, and
will be effectively subordinated to all liabilities of our subsidiaries. Genworth Financial provides a full and
unconditional guarantee to the trustee of the 2066 Notes and the holders of the 2066 Notes, on an unsecured
subordinated basis, of the full and punctual payment of the principal of, premium, if any and interest on, and all
other amounts payable under, the outstanding 2066 Notes, and the full and punctual payment of all other amounts
payable by Genworth Holdings under the 2066 Notes indenture in respect of the 2066 Notes.

In connection with the issuance of the 2066 Notes, we entered into a Replacement Capital Covenant,
whereby we agreed, for the benefit of holders of our 6.50% Senior Notes due 2034, that Genworth Holdings will

not repay, redeem or repurchase all or any part of the 2066 Notes on or before November 15, 2046, unless such

repayment, redemption or repurchase is made from the proceeds of the issuance of certain replacement capital

securities and pursuant to the other terms and conditions set forth in the Replacement Capital Covenant.

See note 23 for information regarding a secured promissory note issued to AXA and reported as

discontinued operations, in which we agreed to make deferred cash payments in two installments in June 2022

AXA Promissory Note

and September 2022.

Genworth Mortgage Holdings, Inc.

On August 21, 2020, Genworth Mortgage Holdings, Inc. (“GMHI”), our wholly-owned U.S. mortgage

insurance subsidiary, issued $750 million of its 6.50% senior notes due in 2025 (“2025 Senior Notes”). Interest

on the notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on

February 15, 2021. These notes mature on August 15, 2025. GMHI may redeem the notes, in whole or in part, at

any time prior to February 15, 2025 at its option, by paying a make-whole premium, plus accrued and unpaid

interest, if any. At any time on or after February 15, 2025, GMHI may redeem the notes, in whole or in part, at its

option, at 100% of the principal amount, plus accrued and unpaid interest. The notes contain customary events of

default, which subject to certain notice and cure conditions, can result in the acceleration of the principal and

accrued interest on the outstanding notes if GMHI breaches the terms of the indenture.

Genworth Financial Mortgage Insurance Pty Limited

On July 3, 2020, Genworth Financial Mortgage Insurance Pty Limited (“GFMIPL”), our majority-owned

Australia mortgage insurance subsidiary, issued AUD$147 million floating rate subordinated notes due in July

2030 in exchange for AUD$147 million of its floating rate subordinated notes due in July 2025 and issued an

additional AUD$43 million floating rate subordinated notes due in July 2030. These notes will pay interest

quarterly at a floating rate equal to the three-month Bank Bill Swap reference rate plus a margin of 5.0% per

annum. GFMIPL has an option to redeem the notes at face value on July 3, 2025 and every interest payment date

thereafter up to and excluding the maturity date and for certain tax and regulatory events in each case subject to

Australian Prudential Regulation Authority’s (“APRA”) prior written approval. GFMIPL redeemed

AUD$5 million of its floating rate subordinated notes due in July 2025 on August 24, 2020 and redeemed the

remaining AUD$48 million of its floating rate subordinated notes due in July 2025 on October 6, 2020 and paid

accrued interest thereon.

Following the settlement of these transactions and as of December 31, 2020, GFMIPL had outstanding

subordinated floating rate notes having an aggregate principal amount of AUD$190 million, with an interest rate

of three-month Bank Bill Swap reference rate plus a margin of 5.0% per annum and a maturity date in July 2030.

(b) Non-Recourse Funding Obligations

As of December 31, 2019, Rivermont Life Insurance Company I (“Rivermont I”), our wholly-owned special

purpose consolidated captive insurance subsidiary, had outstanding non-recourse funding obligations of

$311 million, net of $4 million of deferred borrowing charges, due in 2050 with an interest rate based on

one-month LIBOR that reset every 28 days plus a fixed margin. The weighted-average interest rate on the

non-recourse funding obligations as of December 31, 2019 was 3.78%.

260

261

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

cash payment of $409 million, comprised of the outstanding principal balance, accrued interest and a make-

whole premium of $9 million.

As of December 31, 2020, Genworth Holdings had outstanding five series of fixed rate senior notes with

varying interest rates between 4.80% and 7.625% and maturity dates between 2021 and 2034. The senior

notes are Genworth Holdings’ direct, unsecured obligations and rank equally in right of payment with all of its

existing and future unsecured and unsubordinated obligations. Genworth Financial provides a full and

unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior notes and the holders of the

senior notes, on an unsecured unsubordinated basis, of the full and punctual payment of the principal of,

premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes, and

the full and punctual payment of all other amounts payable by Genworth Holdings under the senior notes

indenture in respect of such senior notes. We have the option to redeem all or a portion of each series of senior

notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of

the present value of the remaining scheduled payments of principal and interest discounted at the then-current

treasury rate plus an applicable spread.

Genworth Holdings paid its 7.20% senior notes with a principal balance of $338 million at maturity on

February 16, 2021. During the year ended December 31, 2020, Genworth Holdings also repurchased $84 million

principal amount of its senior notes with 2021 maturity dates for a pre-tax gain of $4 million and paid accrued

interest thereon.

Long-Term Junior Subordinated Notes

As of December 31, 2020, Genworth Holdings had outstanding floating rate junior notes having an

aggregate principal amount of $598 million, with an annual interest rate equal to three-month LIBOR plus

2.0025% payable quarterly, until the notes mature in November 2066 (“2066 Notes”). Subject to certain

conditions, Genworth Holdings has the right, on one or more occasions, to defer the payment of interest on the

2066 Notes during any period of up to 10 years without giving rise to an event of default and without permitting

acceleration under the terms of the 2066 Notes. Genworth Holdings will not be required to settle deferred interest

payments until it has deferred interest for five years or made a payment of current interest. In the event of our

bankruptcy, holders will have a limited claim for deferred interest.

Genworth Holdings may redeem the 2066 Notes on November 15, 2036, the “scheduled redemption date,”

but only to the extent that it has received net proceeds from the sale of certain qualifying capital securities.

Genworth Holdings may redeem the 2066 Notes in whole or in part at their principal amount plus accrued and

unpaid interest to the date of redemption.

The 2066 Notes will be subordinated to all existing and future senior, subordinated and junior subordinated

debt of Genworth Holdings, except for any future debt that by its terms is not superior in right of payment, and

will be effectively subordinated to all liabilities of our subsidiaries. Genworth Financial provides a full and

unconditional guarantee to the trustee of the 2066 Notes and the holders of the 2066 Notes, on an unsecured

subordinated basis, of the full and punctual payment of the principal of, premium, if any and interest on, and all

other amounts payable under, the outstanding 2066 Notes, and the full and punctual payment of all other amounts

payable by Genworth Holdings under the 2066 Notes indenture in respect of the 2066 Notes.

In connection with the issuance of the 2066 Notes, we entered into a Replacement Capital Covenant,

whereby we agreed, for the benefit of holders of our 6.50% Senior Notes due 2034, that Genworth Holdings will

not repay, redeem or repurchase all or any part of the 2066 Notes on or before November 15, 2046, unless such
repayment, redemption or repurchase is made from the proceeds of the issuance of certain replacement capital
securities and pursuant to the other terms and conditions set forth in the Replacement Capital Covenant.

AXA Promissory Note

See note 23 for information regarding a secured promissory note issued to AXA and reported as

discontinued operations, in which we agreed to make deferred cash payments in two installments in June 2022
and September 2022.

Genworth Mortgage Holdings, Inc.

On August 21, 2020, Genworth Mortgage Holdings, Inc. (“GMHI”), our wholly-owned U.S. mortgage
insurance subsidiary, issued $750 million of its 6.50% senior notes due in 2025 (“2025 Senior Notes”). Interest
on the notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on
February 15, 2021. These notes mature on August 15, 2025. GMHI may redeem the notes, in whole or in part, at
any time prior to February 15, 2025 at its option, by paying a make-whole premium, plus accrued and unpaid
interest, if any. At any time on or after February 15, 2025, GMHI may redeem the notes, in whole or in part, at its
option, at 100% of the principal amount, plus accrued and unpaid interest. The notes contain customary events of
default, which subject to certain notice and cure conditions, can result in the acceleration of the principal and
accrued interest on the outstanding notes if GMHI breaches the terms of the indenture.

Genworth Financial Mortgage Insurance Pty Limited

On July 3, 2020, Genworth Financial Mortgage Insurance Pty Limited (“GFMIPL”), our majority-owned
Australia mortgage insurance subsidiary, issued AUD$147 million floating rate subordinated notes due in July
2030 in exchange for AUD$147 million of its floating rate subordinated notes due in July 2025 and issued an
additional AUD$43 million floating rate subordinated notes due in July 2030. These notes will pay interest
quarterly at a floating rate equal to the three-month Bank Bill Swap reference rate plus a margin of 5.0% per
annum. GFMIPL has an option to redeem the notes at face value on July 3, 2025 and every interest payment date
thereafter up to and excluding the maturity date and for certain tax and regulatory events in each case subject to
Australian Prudential Regulation Authority’s (“APRA”) prior written approval. GFMIPL redeemed
AUD$5 million of its floating rate subordinated notes due in July 2025 on August 24, 2020 and redeemed the
remaining AUD$48 million of its floating rate subordinated notes due in July 2025 on October 6, 2020 and paid
accrued interest thereon.

Following the settlement of these transactions and as of December 31, 2020, GFMIPL had outstanding
subordinated floating rate notes having an aggregate principal amount of AUD$190 million, with an interest rate
of three-month Bank Bill Swap reference rate plus a margin of 5.0% per annum and a maturity date in July 2030.

(b) Non-Recourse Funding Obligations

As of December 31, 2019, Rivermont Life Insurance Company I (“Rivermont I”), our wholly-owned special

purpose consolidated captive insurance subsidiary, had outstanding non-recourse funding obligations of
$311 million, net of $4 million of deferred borrowing charges, due in 2050 with an interest rate based on
one-month LIBOR that reset every 28 days plus a fixed margin. The weighted-average interest rate on the
non-recourse funding obligations as of December 31, 2019 was 3.78%.

260

261

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina,

Rivermont I redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050. The
early redemption resulted in a pre-tax loss of $4 million from the write-off of deferred borrowing costs.

(c) Liquidity

Principal amounts under our long-term borrowings (including senior notes) by maturity were as follows as

of December 31, 2020:

(Amounts in millions)

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ 997
—
400
400
1,796

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,593

(d) Securities lending activity

Under our securities lending program, the borrower is required to provide collateral, which can consist of

cash or government securities, on a daily basis in amounts equal to or exceeding 102% of the value of the loaned
securities. Currently, we only accept cash collateral from borrowers under the program. Cash collateral received
by us on securities lending transactions is reflected in other invested assets with an offsetting liability recognized
in other liabilities for the obligation to return the collateral. Any cash collateral received is reinvested by our
custodian based upon the investment guidelines provided within our agreement. The reinvested cash collateral is
primarily invested in a money market fund approved by the NAIC, U.S. and foreign government securities, U.S.
government agency securities, asset-backed securities, corporate debt securities and equity securities. As of
December 31, 2020 and 2019, the fair value of securities loaned under our securities lending program was
$66 million and $49 million, respectively. As of December 31, 2020 and 2019, the fair value of collateral held
under our securities lending program was $67 million and $51 million, respectively, and the offsetting obligation
to return collateral of $67 million and $51 million, respectively, was included in other liabilities in the
consolidated balance sheets. We did not have any non-cash collateral provided by the borrowers in our securities
lending program as of December 31, 2020 and 2019.

Risks associated with securities lending programs

Our securities lending program exposes us to liquidity risk if we did not have enough cash or collateral
readily available to return to the counterparty when required to do so under the agreement. We manage this risk
by regularly monitoring our available sources of cash and collateral to ensure we can meet short-term liquidity
demands under normal and stressed scenarios.

We are also exposed to credit risk in the event of default of our counterparties or changes in collateral
values. This risk is significantly reduced because our program requires over collateralization and collateral
exposures are trued up on a daily basis. We manage this risk by using multiple counterparties and ensuring that
changes in required collateral are monitored and adjusted daily. We also monitor the creditworthiness, including
credit ratings, of our counterparties on a regular basis.

The following tables present the remaining contractual maturity of the agreement as of December 31:

Overnight and

continuous

Up to 30 days

31—90 days

Greater than

90 days

Total

Non-U.S. government . . . . . . . . . . . . . . .

$ 1

$—

$ 1

Contractual maturity

(Amounts in millions)

Securities lending:

Fixed maturity securities:

U.S. corporate . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate . . . . . . . . . . . . . . . . .

Subtotal, fixed maturity securities . . . . .

Equity securities . . . . . . . . . . . . . . . . . . . . . . .

(Amounts in millions)

Securities lending:

Fixed maturity securities:

Non-U.S. government . . . . . . . . . . . . . . .

U.S. corporate . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate . . . . . . . . . . . . . . . . .

Subtotal, fixed maturity securities . . . . .

Total securities lending . . . . . . . . . . . . . . . . . . . . . .

40

19

60

7

$ 1

34

16

51

$51

2020

2019

$—

—

—

—

—

$—

$—

—

—

—

$—

$—

—

—

—

—

$—

$—

—

—

—

$—

—

—

—

—

$—

—

—

—

$—

40

19

60

7

$ 1

34

16

51

$51

Total securities lending . . . . . . . . . . . . . . . . . . . . . .

$67

$—

$67

Overnight and

continuous

Up to 30 days

31—90 days

Greater than

90 days

Total

(13) Income Taxes

ended December 31:

Income from continuing operations before income taxes included the following components for the years

(Amounts in millions)

2020

2019

2018

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 953

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

Income from continuing operations before income taxes . . .

$1,031

$540

174

$714

$ (57)

194

$137

262

263

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina,

Rivermont I redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050. The

early redemption resulted in a pre-tax loss of $4 million from the write-off of deferred borrowing costs.

Contractual maturity

The following tables present the remaining contractual maturity of the agreement as of December 31:

(c) Liquidity

of December 31, 2020:

Principal amounts under our long-term borrowings (including senior notes) by maturity were as follows as

(Amounts in millions)

Securities lending:

Fixed maturity securities:

Overnight and
continuous

Up to 30 days

31—90 days

Greater than
90 days

Total

2020

(Amounts in millions)

Amount

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 997

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

400

400

2025 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,796

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,593

(d) Securities lending activity

Under our securities lending program, the borrower is required to provide collateral, which can consist of

cash or government securities, on a daily basis in amounts equal to or exceeding 102% of the value of the loaned

securities. Currently, we only accept cash collateral from borrowers under the program. Cash collateral received

by us on securities lending transactions is reflected in other invested assets with an offsetting liability recognized

in other liabilities for the obligation to return the collateral. Any cash collateral received is reinvested by our

custodian based upon the investment guidelines provided within our agreement. The reinvested cash collateral is

primarily invested in a money market fund approved by the NAIC, U.S. and foreign government securities, U.S.

government agency securities, asset-backed securities, corporate debt securities and equity securities. As of

December 31, 2020 and 2019, the fair value of securities loaned under our securities lending program was

$66 million and $49 million, respectively. As of December 31, 2020 and 2019, the fair value of collateral held

under our securities lending program was $67 million and $51 million, respectively, and the offsetting obligation

to return collateral of $67 million and $51 million, respectively, was included in other liabilities in the

consolidated balance sheets. We did not have any non-cash collateral provided by the borrowers in our securities

lending program as of December 31, 2020 and 2019.

Risks associated with securities lending programs

Our securities lending program exposes us to liquidity risk if we did not have enough cash or collateral

readily available to return to the counterparty when required to do so under the agreement. We manage this risk

by regularly monitoring our available sources of cash and collateral to ensure we can meet short-term liquidity

demands under normal and stressed scenarios.

We are also exposed to credit risk in the event of default of our counterparties or changes in collateral

values. This risk is significantly reduced because our program requires over collateralization and collateral

exposures are trued up on a daily basis. We manage this risk by using multiple counterparties and ensuring that

changes in required collateral are monitored and adjusted daily. We also monitor the creditworthiness, including

credit ratings, of our counterparties on a regular basis.

Non-U.S. government . . . . . . . . . . . . . . .
U.S. corporate . . . . . . . . . . . . . . . . . . . . .
Non-U.S. corporate . . . . . . . . . . . . . . . . .

Subtotal, fixed maturity securities . . . . .

Equity securities . . . . . . . . . . . . . . . . . . . . . . .

Total securities lending . . . . . . . . . . . . . . . . . . . . . .

$ 1
40
19

60

7

$67

$—
—
—

—

—

$—

$—
—
—

—

—

$—

2019

$—
—
—

—

—

$—

$ 1
40
19

60

7

$67

(Amounts in millions)

Securities lending:

Fixed maturity securities:

Overnight and
continuous

Up to 30 days

31—90 days

Greater than
90 days

Total

Non-U.S. government . . . . . . . . . . . . . . .
U.S. corporate . . . . . . . . . . . . . . . . . . . . .
Non-U.S. corporate . . . . . . . . . . . . . . . . .

Subtotal, fixed maturity securities . . . . .

Total securities lending . . . . . . . . . . . . . . . . . . . . . .

$ 1
34
16

51

$51

$—
—
—

—

$—

$—
—
—

—

$—

$—
—
—

—

$—

$ 1
34
16

51

$51

(13) Income Taxes

Income from continuing operations before income taxes included the following components for the years

ended December 31:

(Amounts in millions)

2020

2019

2018

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 953
78

Income from continuing operations before income taxes . . .

$1,031

$540
174

$714

$ (57)
194

$137

262

263

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The total provision for income taxes was as follows for the years ended December 31:

foreign operations. The TCJA rate items in 2018 related to estimates made under Staff Accounting Bulletin 118

(Amounts in millions)

2020

2019

2018

Current federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Deferred state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

Current foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

4
230

234

$

6
111

117

2
2

4

(4)
36

32

2
5

7

48
23

71

$ 11
(14)

(3)

1
—

1

30
42

72

Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .

$270

$195

$ 70

Our current income tax payable was $8 million and $19 million as of December 31, 2020 and 2019,

respectively.

The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the

years ended December 31:

Statutory U.S. federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (reduction) in rate resulting from:

2020

2019

2018

21.0% 21.0% 21.0%

1.3
Effect of foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
2.7
Swaps terminated prior to the TCJA . . . . . . . . . . . . . . . . . . . . . .
3.3
0.2
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.1
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
—
Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.2 —
Tax favored investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.4)
Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4
0.8
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
TCJA, impact from change in tax rate . . . . . . . . . . . . . . . . . . . . . —
TCJA, impact on foreign operations . . . . . . . . . . . . . . . . . . . . . . —

(0.6)
0.5
0.8
—
—

15.3
16.6
4.2
(5.4)
(2.4)
(3.4)
3.0
0.2
8.8
(7.1)

Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26.2% 27.3% 50.8%

The effective tax rate for the year ended December 31, 2020 decreased compared to the year ended

December 31, 2019 primarily attributable to a lower effect from foreign operations and gains on forward starting
swaps settled prior to the enactment of the TCJA, which will continue to be tax effected at 35% as they are
amortized into net investment income, in relation to higher pre-tax income in 2020.

For the year ended December 31, 2019, the decrease in the effective rate compared to the year ended
December 31, 2018 was primarily attributable to higher pre-tax income in 2019. The higher pre-tax income in
2019 resulted in a lower impact to the effective tax rate from gains on forward starting swaps settled prior to the
enactment of the TCJA, which are tax effected at 35% as they are amortized into net investment income and from

which did not recur in 2019.

The components of our deferred income taxes were as follows as of December 31:

(Amounts in millions)

Assets:

2020

2019

Foreign tax credit carryforwards . . . . . . . . . . . . . . . . . . . .

$ 136

$ 320

Net operating loss carryforwards . . . . . . . . . . . . . . . . . . .

State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrued commission and general expenses . . . . . . . . . . .

Liabilities associated with discontinued operations . . . . .

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross deferred income tax assets . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred income tax assets . . . . . . . . . . . . . . . .

1,511

(412)

1,099

1,712

(347)

1,365

Liabilities:

Net unrealized gains on investment securities . . . . . . . . .

Net unrealized gains on derivatives . . . . . . . . . . . . . . . . .

DAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PVFP and other intangibles . . . . . . . . . . . . . . . . . . . . . . . .

Insurance reserves transition adjustment

. . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred income tax liabilities . . . . . . . . . . . . .

Net deferred income tax asset . . . . . . . . . . . . . . . . . .

$ 107

$ 425

73

386

633

114

126

20

23

601

70

171

10

123

17

992

129

336

686

114

37

48

42

396

71

275

21

148

29

940

The above valuation allowances of $412 million and $347 million as of December 31, 2020 and 2019,

respectively, related to state deferred tax assets and foreign net operating losses. The state deferred tax assets

related primarily to the future deductions associated with the Section 338 elections and non-insurance net

operating loss (“NOL”) carryforwards.

U.S. federal NOL carryforwards amounted to $185 million as of December 31, 2020, and, if unused, will

expire beginning in 2028. The benefits of the NOL carryforwards have been recognized in our consolidated

financial statements, except to the extent of the valuation allowances described above relating to state and foreign

taxes. Foreign tax credit carryforwards amounted to $136 million as of December 31, 2020, and will begin to

expire in 2025. Also included in the net operating loss carryforwards line are foreign NOL carryforwards, fully

offset by a valuation allowance.

Our ability to realize our net deferred tax asset of $107 million, which includes deferred tax assets related to

NOL and foreign tax credit carryforwards, is primarily dependent upon generating sufficient taxable income in

future years. Management has concluded that there is sufficient positive evidence to support the expected

realization of the net operating losses and foreign tax credit carryforwards. This positive evidence includes the

fact that: (i) we are currently in a cumulative three-year income position; (ii) our U.S. operating forecasts are

264

265

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The total provision for income taxes was as follows for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Current federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

4

$

6

Deferred federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

Deferred state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

Current foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

230

234

2

2

4

(4)

36

32

111

117

2

5

7

48

23

71

$ 11

(14)

(3)

—

1

1

30

42

72

Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .

$270

$195

$ 70

Our current income tax payable was $8 million and $19 million as of December 31, 2020 and 2019,

respectively.

years ended December 31:

The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the

Statutory U.S. federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . .

21.0% 21.0% 21.0%

Increase (reduction) in rate resulting from:

Effect of foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Swaps terminated prior to the TCJA . . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.2 —

Tax favored investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.4)

(0.6)

Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TCJA, impact from change in tax rate . . . . . . . . . . . . . . . . . . . . . —

TCJA, impact on foreign operations . . . . . . . . . . . . . . . . . . . . . . —

2020

2019

2018

1.3

2.7

0.2

0.4

0.8

2.2

3.3

0.1

—

0.5

0.8

—

—

15.3

16.6

4.2

(5.4)

(2.4)

(3.4)

3.0

0.2

8.8

(7.1)

Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26.2% 27.3% 50.8%

The effective tax rate for the year ended December 31, 2020 decreased compared to the year ended

December 31, 2019 primarily attributable to a lower effect from foreign operations and gains on forward starting

swaps settled prior to the enactment of the TCJA, which will continue to be tax effected at 35% as they are

amortized into net investment income, in relation to higher pre-tax income in 2020.

For the year ended December 31, 2019, the decrease in the effective rate compared to the year ended

December 31, 2018 was primarily attributable to higher pre-tax income in 2019. The higher pre-tax income in

2019 resulted in a lower impact to the effective tax rate from gains on forward starting swaps settled prior to the

enactment of the TCJA, which are tax effected at 35% as they are amortized into net investment income and from

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

foreign operations. The TCJA rate items in 2018 related to estimates made under Staff Accounting Bulletin 118
which did not recur in 2019.

The components of our deferred income taxes were as follows as of December 31:

(Amounts in millions)

Assets:

2020

2019

Foreign tax credit carryforwards . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . .
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued commission and general expenses . . . . . . . . . . .
Liabilities associated with discontinued operations . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 136
73
386
633
114
126
20
23

$ 320
129
336
686
114
37
48
42

Gross deferred income tax assets . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred income tax assets . . . . . . . . . . . . . . . .

1,511
(412)

1,099

1,712
(347)

1,365

Liabilities:

Net unrealized gains on investment securities . . . . . . . . .
Net unrealized gains on derivatives . . . . . . . . . . . . . . . . .
DAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PVFP and other intangibles . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Insurance reserves transition adjustment
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred income tax liabilities . . . . . . . . . . . . .

601
70
171
10
123
17

992

396
71
275
21
148
29

940

Net deferred income tax asset . . . . . . . . . . . . . . . . . .

$ 107

$ 425

The above valuation allowances of $412 million and $347 million as of December 31, 2020 and 2019,

respectively, related to state deferred tax assets and foreign net operating losses. The state deferred tax assets
related primarily to the future deductions associated with the Section 338 elections and non-insurance net
operating loss (“NOL”) carryforwards.

U.S. federal NOL carryforwards amounted to $185 million as of December 31, 2020, and, if unused, will

expire beginning in 2028. The benefits of the NOL carryforwards have been recognized in our consolidated
financial statements, except to the extent of the valuation allowances described above relating to state and foreign
taxes. Foreign tax credit carryforwards amounted to $136 million as of December 31, 2020, and will begin to
expire in 2025. Also included in the net operating loss carryforwards line are foreign NOL carryforwards, fully
offset by a valuation allowance.

Our ability to realize our net deferred tax asset of $107 million, which includes deferred tax assets related to

NOL and foreign tax credit carryforwards, is primarily dependent upon generating sufficient taxable income in
future years. Management has concluded that there is sufficient positive evidence to support the expected
realization of the net operating losses and foreign tax credit carryforwards. This positive evidence includes the
fact that: (i) we are currently in a cumulative three-year income position; (ii) our U.S. operating forecasts are

264

265

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

profitable, which include in-force premium rate increases and associated benefit reductions already obtained in
our long-term care insurance business; and (iii) overall domestic losses that we have incurred are allowed to be
reclassified as foreign source income which, along with future projections of foreign source income, is sufficient
to cover the foreign tax credits being carried forward. After consideration of all available evidence, we have
concluded that it is more likely than not that our deferred tax assets, with the exception of certain foreign net
operating losses and state deferred tax assets for which a valuation allowance has been established, will be
realized. If our actual results do not validate the current projections of pre-tax income, we may be required to
record an additional valuation allowance which could have a material impact on our consolidated financial
statements in future periods.

As a consequence of our separation from GE and our joint election with GE to treat that separation as an
asset sale under Section 338 of the Internal Revenue Code, we became entitled to additional tax deductions in
post IPO periods. We are obligated, pursuant to our Tax Matters Agreement with GE, to make fixed payments to
GE over the next three years on an after-tax basis and subject to a cumulative maximum of $640 million, which
is 80% of the projected tax savings associated with the Section 338 deductions. We recorded net interest expense
of $3 million, $4 million and $6 million for the years ended December 31, 2020, 2019 and 2018, respectively,
reflecting accretion of our liability at the Tax Matters Agreement rate of 5.72%. As of December 31, 2020 and
2019, we have recorded the estimated present value of our remaining fixed obligation to GE of $41 million and
$54 million, respectively, as a liability in our consolidated balance sheets. Both our IPO-related deferred tax
assets and our obligation to GE are estimates that are subject to change. There is also a contingent portion of the
obligation included in other liabilities in our consolidated balance sheets.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

(Amounts in millions)

Balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax positions related to the current period:

Gross additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax positions related to the prior years:

Gross additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

$ 64

$ 79

2018

$42

—

(3)

1

—

—
(15)

—
—

2
(3)

40
(2)

Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 62

$ 64

$79

The total amount of unrecognized tax benefits was $62 million as of December 31, 2020, which if

recognized would affect the effective tax rate on continuing operations by $44 million. These unrecognized tax
benefits included the impact of foreign currency translation from our international operations.

We believe it is reasonably possible that in 2021, due to the potential resolution of certain potential

settlements and other administrative and statutory proceedings and limitations, up to approximately $44 million
unrecognized tax benefits will be recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits as components of income

tax expense. We recorded less than $1 million of benefits, in each respective year, related to interest and
penalties for 2020, 2019 and 2018.

Our companies have elected to file a single U.S. consolidated income tax return (the “life/non-life
consolidated return”). All companies domesticated in the United States are included in the life/non-life

consolidated return as allowed by the tax law and regulations. We have a tax sharing agreement in place and all

intercompany balances related to this agreement are settled at least annually. With possible exceptions, we are no

longer subject to U.S. federal tax examinations for years through 2016. Potential state and local examinations for

those years are generally restricted to results that are based on closed U.S. federal examinations. Our Australia

mortgage insurance business is generally no longer subject to examinations by the Australian Tax Office

(“ATO”) for years prior to 2015. In September 2019, the ATO completed a Streamlined Assurance Review of

Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) for the years 2016 and 2017, where

Genworth Australia obtained a high level of assurance that the right Australian income tax outcomes were

reported in Genworth Australia’s income tax returns for 2016 and 2017.

(14) Supplemental Cash Flow Information

Net cash paid for taxes was $12 million, $31 million and $33 million and cash paid for interest was

$196 million, $292 million and $309 million for the years ended December 31, 2020, 2019 and 2018,

respectively.

(15) Stock-Based Compensation

Prior to May 2012, we granted share-based awards to employees and directors, including stock options,

SARs, RSUs and deferred stock units (“DSUs”) under the 2004 Genworth Financial, Inc. Omnibus Incentive

Plan (the “2004 Omnibus Incentive Plan”). In May 2012, the 2012 Genworth Financial, Inc. Omnibus Incentive

Plan (the “2012 Omnibus Incentive Plan”) was approved by stockholders. Under the 2012 Omnibus Incentive

Plan, we were authorized to grant 16 million equity awards, plus a number of additional shares not to exceed

25 million underlying awards outstanding under the 2004 Omnibus Incentive Plan. In December 2018, the 2018

Genworth Financial, Inc. Omnibus Incentive Plan (the “2018 Omnibus Incentive Plan”) was approved by

stockholders. Under the 2018 Omnibus Incentive Plan, we are authorized to grant 25 million equity awards, plus

a number of additional shares not to exceed 20 million underlying awards outstanding under the prior Plans. The

2004 Omnibus Incentive Plan together with the 2012 Omnibus Incentive Plan and the 2018 Omnibus Incentive

Plan are referred to collectively as the “Omnibus Incentive Plans.”

We recorded stock-based compensation expense under the Omnibus Incentive Plans of $39 million,

$26 million and $35 million, respectively, for the years ended December 31, 2020, 2019 and 2018. For awards

issued prior to January 1, 2006, stock-based compensation expense was recognized on a graded vesting

attribution method over the awards’ respective vesting schedule. For awards issued after January 1, 2006, stock-

based compensation expense was recognized evenly on a straight-line attribution method over the awards’

respective vesting period.

For purposes of determining the fair value of stock-based payment awards on the date of grant, we have

historically used the Black-Scholes Model. However, no SARs or stock options were granted during 2020, 2019

and 2018 and therefore, the Black-Scholes Model was not used in those respective years. The Black-Scholes

Model requires the input of certain assumptions that involve judgment. Circumstances may change and

additional data may become available over time, which could result in changes to these assumptions and

methodologies.

During 2020, 2019 and 2018, we issued RSUs with average restriction periods of three years, with a fair

value of $3.53, $3.36 and $3.58, respectively, which were measured at the market price of a share of our Class A

Common Stock on the grant date.

266

267

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

profitable, which include in-force premium rate increases and associated benefit reductions already obtained in

our long-term care insurance business; and (iii) overall domestic losses that we have incurred are allowed to be

reclassified as foreign source income which, along with future projections of foreign source income, is sufficient

to cover the foreign tax credits being carried forward. After consideration of all available evidence, we have

concluded that it is more likely than not that our deferred tax assets, with the exception of certain foreign net

operating losses and state deferred tax assets for which a valuation allowance has been established, will be

realized. If our actual results do not validate the current projections of pre-tax income, we may be required to

record an additional valuation allowance which could have a material impact on our consolidated financial

statements in future periods.

As a consequence of our separation from GE and our joint election with GE to treat that separation as an

asset sale under Section 338 of the Internal Revenue Code, we became entitled to additional tax deductions in

post IPO periods. We are obligated, pursuant to our Tax Matters Agreement with GE, to make fixed payments to

GE over the next three years on an after-tax basis and subject to a cumulative maximum of $640 million, which

is 80% of the projected tax savings associated with the Section 338 deductions. We recorded net interest expense

of $3 million, $4 million and $6 million for the years ended December 31, 2020, 2019 and 2018, respectively,

reflecting accretion of our liability at the Tax Matters Agreement rate of 5.72%. As of December 31, 2020 and

2019, we have recorded the estimated present value of our remaining fixed obligation to GE of $41 million and

$54 million, respectively, as a liability in our consolidated balance sheets. Both our IPO-related deferred tax

assets and our obligation to GE are estimates that are subject to change. There is also a contingent portion of the

obligation included in other liabilities in our consolidated balance sheets.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

(Amounts in millions)

2020

2019

Balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 64

$ 79

Tax positions related to the current period:

Gross additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax positions related to the prior years:

Gross additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(3)

1

—

—

(15)

—

—

2018

$42

2

(3)

40

(2)

Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 62

$ 64

$79

The total amount of unrecognized tax benefits was $62 million as of December 31, 2020, which if

recognized would affect the effective tax rate on continuing operations by $44 million. These unrecognized tax

benefits included the impact of foreign currency translation from our international operations.

We believe it is reasonably possible that in 2021, due to the potential resolution of certain potential

settlements and other administrative and statutory proceedings and limitations, up to approximately $44 million

unrecognized tax benefits will be recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits as components of income

tax expense. We recorded less than $1 million of benefits, in each respective year, related to interest and

penalties for 2020, 2019 and 2018.

Our companies have elected to file a single U.S. consolidated income tax return (the “life/non-life

consolidated return”). All companies domesticated in the United States are included in the life/non-life

consolidated return as allowed by the tax law and regulations. We have a tax sharing agreement in place and all
intercompany balances related to this agreement are settled at least annually. With possible exceptions, we are no
longer subject to U.S. federal tax examinations for years through 2016. Potential state and local examinations for
those years are generally restricted to results that are based on closed U.S. federal examinations. Our Australia
mortgage insurance business is generally no longer subject to examinations by the Australian Tax Office
(“ATO”) for years prior to 2015. In September 2019, the ATO completed a Streamlined Assurance Review of
Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) for the years 2016 and 2017, where
Genworth Australia obtained a high level of assurance that the right Australian income tax outcomes were
reported in Genworth Australia’s income tax returns for 2016 and 2017.

(14) Supplemental Cash Flow Information

Net cash paid for taxes was $12 million, $31 million and $33 million and cash paid for interest was

$196 million, $292 million and $309 million for the years ended December 31, 2020, 2019 and 2018,
respectively.

(15) Stock-Based Compensation

Prior to May 2012, we granted share-based awards to employees and directors, including stock options,
SARs, RSUs and deferred stock units (“DSUs”) under the 2004 Genworth Financial, Inc. Omnibus Incentive
Plan (the “2004 Omnibus Incentive Plan”). In May 2012, the 2012 Genworth Financial, Inc. Omnibus Incentive
Plan (the “2012 Omnibus Incentive Plan”) was approved by stockholders. Under the 2012 Omnibus Incentive
Plan, we were authorized to grant 16 million equity awards, plus a number of additional shares not to exceed
25 million underlying awards outstanding under the 2004 Omnibus Incentive Plan. In December 2018, the 2018
Genworth Financial, Inc. Omnibus Incentive Plan (the “2018 Omnibus Incentive Plan”) was approved by
stockholders. Under the 2018 Omnibus Incentive Plan, we are authorized to grant 25 million equity awards, plus
a number of additional shares not to exceed 20 million underlying awards outstanding under the prior Plans. The
2004 Omnibus Incentive Plan together with the 2012 Omnibus Incentive Plan and the 2018 Omnibus Incentive
Plan are referred to collectively as the “Omnibus Incentive Plans.”

We recorded stock-based compensation expense under the Omnibus Incentive Plans of $39 million,
$26 million and $35 million, respectively, for the years ended December 31, 2020, 2019 and 2018. For awards
issued prior to January 1, 2006, stock-based compensation expense was recognized on a graded vesting
attribution method over the awards’ respective vesting schedule. For awards issued after January 1, 2006, stock-
based compensation expense was recognized evenly on a straight-line attribution method over the awards’
respective vesting period.

For purposes of determining the fair value of stock-based payment awards on the date of grant, we have
historically used the Black-Scholes Model. However, no SARs or stock options were granted during 2020, 2019
and 2018 and therefore, the Black-Scholes Model was not used in those respective years. The Black-Scholes
Model requires the input of certain assumptions that involve judgment. Circumstances may change and
additional data may become available over time, which could result in changes to these assumptions and
methodologies.

During 2020, 2019 and 2018, we issued RSUs with average restriction periods of three years, with a fair
value of $3.53, $3.36 and $3.58, respectively, which were measured at the market price of a share of our Class A
Common Stock on the grant date.

266

267

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

During 2020, 2019 and 2018, we granted performance stock units (“PSUs”) with a fair value of $3.03, $4.61

The following table summarizes stock option activity as of December 31, 2020 and 2019:

Shares subject

Weighted-average

to option

exercise price

(Shares in thousands)

Balance as of January 1, 2019 . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .

Expired and forfeited . . . . . . . . . . . . . . . . .

Balance as of January 1, 2020 . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .

Expired and forfeited . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . .

Exercisable as of December 31, 2020 . . . . . . . .

1,118

—

(200)

(117)

801

—

—

(800)

1

1

$11.77

$ —

$ 2.46

$11.30

$14.17

$ —

$ —

$14.17

$12.75

$12.75

The following table summarizes information about stock options outstanding as of December 31, 2020:

Exercise/Average price

$12.75 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outstanding and exercisable

Shares in

thousands

1

1

Average

life (1)

0.11

(1) Average contractual life remaining in years.

(2)

Shares for both options outstanding and exercisable have no aggregate intrinsic value.

and $3.58, respectively. The PSUs were granted at market price as of the approval date by our Board of
Directors. PSUs may be earned over a three-year period based upon the achievement of certain performance
goals.

The PSUs granted in 2020 have a three-year measurement period starting on January 1, 2020 going through

December 31, 2022. The performance metrics are based on adjusted operating income of our U.S. Mortgage
Insurance and Australia Mortgage Insurance segments and gross incremental annual premiums in our long-term
care insurance business, defined as approved weighted-average premium rate increases multiplied by the
annualized in-force premiums. See note 18 for our definition of adjusted operating income.

The PSUs granted in 2019 have a three-year measurement period starting on January 1, 2019 going through

December 31, 2021. The performance metric is based on consolidated adjusted operating income. The PSUs
granted in 2018 have three separate and distinct performance measurement periods starting on January 1 going
through December 31 for the years ended December 31, 2018, 2019 and 2020, respectively. The performance
metric is based on a range of consolidated annual adjusted operating income.

For all PSU awards granted, the compensation committee of our Board of Directors determines and
approves no later than March 15, following the end of the three-year performance period for each applicable
performance period, the number of units earned and vested for each distinct performance period.

For the years ended December 31, 2020, 2019 and 2018, we recorded $18 million, $5 million and

$7 million, respectively, of expense associated with our PSUs.

In 2020, 2019 and 2018, we granted cash awards with a fair value of $1.00. We have time-based cash
awards, which vest over three years, with a third of the payout occurring per year as determined by the vesting
period, beginning on the first anniversary of the grant date. We also have performance-based cash awards which
vest and payout after three years.

The following table summarizes cash award activity as of December 31, 2020 and 2019:

(Number of awards, in millions)

Balance as of January 1, 2019 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance adjustment
. . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 1, 2020 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance adjustment
. . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . . .

Time-based
cash awards

Performance-based
cash awards

24
16
—
(12)
(2)

26
17
—
(11)
(2)

30

17
—

1
(4)
(1)

13
—

1
(5)
(2)

7

268

269

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table summarizes stock option activity as of December 31, 2020 and 2019:

(Shares in thousands)

Balance as of January 1, 2019 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired and forfeited . . . . . . . . . . . . . . . . .

Balance as of January 1, 2020 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired and forfeited . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . .

Exercisable as of December 31, 2020 . . . . . . . .

Shares subject
to option

Weighted-average
exercise price

1,118
—
(200)
(117)

801
—
—
(800)

1

1

$11.77
$ —
$ 2.46
$11.30

$14.17
$ —
$ —
$14.17

$12.75

$12.75

The following table summarizes information about stock options outstanding as of December 31, 2020:

Exercise/Average price

$12.75 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outstanding and exercisable

Shares in
thousands

1
1

Average
life (1)

0.11

(1) Average contractual life remaining in years.
(2)

Shares for both options outstanding and exercisable have no aggregate intrinsic value.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

During 2020, 2019 and 2018, we granted performance stock units (“PSUs”) with a fair value of $3.03, $4.61

and $3.58, respectively. The PSUs were granted at market price as of the approval date by our Board of

Directors. PSUs may be earned over a three-year period based upon the achievement of certain performance

goals.

The PSUs granted in 2020 have a three-year measurement period starting on January 1, 2020 going through

December 31, 2022. The performance metrics are based on adjusted operating income of our U.S. Mortgage

Insurance and Australia Mortgage Insurance segments and gross incremental annual premiums in our long-term

care insurance business, defined as approved weighted-average premium rate increases multiplied by the

annualized in-force premiums. See note 18 for our definition of adjusted operating income.

The PSUs granted in 2019 have a three-year measurement period starting on January 1, 2019 going through

December 31, 2021. The performance metric is based on consolidated adjusted operating income. The PSUs

granted in 2018 have three separate and distinct performance measurement periods starting on January 1 going

through December 31 for the years ended December 31, 2018, 2019 and 2020, respectively. The performance

metric is based on a range of consolidated annual adjusted operating income.

For all PSU awards granted, the compensation committee of our Board of Directors determines and

approves no later than March 15, following the end of the three-year performance period for each applicable

performance period, the number of units earned and vested for each distinct performance period.

For the years ended December 31, 2020, 2019 and 2018, we recorded $18 million, $5 million and

$7 million, respectively, of expense associated with our PSUs.

In 2020, 2019 and 2018, we granted cash awards with a fair value of $1.00. We have time-based cash

awards, which vest over three years, with a third of the payout occurring per year as determined by the vesting

period, beginning on the first anniversary of the grant date. We also have performance-based cash awards which

vest and payout after three years.

The following table summarizes cash award activity as of December 31, 2020 and 2019:

Time-based

cash awards

Performance-based

cash awards

(Number of awards, in millions)

Balance as of January 1, 2019 . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance adjustment

. . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 1, 2020 . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance adjustment

. . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . . .

24

16

—

(12)

(2)

26

17

—

(11)

(2)

30

17

—

1

(4)

(1)

13

—

1

(5)

(2)

7

268

269

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following tables summarize the status of our other equity-based awards as of December 31, 2020 and

2019:

(Awards in thousands)

RSUs

PSUs

DSUs

SARs

Weighted-
average
grant
date fair
value

Number
of
awards

Balance as of January 1, 2019 . . . . . .
Granted . . . . . . . . . . . . . . . . . . .
Performance adjustment (1)
Exercised . . . . . . . . . . . . . . . . . .
Terminated . . . . . . . . . . . . . . . . .

$4.14
2,356
1,737
$3.36
. . . . — $ —
$4.32
(1,401)
$7.38
(17)

Balance as of January 1, 2020 . . . . . .
Granted . . . . . . . . . . . . . . . . . . .
Performance adjustment (1)
Exercised . . . . . . . . . . . . . . . . . .
Terminated . . . . . . . . . . . . . . . . .

$3.51
2,675
1,683
$3.53
. . . . — $ —
$3.62
(1,336)
$3.47
(488)

Balance as of December 31, 2020 . . .

2,534

$3.48

5,734

Number
of
awards

4,930
2,852
495
(3,100)
(35)

5,142
2,789
443
(1,994)
(646)

Weighted-
average
fair
value

Number
of
awards

Weighted-
average
fair
value

Number
of
awards

Weighted-
average
grant
date fair
value

$3.30
$4.61
$2.81
$2.81
$2.81

$4.28
$3.03
$4.01
$4.01
$3.86

$3.79

1,266
265
—
(16)
—

1,515
237
—
(215)
—

$4.76
$2.71
$ —
$7.45
$ —

8,627

$3.42
— $ —
— $ —
$1.28
(50)
$3.70
(426)

8,151

$4.37
$2.00
$ —
$4.76
$ — (1,121)

$3.41
— $ —
— $ —
— $ —
$3.99

1,537

$3.95

7,030

$3.32

(1)

The performance adjustment relates to additional awards expected to be earned through the achievement of
certain performance metrics.

As of December 31, 2020 and 2019, total unrecognized stock-based compensation expense related to
non-vested awards not yet recognized was $15 million and $17 million, respectively. This expense is expected to
be recognized over a weighted-average period of approximately one year.

(16) Fair Value of Financial Instruments

Recurring Fair Value Measurements

In 2020, there were no stock options exercised. In 2019, there was less than $1 million in cash received from
stock options exercised. New shares were issued to settle all exercised awards. The actual tax benefit realized for
the tax deductions from the exercise of share-based awards was $4 million and $5 million as of December 31,
2020 and 2019, respectively.

270

271

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Genworth Australia, our indirect subsidiary and a public company, grants stock options and other equity-

based awards to its Australian employees. The following table summarizes the status of Genworth Australia’s

restricted share rights and long-term incentive plan as of December 31, 2020 and 2019:

Restricted

share rights

Long-term

incentive plan

(Shares subject to option, in thousands)

Balance as of January 1, 2019 . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Terminated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 1, 2020 . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Terminated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . . . . . . .

427

285

(348)

(29)

335

153

(322)

(8)

158

1,827

801

(163)

(576)

1,889

535

(178)

(1,077)

1,169

As of December 31, 2020 and 2019, none of the restricted share rights balances were vested. For the years

ended December 31, 2020 and 2019, we recorded $1 million of stock-based compensation in each year. For the

year ended December 31, 2018, we recorded less than $1 million of stock-based compensation. We also

estimated total unrecognized expense of less than $1 million in each year for the years ended December 31, 2020,

2019 and 2018 related to these awards.

We have fixed maturity securities, short-term investments, equity securities, limited partnerships,

derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial

instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to

determine fair value by class of instrument.

Fixed maturity, short-term investments and equity securities

The fair value of fixed maturity securities, short-term investments and equity securities are estimated

primarily based on information derived from third-party pricing services (“pricing services”), internal models

and/or broker quotes, which use a market approach, income approach or a combination of the market and income

approach depending on the type of instrument and availability of information. In general, a market approach is

utilized if there is readily available and relevant market activity for an individual security. In certain cases where

market information is not available for a specific security but is available for similar securities, that security is

valued using market information for similar securities, which is also a market approach. When market

information is not available for a specific security (or similar securities) or is available but such information is

less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For

securities with optionality, such as call or prepayment features (including mortgage-backed or asset-backed

securities), an income approach may be used. In addition, a combination of the results from market and income

approaches may be used to estimate fair value. These valuation techniques may change from period to period,

based on the relevance and availability of market data.

The following tables summarize the status of our other equity-based awards as of December 31, 2020 and

2019:

RSUs

PSUs

DSUs

SARs

Weighted-

average

grant

date fair

value

Number

of

awards

(Awards in thousands)

Balance as of January 1, 2019 . . . . . .

Granted . . . . . . . . . . . . . . . . . . .

2,356

1,737

$4.14

$3.36

Performance adjustment (1)

. . . . — $ —

Exercised . . . . . . . . . . . . . . . . . .

(1,401)

Terminated . . . . . . . . . . . . . . . . .

(17)

Balance as of January 1, 2020 . . . . . .

Granted . . . . . . . . . . . . . . . . . . .

2,675

1,683

Performance adjustment (1)

. . . . — $ —

Exercised . . . . . . . . . . . . . . . . . .

(1,336)

Terminated . . . . . . . . . . . . . . . . .

(488)

Balance as of December 31, 2020 . . .

2,534

$4.32

$7.38

$3.51

$3.53

$3.62

$3.47

$3.48

Weighted-

average

Weighted-

average

Number

of

awards

4,930

2,852

495

(3,100)

(35)

5,142

2,789

443

(1,994)

(646)

5,734

fair

value

$3.30

$4.61

$2.81

$2.81

$2.81

$4.28

$3.03

$4.01

$4.01

$3.86

$3.79

Number

of

awards

1,266

265

—

(16)

—

1,515

237

—

(215)

—

fair

value

$4.76

$2.71

$ —

$7.45

$ —

$4.37

$2.00

$ —

$4.76

Weighted-

average

grant

date fair

value

Number

of

awards

8,627

$3.42

— $ —

— $ —

(50)

(426)

8,151

$1.28

$3.70

$3.41

— $ —

— $ —

— $ —

$ — (1,121)

$3.99

1,537

$3.95

7,030

$3.32

(1)

The performance adjustment relates to additional awards expected to be earned through the achievement of

certain performance metrics.

In 2020, there were no stock options exercised. In 2019, there was less than $1 million in cash received from

stock options exercised. New shares were issued to settle all exercised awards. The actual tax benefit realized for

the tax deductions from the exercise of share-based awards was $4 million and $5 million as of December 31,

2020 and 2019, respectively.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Genworth Australia, our indirect subsidiary and a public company, grants stock options and other equity-
based awards to its Australian employees. The following table summarizes the status of Genworth Australia’s
restricted share rights and long-term incentive plan as of December 31, 2020 and 2019:

(Shares subject to option, in thousands)

Balance as of January 1, 2019 . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Terminated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 1, 2020 . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Terminated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . . . . . . .

Restricted
share rights

Long-term
incentive plan

427
285
(348)
(29)

335
153
(322)
(8)

158

1,827
801
(163)
(576)

1,889
535
(178)
(1,077)

1,169

As of December 31, 2020 and 2019, none of the restricted share rights balances were vested. For the years
ended December 31, 2020 and 2019, we recorded $1 million of stock-based compensation in each year. For the
year ended December 31, 2018, we recorded less than $1 million of stock-based compensation. We also
estimated total unrecognized expense of less than $1 million in each year for the years ended December 31, 2020,
2019 and 2018 related to these awards.

As of December 31, 2020 and 2019, total unrecognized stock-based compensation expense related to

non-vested awards not yet recognized was $15 million and $17 million, respectively. This expense is expected to

be recognized over a weighted-average period of approximately one year.

(16) Fair Value of Financial Instruments

Recurring Fair Value Measurements

We have fixed maturity securities, short-term investments, equity securities, limited partnerships,

derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial
instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to
determine fair value by class of instrument.

Fixed maturity, short-term investments and equity securities

The fair value of fixed maturity securities, short-term investments and equity securities are estimated
primarily based on information derived from third-party pricing services (“pricing services”), internal models
and/or broker quotes, which use a market approach, income approach or a combination of the market and income
approach depending on the type of instrument and availability of information. In general, a market approach is
utilized if there is readily available and relevant market activity for an individual security. In certain cases where
market information is not available for a specific security but is available for similar securities, that security is
valued using market information for similar securities, which is also a market approach. When market
information is not available for a specific security (or similar securities) or is available but such information is
less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For
securities with optionality, such as call or prepayment features (including mortgage-backed or asset-backed
securities), an income approach may be used. In addition, a combination of the results from market and income
approaches may be used to estimate fair value. These valuation techniques may change from period to period,
based on the relevance and availability of market data.

270

271

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Further, while we consider the valuations provided by pricing services and broker quotes to be of high
quality, management determines the fair value of our investment securities after considering all relevant and
available information.

A summary of the inputs used for our fixed maturity securities, short-term investments and equity securities

based on the level in which instruments are classified is included below. We have combined certain classes of

instruments together as the nature of the inputs is similar.

Level 1 measurements

prices for the identical instrument.

Equity securities. The primary inputs to the valuation of exchange-traded equity securities include quoted

Separate account assets. The fair value of separate account assets is based on the quoted prices of the

underlying fund investments and, therefore, represents Level 1 pricing.

Level 2 measurements

Fixed maturity securities

•

Third-party pricing services: In estimating the fair value of fixed maturity securities, approximately

90% of our portfolio was priced using third-party pricing services as of December 31, 2020. These

pricing services utilize industry-standard valuation techniques that include market-based approaches,

income-based approaches, a combination of market-based and income-based approaches or other

proprietary, internally generated models as part of the valuation processes. These third-party pricing

vendors maximize the use of publicly available data inputs to generate valuations for each asset class.

Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of

valuation at the time of pricing. Examples of significant inputs incorporated by pricing services may

include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data,

prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade

data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings

with our pricing services for the purpose of understanding the methodologies, techniques and inputs

used by the third-party pricing providers.

In general, we first obtain valuations from pricing services. If prices are unavailable for public securities, we

obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing
service nor broker quotes valuation is available, we determine fair value using internal models. For certain
private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal
model to determine fair value since transactions for similar securities are not readily observable and these
securities are not typically valued by pricing services.

Given our understanding of the pricing methodologies and procedures of pricing services, the securities
valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a
security or group of securities utilizes significant unobservable inputs, which would result in the valuation being
classified as Level 3.

Broker quotes are typically based on an income approach given the lack of available market data. As the

valuation typically includes significant unobservable inputs, we classify the securities where fair value is based
on our consideration of broker quotes as Level 3 measurements.

For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads

and utilize those in an internal model to determine fair value. Other inputs to the model include rating and
weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium,
which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of
our private placements. We utilize the estimated market yield to discount the expected cash flows of the security
to determine fair value. We utilize price caps for securities where the estimated market yield results in a
valuation that may exceed the amount that would be received in a market transaction. When a security does not
have an external rating, we assign the security an internal rating to determine the appropriate public bond spread
that should be utilized in the valuation. While we generally consider the public bond spreads by sector and
maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any
price caps utilized, liquidity premiums applied, and whether external ratings are available for our private
placements to determine whether the spreads utilized would be considered observable inputs. We classify private
securities without an external rating or public bond spread as Level 3. In general, a significant increase (decrease)
in credit spreads would have resulted in a significant decrease (increase) in the fair value for our fixed maturity
securities as of December 31, 2020.

For remaining securities priced using internal models, we determine fair value using an income approach.
We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair
value. Accordingly, the valuations are typically classified as Level 3.

Our assessment of whether or not there were significant unobservable inputs related to fixed maturity

securities was based on our observations obtained through the course of managing our investment portfolio,
including interaction with other market participants, observations related to the availability and consistency of
pricing and/or rating, and understanding of general market activity such as new issuance and the level of
secondary market trading for a class of securities. Additionally, we considered data obtained from pricing
services to determine whether our estimated values incorporate significant unobservable inputs that would result
in the valuation being classified as Level 3.

272

273

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Further, while we consider the valuations provided by pricing services and broker quotes to be of high

quality, management determines the fair value of our investment securities after considering all relevant and

available information.

A summary of the inputs used for our fixed maturity securities, short-term investments and equity securities

based on the level in which instruments are classified is included below. We have combined certain classes of
instruments together as the nature of the inputs is similar.

Level 1 measurements

Equity securities. The primary inputs to the valuation of exchange-traded equity securities include quoted

prices for the identical instrument.

Separate account assets. The fair value of separate account assets is based on the quoted prices of the

underlying fund investments and, therefore, represents Level 1 pricing.

Level 2 measurements

Fixed maturity securities

•

Third-party pricing services: In estimating the fair value of fixed maturity securities, approximately
90% of our portfolio was priced using third-party pricing services as of December 31, 2020. These
pricing services utilize industry-standard valuation techniques that include market-based approaches,
income-based approaches, a combination of market-based and income-based approaches or other
proprietary, internally generated models as part of the valuation processes. These third-party pricing
vendors maximize the use of publicly available data inputs to generate valuations for each asset class.
Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of
valuation at the time of pricing. Examples of significant inputs incorporated by pricing services may
include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data,
prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade
data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings
with our pricing services for the purpose of understanding the methodologies, techniques and inputs
used by the third-party pricing providers.

In general, we first obtain valuations from pricing services. If prices are unavailable for public securities, we

obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing

service nor broker quotes valuation is available, we determine fair value using internal models. For certain

private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal

model to determine fair value since transactions for similar securities are not readily observable and these

securities are not typically valued by pricing services.

Given our understanding of the pricing methodologies and procedures of pricing services, the securities

valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a

security or group of securities utilizes significant unobservable inputs, which would result in the valuation being

classified as Level 3.

Broker quotes are typically based on an income approach given the lack of available market data. As the

valuation typically includes significant unobservable inputs, we classify the securities where fair value is based

on our consideration of broker quotes as Level 3 measurements.

For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads

and utilize those in an internal model to determine fair value. Other inputs to the model include rating and

weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium,

which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of

our private placements. We utilize the estimated market yield to discount the expected cash flows of the security

to determine fair value. We utilize price caps for securities where the estimated market yield results in a

valuation that may exceed the amount that would be received in a market transaction. When a security does not

have an external rating, we assign the security an internal rating to determine the appropriate public bond spread

that should be utilized in the valuation. While we generally consider the public bond spreads by sector and

maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any

price caps utilized, liquidity premiums applied, and whether external ratings are available for our private

placements to determine whether the spreads utilized would be considered observable inputs. We classify private

securities without an external rating or public bond spread as Level 3. In general, a significant increase (decrease)

in credit spreads would have resulted in a significant decrease (increase) in the fair value for our fixed maturity

securities as of December 31, 2020.

For remaining securities priced using internal models, we determine fair value using an income approach.

We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair

value. Accordingly, the valuations are typically classified as Level 3.

Our assessment of whether or not there were significant unobservable inputs related to fixed maturity

securities was based on our observations obtained through the course of managing our investment portfolio,

including interaction with other market participants, observations related to the availability and consistency of

pricing and/or rating, and understanding of general market activity such as new issuance and the level of

secondary market trading for a class of securities. Additionally, we considered data obtained from pricing

services to determine whether our estimated values incorporate significant unobservable inputs that would result

in the valuation being classified as Level 3.

272

273

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table presents a summary of the significant inputs used by our pricing services for certain fair

value measurements of fixed maturity securities that are classified as Level 2 as of December 31, 2020:

(Amounts in millions)
U.S. government, agencies and

government-sponsored
enterprises . . . . . . . . . . . . . . . . .

$4,805

Price quotes from
trading desk, broker
feeds

Fair
value

Primary methodologies

Significant inputs

State and political subdivisions . . .

$3,104 Multi-dimensional

attribute-based
modeling systems,
third-party pricing
vendors

Non-U.S. government . . . . . . . . . .

$1,559 Matrix pricing, spread

priced to benchmark
curves, price quotes
from market makers

U.S. corporate . . . . . . . . . . . . . . . . $32,367 Multi-dimensional

attribute-based
modeling systems,
broker quotes, price
quotes from market
makers, OAS-based
models

Non-U.S. corporate . . . . . . . . . . . .

$9,604 Multi-dimensional

attribute-based
modeling systems,
OAS-based models,
price quotes from
market makers

Residential mortgage-backed . . . .

$1,895 OAS-based models,

single factor binomial
models, internally
priced

Commercial mortgage-backed . . .

$2,954 Multi-dimensional

attribute-based
modeling systems,
pricing matrix, spread
matrix priced to swap
curves, Trepp
commercial mortgage-
backed securities
analytics model

Other asset-backed . . . . . . . . . . . .

$3,236 Multi-dimensional

attribute-based
modeling systems,
spread matrix priced to
swap curves, price
quotes from market
makers

274

Bid side prices, trade prices, Option
Adjusted Spread (“OAS”) to swap
curve, Bond Market Association OAS,
Treasury Curve, Agency Bullet Curve,
maturity to issuer spread
Trade prices, material event notices,
Municipal Market Data benchmark
yields, broker quotes

Benchmark yields, trade prices, broker
quotes, comparative transactions, issuer
spreads, bid-offer spread, market
research publications, third-party pricing
sources
Bid side prices to Treasury Curve, Issuer
Curve, which includes sector, quality,
duration, OAS percentage and change
for spread matrix, trade prices,
comparative transactions, Trade
Reporting and Compliance Engine
(“TRACE”) reports
Benchmark yields, trade prices, broker
quotes, comparative transactions, issuer
spreads, bid-offer spread, market
research publications, third-party pricing
sources

Prepayment and default assumptions,
aggregation of bonds with similar
characteristics, including collateral type,
vintage, tranche type, weighted-average
life, weighted-average loan age, issuer
program and delinquency ratio, pay up
and pay down factors, TRACE reports
Credit risk, interest rate risk,
prepayment speeds, new issue data,
collateral performance, origination year,
tranche type, original credit ratings,
weighted-average life, cash flows,
spreads derived from broker quotes, bid
side prices, spreads to daily updated
swap curves, TRACE reports

Spreads to daily updated swap curves,
spreads derived from trade prices and
broker quotes, bid side prices, new issue
data, collateral performance, analysis of
prepayment speeds, cash flows,
collateral loss analytics, historical issue
analysis, trade data from market makers,
TRACE reports

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

•

Internal models: A portion of our U.S. corporate and non-U.S. corporate securities are valued using

internal models. The fair value of these fixed maturity securities was $1,475 million and $702 million,

respectively, as of December 31, 2020. Internally modeled securities are primarily private fixed

maturity securities where we use market observable inputs such as an interest rate yield curve,

published credit spreads for similar securities based on the external ratings of the instrument and

related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity

premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are

established using inputs from market participants.

Equity securities. The primary inputs to the valuation include quoted prices for identical assets, or similar

The fair value of securities held as collateral is primarily based on Level 2 inputs from market information

for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices

The fair value of short-term investments classified as Level 2 is determined after considering prices

assets in markets that are not active.

Securities lending collateral

obtained by pricing services.

Short-term investments

obtained by pricing services.

Level 3 measurements

Fixed maturity securities

• Broker quotes: A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate,

residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are

valued using broker quotes. Broker quotes are obtained from third-party providers that have current

market knowledge to provide a reasonable price for securities not routinely priced by pricing services.

Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed

maturity securities priced by broker quotes was $730 million as of December 31, 2020.

•

Internal models: A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate,

residential mortgage-backed and other asset-backed securities are valued using internal models. The

primary inputs to the valuation of the bond population include quoted prices for identical assets, or

similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer

rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using

an internal model using market observable inputs such as the interest rate yield curve, as well as

published credit spreads for similar securities, which includes significant unobservable inputs.

Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed

maturity securities. Price caps are established using inputs from market participants. For structured

securities, the primary inputs to the valuation include quoted prices for identical assets, or similar

assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-

average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes,

collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans,

geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields

and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models

was $3,359 million as of December 31, 2020.

Equity securities. The primary inputs to the valuation include broker quotes where the underlying inputs are

unobservable and for internal models, structure of the security and issuer rating.

275

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

•

Internal models: A portion of our U.S. corporate and non-U.S. corporate securities are valued using
internal models. The fair value of these fixed maturity securities was $1,475 million and $702 million,
respectively, as of December 31, 2020. Internally modeled securities are primarily private fixed
maturity securities where we use market observable inputs such as an interest rate yield curve,
published credit spreads for similar securities based on the external ratings of the instrument and
related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity
premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are
established using inputs from market participants.

Equity securities. The primary inputs to the valuation include quoted prices for identical assets, or similar

assets in markets that are not active.

Securities lending collateral

The fair value of securities held as collateral is primarily based on Level 2 inputs from market information

for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices
obtained by pricing services.

U.S. corporate . . . . . . . . . . . . . . . . $32,367 Multi-dimensional

Short-term investments

The fair value of short-term investments classified as Level 2 is determined after considering prices

obtained by pricing services.

Level 3 measurements

Fixed maturity securities

• Broker quotes: A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate,
residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are
valued using broker quotes. Broker quotes are obtained from third-party providers that have current
market knowledge to provide a reasonable price for securities not routinely priced by pricing services.
Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed
maturity securities priced by broker quotes was $730 million as of December 31, 2020.

•

Internal models: A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate,
residential mortgage-backed and other asset-backed securities are valued using internal models. The
primary inputs to the valuation of the bond population include quoted prices for identical assets, or
similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer
rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using
an internal model using market observable inputs such as the interest rate yield curve, as well as
published credit spreads for similar securities, which includes significant unobservable inputs.
Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed
maturity securities. Price caps are established using inputs from market participants. For structured
securities, the primary inputs to the valuation include quoted prices for identical assets, or similar
assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-
average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes,
collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans,
geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields
and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models
was $3,359 million as of December 31, 2020.

Equity securities. The primary inputs to the valuation include broker quotes where the underlying inputs are

unobservable and for internal models, structure of the security and issuer rating.

275

The following table presents a summary of the significant inputs used by our pricing services for certain fair

value measurements of fixed maturity securities that are classified as Level 2 as of December 31, 2020:

(Amounts in millions)

Primary methodologies

Significant inputs

Fair

value

U.S. government, agencies and

government-sponsored

Price quotes from

trading desk, broker

enterprises . . . . . . . . . . . . . . . . .

$4,805

feeds

State and political subdivisions . . .

$3,104 Multi-dimensional

Non-U.S. government . . . . . . . . . .

$1,559 Matrix pricing, spread

attribute-based

modeling systems,

third-party pricing

vendors

priced to benchmark

curves, price quotes

from market makers

attribute-based

modeling systems,

broker quotes, price

quotes from market

makers, OAS-based

models

attribute-based

modeling systems,

OAS-based models,

price quotes from

market makers

models, internally

priced

Bid side prices, trade prices, Option

Adjusted Spread (“OAS”) to swap

curve, Bond Market Association OAS,

Treasury Curve, Agency Bullet Curve,

maturity to issuer spread

Trade prices, material event notices,

Municipal Market Data benchmark

yields, broker quotes

Benchmark yields, trade prices, broker

quotes, comparative transactions, issuer

spreads, bid-offer spread, market

research publications, third-party pricing

sources

Bid side prices to Treasury Curve, Issuer

Curve, which includes sector, quality,

duration, OAS percentage and change

for spread matrix, trade prices,

comparative transactions, Trade

Reporting and Compliance Engine

(“TRACE”) reports

Benchmark yields, trade prices, broker

quotes, comparative transactions, issuer

spreads, bid-offer spread, market

research publications, third-party pricing

sources

characteristics, including collateral type,

vintage, tranche type, weighted-average

life, weighted-average loan age, issuer

program and delinquency ratio, pay up

and pay down factors, TRACE reports

attribute-based

modeling systems,

pricing matrix, spread

matrix priced to swap

curves, Trepp

prepayment speeds, new issue data,

collateral performance, origination year,

tranche type, original credit ratings,

weighted-average life, cash flows,

spreads derived from broker quotes, bid

commercial mortgage-

side prices, spreads to daily updated

swap curves, TRACE reports

backed securities

analytics model

attribute-based

modeling systems,

spread matrix priced to

swap curves, price

quotes from market

makers

274

Spreads to daily updated swap curves,

spreads derived from trade prices and

broker quotes, bid side prices, new issue

data, collateral performance, analysis of

prepayment speeds, cash flows,

collateral loss analytics, historical issue

analysis, trade data from market makers,

TRACE reports

Non-U.S. corporate . . . . . . . . . . . .

$9,604 Multi-dimensional

Residential mortgage-backed . . . .

$1,895 OAS-based models,

Prepayment and default assumptions,

single factor binomial

aggregation of bonds with similar

Commercial mortgage-backed . . .

$2,954 Multi-dimensional

Credit risk, interest rate risk,

Other asset-backed . . . . . . . . . . . .

$3,236 Multi-dimensional

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Net asset value

Limited partnerships

Limited partnerships are valued based on comparable market transactions, discounted future cash flows,
quoted market prices and/or estimates using the most recent data available for the underlying instrument. We
utilize the net asset value (“NAV”) from the underlying fund statements as a practical expedient for fair value.

Derivatives

We consider counterparty collateral arrangements and rights of set-off when evaluating our net credit risk

exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these
arrangements when determining whether any incremental adjustment should be made for both the counterparty’s
and our non-performance risk in measuring fair value for our derivative instruments. As a result of these
counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have
not recorded any incremental adjustment for our non-performance risk or the non-performance risk of the
derivative counterparty for our derivative assets or liabilities.

Interest rate swaps. The valuation of interest rate swaps is determined using an income approach. The
primary input into the valuation represents the forward interest rate swap curve, which is generally considered an
observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the
inputs into the valuation also include the total returns of certain bonds that would primarily be considered an
observable input and result in the derivative being classified as Level 2.

Foreign currency swaps. The valuation of foreign currency swaps is determined using an income approach.

The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency
exchange rates, both of which are considered observable inputs, and results in the derivative being classified as
Level 2.

Equity index options. We have equity index options associated with various equity indices. The valuation of

equity index options is determined using an income approach. The primary inputs into the valuation represent
forward interest rates, equity index volatility, equity index and time value component associated with the
optionality in the derivative. The equity index volatility surface is determined based on market information that is
not readily observable and is developed based upon inputs received from several third-party sources.
Accordingly, these options are classified as Level 3. As of December 31, 2020, a significant increase (decrease)
in the equity index volatility discussed above would have resulted in a significantly higher (lower) fair value
measurement.

Financial futures. The fair value of financial futures is based on the closing exchange prices. Accordingly,

these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the
margins on these contracts on a daily basis.

Other foreign currency contracts. We have certain foreign currency options classified as other foreign
currency contracts. The valuation of foreign currency options is determined using an income approach. The
primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates,
forward interest rate, foreign currency exchange rate volatility and time value component associated with the
optionality in the derivative, which are generally considered observable inputs and results in the derivative being
classified as Level 2. We also have foreign currency forward contracts where the valuation is determined using
an income approach. The primary inputs into the valuation represent the forward foreign currency exchange
rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.

GMWB embedded derivatives

We are required to bifurcate an embedded derivative for certain features associated with annuity products

and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the

GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an

income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and

fund correlation, and policyholder assumptions such as utilization, lapse and mortality. We determine fair value

using an internal model based on the various inputs noted above.

Non-performance risk is integrated into the discount rate used to value GMWB liabilities. Our discount rate

used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to

reflect an adjustment for the non-performance risk of the GMWB liabilities. As of December 31, 2020 and 2019,

the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $66 million and

$62 million, respectively.

We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity

index volatility and non-performance risk being considered the more significant unobservable inputs. As equity

index volatility increases, the fair value of the GMWB liabilities will increase. Any increase in non-performance

risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we

consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse

assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate

would increase the fair value. As of December 31, 2020, a significant change in the unobservable inputs

discussed above would have resulted in a significantly lower or higher fair value measurement.

Fixed index annuity embedded derivatives

We have fixed indexed annuity products where interest is credited to the policyholder’s account balance

based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded

at fair value. Fair value is determined using an income approach where the present value of the excess cash flows

above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs

used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity

index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to

incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and

expected future interest credited being considered significant unobservable inputs, we classify these instruments

as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As

expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of

December 31, 2020, a significant change in the unobservable inputs discussed above would have resulted in a

significantly lower or higher fair value measurement.

Indexed universal life embedded derivatives

We have indexed universal life insurance products where interest is credited to the policyholder’s account

balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and

recorded at fair value. Fair value is determined using an income approach where the present value of the excess

cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature.

The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term

equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount

rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder

behavior and expected future interest credited being considered significant unobservable inputs, we classify these

instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will

decrease. As expected future interest credited decreases, the value of our embedded derivative liability will

decrease. As of December 31, 2020, a significant change in the unobservable inputs discussed above would have

resulted in a significantly lower or higher fair value measurement.

276

277

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Net asset value

Limited partnerships

Derivatives

Limited partnerships are valued based on comparable market transactions, discounted future cash flows,

quoted market prices and/or estimates using the most recent data available for the underlying instrument. We

utilize the net asset value (“NAV”) from the underlying fund statements as a practical expedient for fair value.

We consider counterparty collateral arrangements and rights of set-off when evaluating our net credit risk

exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these

arrangements when determining whether any incremental adjustment should be made for both the counterparty’s

and our non-performance risk in measuring fair value for our derivative instruments. As a result of these

counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have

not recorded any incremental adjustment for our non-performance risk or the non-performance risk of the

derivative counterparty for our derivative assets or liabilities.

Interest rate swaps. The valuation of interest rate swaps is determined using an income approach. The

primary input into the valuation represents the forward interest rate swap curve, which is generally considered an

observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the

inputs into the valuation also include the total returns of certain bonds that would primarily be considered an

observable input and result in the derivative being classified as Level 2.

Foreign currency swaps. The valuation of foreign currency swaps is determined using an income approach.

The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency

exchange rates, both of which are considered observable inputs, and results in the derivative being classified as

Level 2.

Equity index options. We have equity index options associated with various equity indices. The valuation of

equity index options is determined using an income approach. The primary inputs into the valuation represent

forward interest rates, equity index volatility, equity index and time value component associated with the

optionality in the derivative. The equity index volatility surface is determined based on market information that is

not readily observable and is developed based upon inputs received from several third-party sources.

Accordingly, these options are classified as Level 3. As of December 31, 2020, a significant increase (decrease)

in the equity index volatility discussed above would have resulted in a significantly higher (lower) fair value

measurement.

Financial futures. The fair value of financial futures is based on the closing exchange prices. Accordingly,

these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the

margins on these contracts on a daily basis.

Other foreign currency contracts. We have certain foreign currency options classified as other foreign

currency contracts. The valuation of foreign currency options is determined using an income approach. The

primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates,

forward interest rate, foreign currency exchange rate volatility and time value component associated with the

optionality in the derivative, which are generally considered observable inputs and results in the derivative being

classified as Level 2. We also have foreign currency forward contracts where the valuation is determined using

an income approach. The primary inputs into the valuation represent the forward foreign currency exchange

rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.

GMWB embedded derivatives
We are required to bifurcate an embedded derivative for certain features associated with annuity products
and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the
GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an
income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and
fund correlation, and policyholder assumptions such as utilization, lapse and mortality. We determine fair value
using an internal model based on the various inputs noted above.

Non-performance risk is integrated into the discount rate used to value GMWB liabilities. Our discount rate
used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to
reflect an adjustment for the non-performance risk of the GMWB liabilities. As of December 31, 2020 and 2019,
the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $66 million and
$62 million, respectively.

We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity
index volatility and non-performance risk being considered the more significant unobservable inputs. As equity
index volatility increases, the fair value of the GMWB liabilities will increase. Any increase in non-performance
risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we
consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse
assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate
would increase the fair value. As of December 31, 2020, a significant change in the unobservable inputs
discussed above would have resulted in a significantly lower or higher fair value measurement.

Fixed index annuity embedded derivatives
We have fixed indexed annuity products where interest is credited to the policyholder’s account balance
based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded
at fair value. Fair value is determined using an income approach where the present value of the excess cash flows
above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs
used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity
index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to
incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and
expected future interest credited being considered significant unobservable inputs, we classify these instruments
as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As
expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of
December 31, 2020, a significant change in the unobservable inputs discussed above would have resulted in a
significantly lower or higher fair value measurement.

Indexed universal life embedded derivatives
We have indexed universal life insurance products where interest is credited to the policyholder’s account
balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and
recorded at fair value. Fair value is determined using an income approach where the present value of the excess
cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature.
The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term
equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount
rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder
behavior and expected future interest credited being considered significant unobservable inputs, we classify these
instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will
decrease. As expected future interest credited decreases, the value of our embedded derivative liability will
decrease. As of December 31, 2020, a significant change in the unobservable inputs discussed above would have
resulted in a significantly lower or higher fair value measurement.

276

277

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following tables set forth our assets by class of instrument that are measured at fair value on a recurring

basis as of December 31:

(Amounts in millions)
Assets

Investments:

Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises . . . . .
State and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—non-cyclical
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—non-cyclical
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets:
Derivative assets:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities lending collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

Total

Level 1 Level 2

Level 3 NAV (1)

$ 4,805
3,170
1,559

$ — $ 4,805
3,104
1,559

—
—

$ —
66
—

$—
—
—

5,212
2,900
9,148
6,470
3,827
1,607
3,001
2,007
1,502
440
36,114

983
1,398
2,820
824
1,311
1,129
616
396
609
1,828
11,914
1,909
2,974
3,345
65,790
476

—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
276

4,370
2,772
8,541
6,361
3,780
1,567
2,941
1,857
1,432
221
33,842

631
1,153
2,515
757
1,283
1,034
438
250
500
1,745
10,306
1,895
2,954
3,236
61,701
149

842
128
607
109
47
40
60
150
70
219
2,272

352
245
305
67
28
95
178
146
109
83
1,608
14
20
109
4,089
51

—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

468
1
63
55
587
67
159
835
1,648
26
6,081
$74,021

—
—
—
—
—
—
25
—
25
—
6,081
$6,382

468
1
—
55
524
67
134
—
725
—
—
$62,575

—
—

63
—
63
—
—
—
63
26
—
$4,229

—
—
—
—
—
—
—
835
835
—
—
$835

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,111

29,872

2,239

(Amounts in millions)

Assets

Investments:

Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises . . . . .

State and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets:

Derivative assets:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Securities lending collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2019

Total

Level 1 Level 2

Level 3 NAV (1)

$ 5,025

$ — $ 5,025

$ —

2,747

1,350

4,997

2,699

7,774

5,701

3,245

1,396

2,711

1,760

1,506

322

829

1,319

2,319

684

1,138

988

605

397

629

1,617

2,270

3,026

3,285

197

4

81

8

290

51

211

503

1,055

20

6,108

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

2,645

1,350

4,132

2,570

7,202

5,607

3,195

1,356

2,609

1,587

1,428

186

455

1,072

2,085

625

1,110

884

444

250

438

1,477

8,840

2,243

3,020

3,153

197

—

4

8

209

51

211

—

471

—

—

102

—

865

129

572

94

50

40

102

173

78

136

374

247

234

59

28

104

161

147

191

140

27

6

132

—

—

—

81

81

—

—

—

81

20

—

$—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

503

503

—

—

Total non-U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,525

1,685

Total fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60,339

56,148

4,191

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

239

62

126

51

Reinsurance recoverable (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,108

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$67,761

$6,170

$56,745

$4,343

$503

(1)

Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been
categorized in the fair value hierarchy.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

(1)

Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been

categorized in the fair value hierarchy.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

278

279

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following tables set forth our assets by class of instrument that are measured at fair value on a recurring

basis as of December 31:

(Amounts in millions)

Assets

Investments:

Fixed maturity securities:

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,114

33,842

2,272

U.S. government, agencies and government-sponsored enterprises . . . . .

State and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—non-cyclical

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total non-U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets:

Derivative assets:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Securities lending collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

Level 1 Level 2

Level 3 NAV (1)

$ 4,805

$ — $ 4,805

$ —

2020

3,104

1,559

4,370

2,772

8,541

6,361

3,780

1,567

2,941

1,857

1,432

221

631

1,153

2,515

757

1,283

1,034

438

250

500

1,745

10,306

1,895

2,954

3,236

468

1

—

55

524

67

134

—

725

—

—

66

—

842

128

607

109

47

40

60

150

70

219

352

245

305

67

28

95

178

146

109

83

14

20

109

—

—

—

63

63

—

—

—

63

26

—

1,608

$—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

835

835

—

—

3,170

1,559

5,212

2,900

9,148

6,470

3,827

1,607

3,001

2,007

1,502

440

983

1,398

2,820

824

1,311

1,129

616

396

609

1,828

11,914

1,909

2,974

3,345

468

1

63

55

587

67

159

835

1,648

26

6,081

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

25

25

—

6,081

Total fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65,790

61,701

4,089

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

476

276

149

51

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

2019

Total

Level 1 Level 2

Level 3 NAV (1)

$ 5,025
2,747
1,350

$ — $ 5,025
2,645
1,350

—
—

$ —
102
—

$—
—
—

(Amounts in millions)

Assets

Investments:

Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises . . . . .
State and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—non-cyclical
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,997
2,699
7,774
5,701
3,245
1,396
2,711
1,760
1,506
322

Total U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,111

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—non-cyclical
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer—cyclical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

829
1,319
2,319
684
1,138
988
605
397
629
1,617

Total non-U.S. corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,525

Residential mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset-backed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,270
3,026
3,285

Total fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60,339

—
—
—
—
—
—
—
—
—
—

—

—
—
—
—
—
—
—
—
—
—

—

—
—
—

—

4,132
2,570
7,202
5,607
3,195
1,356
2,609
1,587
1,428
186

865
129
572
94
50
40
102
173
78
136

29,872

2,239

455
1,072
2,085
625
1,110
884
444
250
438
1,477

8,840

2,243
3,020
3,153

374
247
234
59
28
104
161
147
191
140

1,685

27
6
132

56,148

4,191

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

239

62

126

51

Other invested assets:
Derivative assets:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity index options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Securities lending collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197
4
81
8

290

51
211
503

1,055

20
6,108

—
—
—
—

—

—
—
—

—

—
6,108

197
4
—
8

209

51
211
—

471

—
—

—
—

81

—

81

—
—
—

81

20
—

—
—
—
—
—
—
—
—
—
—

—

—
—
—
—
—
—
—
—
—
—

—

—
—
—

—

—

—
—
—
—

—

—
—
503

503

—
—

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$74,021

$6,382

$62,575

$4,229

$835

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$67,761

$6,170

$56,745

$4,343

$503

(1)

Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been

categorized in the fair value hierarchy.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

(1)

Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been
categorized in the fair value hierarchy.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

278

279

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following tables present additional information about assets measured at fair value on a recurring basis and

for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates
indicated:

Total realized and
unrealized gains
(losses)

Included
in net
income

Included
in OCI Purchases Sales Issuances Settlements

Transfer
into
Level 3 (1)

Transfer
out of
Level 3 (1)

Ending
balance
as of
December 31,
2020

Total gains (losses)
attributable to
assets still held

Included
in net
income

Included
in OCI

Beginning
balance
as of
January 1,
2020

$ 102
—

3

$
—

$ (11)
—

$— $— $—
—
—
—

$ (1)
(1)

$—

1

$ (27)
—

$

(Amounts in millions)
Fixed maturity securities:
State and political

subdivisions . . . . . . . . . . .
. . . . . .

Non-U.S. government
U.S. corporate:

Utilities . . . . . . . . . . . . .
Energy . . . . . . . . . . . . .
Finance and

insurance . . . . . . . . .
Consumer—non-cyclical
Technology and

communications . . . .
Industrial
. . . . . . . . . . .
Capital goods . . . . . . . .
Consumer—cyclical
. . .
Transportation . . . . . . . .
Other
. . . . . . . . . . . . . .
Total U.S. corporate . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . .
Energy . . . . . . . . . . . . .
Finance and

insurance . . . . . . . . .
Consumer—non-cyclical
Technology and

communications . . . .
Industrial
. . . . . . . . . . .
Capital goods . . . . . . . .
Consumer—cyclical
. . .
Transportation . . . . . . . .
Other
. . . . . . . . . . . . . .
Total non-U.S.

corporate . . . . . . . . .

Residential

Commercial

mortgage-backed . . . . . . . .

mortgage-backed . . . . . . . .
Other asset-backed . . . . . . . .
Total fixed maturity

securities . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . .
Other invested assets:

Derivative assets:

Equity index options . . .
Total derivative

assets . . . . . . . . . . . .

865
129

572
94

50
40
102
173
78
136
2,239

374
247

234
59

28
104
161
147
191
140

9
1

2

8
1

16
4

—

—
—
—

3

—
—
15

3

—
—

4
(1)
2
37

76
30

(13) —
(21) —

167 —
8 —

—
—

82 —
—
—
—
—
15 —
—
—
25 —
403

—
—
—
—
—
—
(34) —

—
—

—

—
—

—
—

4

1

9

10
(5)

17
3

—

4
1
3
1
(1)

13 —
7 —

15 —
20 —

—
—
—
—
20 —
21 —
7 —
6 —

1,685

14

33

109 —

27

6
132

4,191
51

81

81

—

—
—

32
—

4

4

1
1

60
—

—

—

(1)

—

—

—
—
130 —

642
6

(34) —
(7) —

59 —

—

59 —

—
—

—
—

—
—
—
—
—
—

—

—

—
—

—

—

2
2

66
—

842
128

607
109

47
40
60
150
70
219
2,272

352
245

305
67

28
95
178
146
109
83

(89)
(13)

(109)
—

(100)
—
(45)
(56)
(30)
(24)
(466)

(73)
—

(32)
(16)

—

(8)

—
(31)
(102)
—

(262)

1,608

(15)

(7)
(129)

(906)
—

—

—

14

20
109

4,089
51

63

63

3

$

—

$ (11)
—

—
—

—
—

—
—
—
—
—
—
—

—
—

—

—
—
—
—
—
—

—

—
—

—

4

4

7

5

5

14
(3)

19
4

—

5

1
6
2
2
50

9
(5)

17
2

1
3
1
2
4
2

36

—

1

—

76
—

—

—

(56)
(21)

(41)
(22)

(1)

—

(8)
(36)
(4)
(7)
(196)

—
(28)

(10)
—

—

(5)
(39)
(26)
(10)
(72)

(190)

(1)

—
(35)

(424)
—

(81)

(81)

42
22

—
25

13
—

11
47
27
87
274

28
24

77
1

—
—
34
32
22
1

219

4

20
10

528
1

—

—

Total other invested

assets . . . . . . . . . . . . . .
Reinsurance recoverable (2)
. . . .
Total Level 3 assets . . . . . . . . . .

81
20
$4,343

4
4
$ 40

—
—
$ 60

59 —
—
$ (41) $

—
$707

(81)
—
$(505)

—
—
$529

—
—
$(906)

63
26
$4,229

5
4
$ 16

—
—
$ 76

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the
observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the
industry sectors assigned to specific securities.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

280

Total U.S. corporate . . . . . . .

1,998

1

175

308

(37) —

(161)

(174)

2,239

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Total realized and

unrealized gains

(losses)

Beginning

balance

as of

Included in

January 1,

2019

net

income

Included

in OCI

Transfer

Transfer

into

out of

December 31,

Ending

balance

as of

Total gains

(losses)

included in

net income

attributable

to assets

still held

Purchases Sales Issuances Settlements

Level 3 (1)

Level 3 (1)

2019

State and political subdivisions . . .

$

51

$

$ 20

$— $— $—

$ —

$ 28

$ —

$ 102

$

3

(Amounts in millions)

Fixed maturity securities:

U.S. corporate:

Utilities . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . .

Finance and insurance . . . . .

Consumer—non-cyclical

. . .

Technology and

communications . . . . . . . .

Industrial . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . .

Consumer—cyclical . . . . . . .

Transportation . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . .

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . .

Energy . . . . . . . . . . . . . . . . .

Finance and insurance . . . . .

Consumer—non-cyclical

. . .

Technology and

communications . . . . . . . .

Industrial . . . . . . . . . . . . . . .

Capital goods . . . . . . . . . . . .

Consumer—cyclical . . . . . . .

Transportation . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . .

Total non-U.S. corporate . . .

1,532

130

Residential mortgage-backed . . . .

Commercial mortgage-backed . . . .

Other asset-backed . . . . . . . . . . . .

Total fixed maturity securities . . . .

3,865

Equity securities . . . . . . . . . . . . . . . .

58

Other invested assets:

Derivative assets:

Equity index options . . . . . . .

Total derivative assets . . . . .

Total other invested assets . . . .

Reinsurance recoverable (2)

. . . . . . . .

3

1

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(1)

4

2

5

9

43

43

43

(1)

72

9

51

5

7

1

10

11

3

6

30

19

23

5

2

5

12

12

10

12

1

17

3

346

—

—

—

—

—

643

121

534

73

50

39

92

211

57

178

404

217

171

106

26

61

173

122

171

81

35

95

154

39

39

39

20

156

17

(14) —

(5) —

50 —

—

23

(5) —

—

—

—

—

—

—

—

(13) —

39 —

23 —

30

46

(7) —

(18) —

7 —

1 —

—

—

38 —

10 —

16 —

27 —

43 —

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

3 —

139 —

218

—

668

2

(25) —

(2) —

(64) —

(9) —

63 —

63 —

63 —

—

—

—

—

—

1

1

281

(49)

(13)

(39)

(11)

(1)

—

—

(18)

(10)

(20)

(67)

(16)

(16)

(55)

—

—

(16)

(3)

—

(2)

(175)

(1)

—

(69)

(406)

—

(64)

(64)

(64)

—

72

—

35

9

5

—

—

—

—

8

129

—

—

54

—

—

—

—

—

3

6

63

1

28

—

249

—

—

—

—

—

(16)

—

—

(59)

(11)

—

—

(18)

(11)

(59)

(16)

(9)

—

—

—

—

—

—

(21)

(17)

(63)

(6)

(110)

(123)

(476)

—

—

—

—

—

865

129

572

94

50

40

102

173

78

136

374

247

234

59

28

104

161

147

191

140

27

6

132

81

81

81

20

1,685

4,191

51

(1)

(1)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

4

4

6

18

18

18

(1)

Total Level 3 assets . . . . . . . . . . . . . .

$3,982

$ 51

$346

$733

$ (73) $

$(470)

$249

$(476)

$4,343

$ 23

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in

the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes

in the industry sectors assigned to specific securities.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

Total U.S. corporate . . .

2,239

15

403

(34) —

(196)

274

2,272

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following tables present additional information about assets measured at fair value on a recurring basis and

for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates

indicated:

Total realized and

unrealized gains

(losses)

Included

in net

income

Included

Beginning

balance

January 1,

as of

2020

in OCI Purchases Sales Issuances Settlements

Level 3 (1)

Level 3 (1)

2020

Transfer

Transfer

into

out of

December 31,

Ending

balance

as of

Total gains (losses)

attributable to

assets still held

Included

in net

income

Included

in OCI

subdivisions . . . . . . . . . . .

Non-U.S. government

. . . . . .

$ 102

—

$

—

$ (11)

—

$— $— $—

—

—

—

$

(1)

(1)

$—

$ (27)

—

$

66

—

$

3

$ (11)

—

(Amounts in millions)

Fixed maturity securities:

State and political

U.S. corporate:

Non-U.S. corporate:

Utilities . . . . . . . . . . . . .

Energy . . . . . . . . . . . . .

Finance and

insurance . . . . . . . . .

Consumer—non-cyclical

Technology and

communications . . . .

Industrial

. . . . . . . . . . .

Capital goods . . . . . . . .

Consumer—cyclical

. . .

Transportation . . . . . . . .

Other

. . . . . . . . . . . . . .

Utilities . . . . . . . . . . . . .

Energy . . . . . . . . . . . . .

Finance and

insurance . . . . . . . . .

Consumer—non-cyclical

Technology and

communications . . . .

Industrial

. . . . . . . . . . .

Capital goods . . . . . . . .

Consumer—cyclical

. . .

Transportation . . . . . . . .

Other

. . . . . . . . . . . . . .

Total non-U.S.

Residential

Commercial

mortgage-backed . . . . . . . .

mortgage-backed . . . . . . . .

Other asset-backed . . . . . . . .

Total fixed maturity

securities . . . . . . . . . . . . . .

4,191

Equity securities . . . . . . . . . . . .

Other invested assets:

Derivative assets:

Equity index options . . .

Total derivative

assets . . . . . . . . . . . .

Total other invested

assets . . . . . . . . . . . . . .

Reinsurance recoverable (2)

. . . .

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

32

—

3

9

1

2

3

4

1

9

4

4

4

4

865

129

572

94

50

40

102

173

78

136

374

247

234

59

28

104

161

147

191

140

27

6

132

51

81

81

81

20

—

—

—

8

1

16

4

3

(1)

4

2

37

10

(5)

17

3

4

1

3

1

(1)

33

(1)

1

1

—

—

—

—

76

30

(13) —

(21) —

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

2

2

167 —

8 —

82 —

—

—

—

—

—

—

15 —

25 —

13 —

7 —

15 —

20 —

—

—

—

—

20 —

21 —

7 —

6 —

109 —

—

—

—

—

130 —

59 —

59 —

59 —

—

—

280

60

—

642

6

(34) —

(7) —

1

42

22

25

13

11

47

27

87

—

—

—

—

28

24

77

1

34

32

22

1

4

20

10

528

1

—

—

—

—

(56)

(21)

(41)

(22)

(1)

—

(8)

(36)

(4)

(7)

—

(28)

(10)

—

—

(5)

(39)

(26)

(10)

(72)

(1)

—

(35)

(424)

—

(81)

(81)

(81)

—

(89)

(13)

(109)

—

(100)

—

(45)

(56)

(30)

(24)

(466)

(73)

—

(32)

(16)

—

—

(8)

(31)

(102)

—

(15)

(7)

(129)

(906)

—

—

—

—

—

842

128

607

109

47

40

60

150

70

219

352

245

305

67

28

95

178

146

109

83

14

20

109

63

63

63

26

4,089

51

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

4

4

7

5

5

5

4

14

(3)

19

4

—

50

9

(5)

17

2

5

1

6

2

2

1

3

1

2

4

2

36

—

1

—

76

—

—

—

—

—

corporate . . . . . . . . .

1,685

14

(190)

219

(262)

1,608

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Total realized and
unrealized gains
(losses)

Included in
net
income

Included
in OCI

Beginning
balance
as of
January 1,
2019

Purchases Sales Issuances Settlements

Transfer
into
Level 3 (1)

Transfer
out of
Level 3 (1)

Total gains
(losses)
included in
net income
attributable
to assets
still held

Ending
balance
as of
December 31,
2019

(Amounts in millions)

Fixed maturity securities:

$ 20

$— $— $—

$ —

$ 28

$ —

$ 102

$

3

State and political subdivisions . . .
U.S. corporate:

$

51

$

Utilities . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . .
Finance and insurance . . . . .
Consumer—non-cyclical
. . .
Technology and

communications . . . . . . . .
Industrial
. . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . .
Consumer—cyclical . . . . . . .
Transportation . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . .

643
121
534
73

50
39
92
211
57
178

Total U.S. corporate . . . . . . .

1,998

Non-U.S. corporate:

Utilities . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . .
Finance and insurance . . . . .
Consumer—non-cyclical
. . .
Technology and

communications . . . . . . . .
Industrial
. . . . . . . . . . . . . . .
Capital goods . . . . . . . . . . . .
Consumer—cyclical . . . . . . .
Transportation . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . .

404
217
171
106

26
61
173
122
171
81

Total non-U.S. corporate . . .

1,532

Residential mortgage-backed . . . .
Commercial mortgage-backed . . . .
Other asset-backed . . . . . . . . . . . .

35
95
154

Total fixed maturity securities . . . .

3,865

Equity securities . . . . . . . . . . . . . . . .

58

Other invested assets:

Derivative assets:

Equity index options . . . . . . .

Total derivative assets . . . . .

Total other invested assets . . . .

Reinsurance recoverable (2)

. . . . . . . .

39

39

39

20

3

1

—
—
—

—
—
—
—
—
—

—

(1)
4
2

—
—
—
—
—
—

—
—
—

—

5

9

43

43

43

(1)

72
9
51
5

7
1
10
11
3
6

156
17
50 —
23

(14) —
(5) —
—
(5) —

—
—
—
—

—
—
—
—
—
—
(13) —
—
—

39 —
23 —

30
19
23
5

2
5
12
12
10
12

130

1
17
3

346

—

—

—

—

—

30
46
7 —
1 —

(7) —
(18) —
—
—

—

—
38 —
10 —
16 —
27 —
43 —

—
—
—
—
—
—

218

—

(25) —

(2) —
—
—

3 —
139 —

668

2

(64) —

(9) —

63 —

63 —

63 —

—

—

—

—

—

1

1

(49)
(13)
(39)
(11)

(1)

—
—
(18)
(10)
(20)

(67)
(16)
(16)
(55)

—
—
(16)
(3)

—

(2)

(175)

(1)

—
(69)

(406)

—

(64)

(64)

(64)

—

72

—

35
9

5

—
—
—
—

8

129

—
—
54

—

—
—

—
—

3

6

63

—

1
28

249

—

—

—

—

—

(16)
—
(59)
—

(11)
—
—
(18)
(11)
(59)

865
129
572
94

50
40
102
173
78
136

(174)

2,239

(16)
—

(9)

—

—
—
(21)
—
(17)
—

(63)

(6)
(110)
(123)

(476)

—

—

—

—

—

374
247
234
59

28
104
161
147
191
140

1,685

27
6
132

4,191

51

81

81

81

20

—
—
—
—

—
—
—

(1)

—
—

(1)

—
—

—

—
—
—
—
—
—

—
—
—

—

4

4

6

18

18

18

(1)

Total Level 3 assets . . . . . . . . . . . . . .

$3,982

$ 51

$346

$733

$ (73) $

$(470)

$249

$(476)

$4,343

$ 23

1

175

308

(37) —

(161)

Total Level 3 assets . . . . . . . . . .

$4,343

$ 40

$ 60

$707

$ (41) $

$(505)

$529

$(906)

$4,229

$ 16

$ 76

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the

observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the

industry sectors assigned to specific securities.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in
the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes
in the industry sectors assigned to specific securities.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

281

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following table presents the gains and losses included in net income from assets measured at fair value

on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair

value and the related income statement line item in which these gains and losses were presented for the years

ended December 31:

(Amounts in millions)

Total realized and unrealized gains (losses) included in net income:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total gains (losses) included in net income attributable to assets still held:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

2018

$32

8

$40

$ 7

9

$16

$10

41

$51

$ 6

17

$23

$ 8

(32)

$(24)

$ 9

(21)

$(12)

The amount presented for realized and unrealized gains (losses) included in net income for fixed maturity

securities primarily represents amortization and accretion of premiums and discounts on certain fixed maturity

securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Beginning
balance
as of
January 1,
2018

Total realized and
unrealized gains
(losses)

Included in
net
income

Included
in OCI

Purchases Sales Issuances Settlements

Transfer
into
Level 3(1)

Transfer
out of
Level 3(1)

Ending
balance
as of
December 31,
2018

Total gains
(losses)
included in
net income
attributable
to assets
still held

(Amounts in millions)

Fixed maturity securities:

$—

$ —

$—

$— $—

$ (1)

$—

$ —

$ —

$—

U.S. government, agencies and
government-sponsored
enterprises . . . . . . . . . . . . .

$

State and political

subdivisions . . . . . . . . . . . .

U.S. corporate:

Utilities . . . . . . . . . . . . .
Energy . . . . . . . . . . . . .
Finance and insurance . .
Consumer—non-cyclical
Technology and

communications . . . .
Industrial . . . . . . . . . . . .
. . . . . . . .
Capital goods
Consumer—cyclical
. . .
Transportation . . . . . . . .
Other . . . . . . . . . . . . . . .

1

37

574
147
626
81

73
39
121
262
60
169

3

(1)

—
—
—

—
—
—
—
—
—

4

(40)
(7)
(77)
(3)

(6)

—
(10)
(12)
(2)
(3)

Total U.S. corporate . . .

2,152

(1)

(160)

Non-U.S. corporate:

Utilities . . . . . . . . . . . . .
Energy . . . . . . . . . . . . .
Finance and insurance . .
Consumer—non-cyclical
Technology and

communications . . . .
Industrial . . . . . . . . . . . .
. . . . . . . .
Capital goods
Consumer—cyclical
. . .
Transportation . . . . . . . .
Other . . . . . . . . . . . . . . .

Total non-U.S.

343
176
161
124

29
116
191
54
170
52

—
—

—

—
—

—

4

1

(2)

—

(19)
(9)
(13)
(5)

—

(5)
(8)
(5)
(9)
(4)

—

111
22
84
—

20
—
33
17
3

—

290

52
53
6

—

10
3
15
30
45
33

—

—

(12) —
—
—
—
—
—
—

—
—
—

—
—
—
(5) —
—
—
(10) —

(27) —

—
—
—
—

—
—
—
—

—
—
—

—
—
—
(1) —
(18) —
—
—

—

(6)
(34)
(122)
(5)

(60)
—
(45)
(19)
(4)
(8)

(303)

(20)
(29)
(2)
(20)

(13)
(10)
(26)
(3)

—
—

corporate . . . . . . . . . .

1,416

3

(77)

247

(19) —

(123)

Residential

mortgage-backed . . . . . . . .

Commercial

mortgage-backed . . . . . . . .
Other asset-backed . . . . . . . . .

77

30
227

Total fixed maturity

securities . . . . . . . . . . . . . .

3,940

Equity securities . . . . . . . . . . . . .

Other invested assets:
Derivative assets:

Equity index options . . . . .

Total derivative assets . . . .

Total other invested assets . . .

Reinsurance recoverable (2) . . . . .

44

80

80

80

14

—

—
—

5

—

(34)

(34)

(34)

5

—

37

—

—

(4)
(3)

(240)

—

—

—

—

—

70
114

758

18

74

74

74

—

—
—
(16) —

(62) —

(4) —

—

—

—

—

—

—

—

Total Level 3 assets . . . . . . . . . .

$4,078

$ (24)

$(240)

$850

$ (66)

$

1

1

(1)

—
(93)

(521)

—

(81)

(81)

(81)

—

18

55
—
49
—

31
—
—
—
—
30

165

69
26
16
7

—
—
—
48
18
—

184

14

31
54

466

—

—

—

—

—

(11)

(38)
(7)
(26)
—

(8)

—

(7)
(32)
—
—

51

643
121
534
73

50
39
92
211
57
178

(118)

1,998

(21)
—

(1)

—

—
(43)
—

(1)
(33)
—

(99)

(92)

(32)
(129)

(481)

—

—

—

—

—

404
217
171
106

26
61
173
122
171
81

1,532

35

95
154

3,865

58

39

39

39

20

3

1

1

4

1

5

—
—

—

—
—
—
—
—
—

—
—

—

—
—

—
—
—

—

—
—

9

—

(26)

(26)

(26)

5

$(602)

$466

$(481)

$3,982

$ (12)

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in
the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes
in the industry sectors assigned to specific securities.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

282

283

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Total realized and

unrealized gains

(losses)

Beginning

balance

as of

Included in

January 1,

2018

net

income

Included

in OCI

Transfer

Transfer

into

out of

December 31,

Ending

balance

as of

Total gains

(losses)

included in

net income

attributable

to assets

still held

Purchases Sales Issuances Settlements

Level 3(1)

Level 3(1)

2018

The following table presents the gains and losses included in net income from assets measured at fair value

on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair
value and the related income statement line item in which these gains and losses were presented for the years
ended December 31:

(Amounts in millions)

Total realized and unrealized gains (losses) included in net income:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total gains (losses) included in net income attributable to assets still held:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2019

2018

$32
8

$40

$ 7
9

$16

$10
41

$51

$ 6
17

$23

$ 8
(32)

$(24)

$ 9
(21)

$(12)

The amount presented for realized and unrealized gains (losses) included in net income for fixed maturity
securities primarily represents amortization and accretion of premiums and discounts on certain fixed maturity
securities.

Total U.S. corporate . . .

2,152

(1)

(160)

(118)

1,998

enterprises . . . . . . . . . . . . .

$

$—

$ —

$—

$— $—

$

(1)

$—

$ —

$ —

$—

(Amounts in millions)

Fixed maturity securities:

U.S. government, agencies and

government-sponsored

State and political

subdivisions . . . . . . . . . . . .

U.S. corporate:

Non-U.S. corporate:

Utilities . . . . . . . . . . . . .

Energy . . . . . . . . . . . . .

Finance and insurance . .

Consumer—non-cyclical

Technology and

communications . . . .

Industrial . . . . . . . . . . . .

Capital goods

. . . . . . . .

Consumer—cyclical

. . .

Transportation . . . . . . . .

Other . . . . . . . . . . . . . . .

Utilities . . . . . . . . . . . . .

Energy . . . . . . . . . . . . .

Finance and insurance . .

Consumer—non-cyclical

Technology and

communications . . . .

Industrial . . . . . . . . . . . .

Capital goods

. . . . . . . .

Consumer—cyclical

. . .

Transportation . . . . . . . .

Other . . . . . . . . . . . . . . .

Total non-U.S.

Residential

Commercial

mortgage-backed . . . . . . . .

mortgage-backed . . . . . . . .

Other asset-backed . . . . . . . . .

Total fixed maturity

securities . . . . . . . . . . . . . .

3,940

Equity securities . . . . . . . . . . . . .

Other invested assets:

Derivative assets:

Equity index options . . . . .

Total derivative assets . . . .

Total other invested assets . . .

Reinsurance recoverable (2) . . . . .

1

37

574

147

626

81

73

39

121

262

60

169

343

176

161

124

29

116

191

54

170

52

77

30

227

44

80

80

80

14

3

(1)

4

1

(2)

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

5

—

(34)

(34)

(34)

5

4

(40)

(7)

(77)

(3)

(6)

—

(10)

(12)

(2)

(3)

(19)

(9)

(13)

(5)

—

(5)

(8)

(5)

(9)

(4)

—

(4)

(3)

(240)

—

—

—

—

—

—

111

22

84

—

—

20

33

17

3

—

290

—

52

53

6

10

3

15

30

45

33

37

70

114

758

18

74

74

74

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(12) —

(5) —

(10) —

(27) —

(1) —

(18) —

(16) —

(62) —

(4) —

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

1

1

—

(6)

(34)

(122)

(5)

(60)

—

(45)

(19)

(4)

(8)

(303)

(20)

(29)

(2)

(20)

(13)

(10)

(26)

(3)

—

—

(1)

—

(93)

(521)

—

(81)

(81)

(81)

—

18

55

—

—

49

31

—

—

—

—

30

165

69

26

16

7

—

—

—

48

18

—

184

14

31

54

466

—

—

—

—

—

(11)

(38)

(7)

(26)

—

(8)

—

(7)

(32)

—

—

(21)

(1)

—

—

—

—

(43)

(1)

(33)

—

(99)

(92)

(32)

(129)

(481)

—

—

—

—

—

51

643

121

534

73

50

39

92

211

57

178

404

217

171

106

26

61

173

122

171

81

35

95

154

3,865

58

39

39

39

20

3

1

1

4

1

5

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

9

—

(26)

(26)

(26)

5

corporate . . . . . . . . . .

1,416

3

(77)

247

(19) —

(123)

1,532

Total Level 3 assets . . . . . . . . . .

$4,078

$ (24)

$(240)

$850

$ (66)

$

$(602)

$466

$(481)

$3,982

$ (12)

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in

the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes

in the industry sectors assigned to specific securities.

(2) Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

282

283

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following table presents a summary of the significant unobservable inputs used for certain asset fair

value measurements that are based on internal models and classified as Level 3 as of December 31, 2020:

Certain classes of instruments classified as Level 3 are excluded above as a result of not being material or

due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker

(Amounts in millions)

Valuation technique

Fair value

Unobservable
input

Range

Weighted-average (1)

Fixed maturity securities:
U.S. corporate:

Utilities . . . . . . . . . . . .
Energy . . . . . . . . . . . .
Finance and

Internal models
Internal models

$ 792
6

Credit spreads
Credit spreads

66bps – 219bps
73bps

148bps
Not applicable

insurance . . . . . . . . .

Internal models

593

Credit spreads

56bps – 222bps

137bps

Consumer—

non-cyclical
Technology and

. . . . . .

Internal models

109

Credit spreads

66bps – 266bps

143bps

communications . . .
Industrial . . . . . . . . . . .
Capital goods . . . . . . .
Consumer—cyclical . .
Transportation . . . . . .
Other . . . . . . . . . . . . . .

Total U.S.

Internal models
Internal models
Internal models
Internal models
Internal models
Internal models

47
40
60
141
58
204

Credit spreads 104bps – 221bps
Credit spreads 112bps – 237bps
76bps – 208bps
Credit spreads
Credit spreads 104bps – 183bps
58bps – 150bps
Credit spreads
79bps – 208bps
Credit spreads

181bps
155bps
143bps
147bps
106bps
113bps

corporate . . . . . . . . .

Internal models

$2,050

Credit spreads

56bps – 266bps

140bps

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$830

$—

$ 26

$804

Non-U.S. corporate:

Utilities . . . . . . . . . . . .
Energy . . . . . . . . . . . .
Finance and

Internal models
Internal models

$ 351
90

Credit spreads
Credit spreads

68bps – 219bps
76bps – 187bps

125bps
121bps

insurance . . . . . . . . .

Internal models

191

Credit spreads

89bps – 144bps

107bps

Consumer—

non-cyclical
Technology and

. . . . . .

Internal models

65

Credit spreads

80bps – 137bps

106bps

communications . . .
Industrial . . . . . . . . . . .
Capital goods . . . . . . .
Consumer—cyclical . .
Transportation . . . . . .
Other . . . . . . . . . . . . . .

Total non-U.S.

Internal models
Internal models
Internal models
Internal models
Internal models
Internal models

28
95
148
45
92
83

Credit spreads
76bps – 161bps
Credit spreads
73bps – 187bps
80bps – 186bps
Credit spreads
Credit spreads 115bps – 187bps
66bps – 187bps
Credit spreads
93bps – 525bps
Credit spreads

129bps
125bps
128bps
142bps
102bps
145bps

corporate . . . . . . . . .

Internal models

$1,188

Credit spreads

66bps – 525bps

122bps

Derivative assets:

Equity index options . . . . . .

Discounted cash
flows

$63

Equity index
volatility

6% – 53%

29%

(1) Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by

reinsurance.

notional for derivative assets.

284

285

quotes, used as an input in determining fair value.

The following tables set forth our liabilities by class of instrument that are measured at fair value on a

recurring basis as of December 31:

(Amounts in millions)

Liabilities

Policyholder account balances:

GMWB embedded derivatives (1)

. . . . . . . . . . . . . . . . .

$379

$—

2020

Total

Level 1

Level 2

Level 3

Fixed index annuity embedded derivatives . . . . . . . . . .

Indexed universal life embedded derivatives . . . . . . . .

Total policyholder account balances . . . . . . . . . . . . . . .

Derivative liabilities:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency swaps . . . . . . . . . . . . . . . . . . . . . . . . .

Other foreign currency contracts . . . . . . . . . . . . . . . . . .

Total derivative liabilities . . . . . . . . . . . . . . . . . . . . . . .

399

26

804

23

2

1

26

452

19

794

10

1

11

—

—

—

—

—

—

—

—

—

—

—

—

—

$—

—

—

—

23

2

1

26

$379

399

26

804

—

—

—

—

$—

—

—

—

10

1

11

$323

452

19

794

—

—

—

2019

Total

Level 1

Level 2

Level 3

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of

reinsurance.

(Amounts in millions)

Liabilities

Policyholder account balances:

GMWB embedded derivatives (1)

. . . . . . . . . . . . . . . . .

$323

$—

Fixed index annuity embedded derivatives . . . . . . . . . .

Indexed universal life embedded derivatives . . . . . . . .

Total policyholder account balances . . . . . . . . . . . . . . .

Derivative liabilities:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other foreign currency contracts . . . . . . . . . . . . . . . . . .

Total derivative liabilities . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$805

$—

$ 11

$794

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Certain classes of instruments classified as Level 3 are excluded above as a result of not being material or
due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker
quotes, used as an input in determining fair value.

The following tables set forth our liabilities by class of instrument that are measured at fair value on a

recurring basis as of December 31:

(Amounts in millions)

Liabilities

Policyholder account balances:

2020

Total

Level 1

Level 2

Level 3

. . . . . . . . . . . . . . . . .
GMWB embedded derivatives (1)
Fixed index annuity embedded derivatives . . . . . . . . . .
Indexed universal life embedded derivatives . . . . . . . .

Total policyholder account balances . . . . . . . . . . . . . . .

Derivative liabilities:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency swaps . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign currency contracts . . . . . . . . . . . . . . . . . .

Total derivative liabilities . . . . . . . . . . . . . . . . . . . . . . .

$379
399
26

804

23
2
1

26

$—
—
—

—

—
—
—

—

$—
—
—

—

23
2
1

26

$379
399
26

804

—
—
—

—

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$830

$—

$ 26

$804

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of

reinsurance.

(Amounts in millions)

Liabilities

2019

Total

Level 1

Level 2

Level 3

Policyholder account balances:

GMWB embedded derivatives (1)
. . . . . . . . . . . . . . . . .
Fixed index annuity embedded derivatives . . . . . . . . . .
Indexed universal life embedded derivatives . . . . . . . .

Total policyholder account balances . . . . . . . . . . . . . . .

Derivative liabilities:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign currency contracts . . . . . . . . . . . . . . . . . .

Total derivative liabilities . . . . . . . . . . . . . . . . . . . . . . .

$323
452
19

794

10
1

11

$—
—
—

—

—
—

—

$—
—
—

—

10
1

11

$323
452
19

794

—
—

—

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$805

$—

$ 11

$794

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of

(1) Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by

reinsurance.

notional for derivative assets.

285

The following table presents a summary of the significant unobservable inputs used for certain asset fair

value measurements that are based on internal models and classified as Level 3 as of December 31, 2020:

(Amounts in millions)

Valuation technique

Fair value

input

Range

Weighted-average (1)

Unobservable

Fixed maturity securities:

U.S. corporate:

Finance and

Consumer—

Technology and

Utilities . . . . . . . . . . . .

Internal models

$ 792

Credit spreads

66bps – 219bps

148bps

Energy . . . . . . . . . . . .

Internal models

6

Credit spreads

73bps

Not applicable

insurance . . . . . . . . .

Internal models

593

Credit spreads

56bps – 222bps

137bps

non-cyclical

. . . . . .

Internal models

109

Credit spreads

66bps – 266bps

143bps

communications . . .

Internal models

Industrial . . . . . . . . . . .

Internal models

Capital goods . . . . . . .

Internal models

Consumer—cyclical . .

Internal models

Transportation . . . . . .

Internal models

Other . . . . . . . . . . . . . .

Internal models

47

40

60

141

58

204

Credit spreads 104bps – 221bps

Credit spreads 112bps – 237bps

Credit spreads

76bps – 208bps

Credit spreads 104bps – 183bps

Credit spreads

58bps – 150bps

Credit spreads

79bps – 208bps

181bps

155bps

143bps

147bps

106bps

113bps

corporate . . . . . . . . .

Internal models

$2,050

Credit spreads

56bps – 266bps

140bps

Total U.S.

Non-U.S. corporate:

Finance and

Consumer—

Technology and

Total non-U.S.

Derivative assets:

Utilities . . . . . . . . . . . .

Internal models

$ 351

Credit spreads

68bps – 219bps

Energy . . . . . . . . . . . .

Internal models

90

Credit spreads

76bps – 187bps

125bps

121bps

insurance . . . . . . . . .

Internal models

191

Credit spreads

89bps – 144bps

107bps

non-cyclical

. . . . . .

Internal models

Credit spreads

80bps – 137bps

106bps

communications . . .

Internal models

Industrial . . . . . . . . . . .

Internal models

Credit spreads

76bps – 161bps

Credit spreads

73bps – 187bps

Capital goods . . . . . . .

Internal models

148

Credit spreads

80bps – 186bps

Consumer—cyclical . .

Internal models

Transportation . . . . . .

Internal models

Other . . . . . . . . . . . . . .

Internal models

Credit spreads 115bps – 187bps

Credit spreads

66bps – 187bps

Credit spreads

93bps – 525bps

129bps

125bps

128bps

142bps

102bps

145bps

corporate . . . . . . . . .

Internal models

$1,188

Credit spreads

66bps – 525bps

122bps

Equity index options . . . . . .

flows

$63

6% – 53%

29%

Discounted cash

Equity index

volatility

65

28

95

45

92

83

284

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following tables present additional information about liabilities measured at fair value on a recurring
basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for
the dates indicated:

Total realized and
unrealized (gains)
losses

Included
in net
(income)

Included
in OCI Purchases Sales Issuances Settlements

Transfer
into
Level 3

Transfer
out of
Level 3

Ending
balance
as of
December 31,
2020

Total (gains) losses
attributable to
liabilities still held

Included
in net
(income)

Included
in OCI

Beginning
balance
as of
January 1,
2020

(Amounts in millions)

Policyholder account

balances:

GMWB embedded

derivatives (1) . . . .

$323

$ 32

$—

$— $— $ 24

$ —

$—

$—

$379

$ 38

$—

Fixed index annuity

embedded
derivatives . . . . . .

Indexed universal
life embedded
derivatives . . . . . .

Total policyholder

account
balances . . . . . . . .

Total Level 3 liabilities . .

$794

794

66

$ 66

—

$—

—

—

$— $— $ 48

(104)

$(104)

—

$—

—

$—

804

$804

72

$ 72

—

$—

24

48

452

51

—

19

(17)

—

—

—

—

—

(104)

—

—

—

—

—

—

399

51

—

26

(17)

—

Total Level 3 liabilities . .

$683

$ 31

$— $ 39

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

Total realized and
unrealized (gains)
losses

Included
in net
(income)

Included
in OCI Purchases Sales Issuances Settlements

Transfer
into
Level 3

Transfer
out of
Level 3

Ending
balance
as of
December 31,
2019

Total (gains)
losses
included in
net (income)
attributable
to liabilities
still held

Beginning
balance
as of
January 1,
2019

(Amounts in millions)

Policyholder account

balances:

GMWB embedded

derivatives (1) . . . .

$337

$(39)

$—

$—

$— $ 25

$ —

$—

$—

$323

$(34)

Fixed index annuity

embedded
derivatives . . . . . .

Indexed universal
life embedded
derivatives . . . . . .

Total policyholder

account
balances . . . . . . .

389

12

738

90

(4)

47

Total Level 3 liabilities . .

$738

$ 47

—

—

—

$—

—

—

—

$—

—

—

—

—

(27)

11

36

—

(27)

$(27)

—

—

—

$—

—

—

—

$—

452

19

794

$794

90

(4)

52

$ 52

$— $ 36

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

286

287

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Total realized and

unrealized (gains)

losses

Beginning

balance

as of

Included

January 1,

in net

Included

Ending

balance

as of

Transfer

Transfer

into

out of

Level 3

December 31,

2018

Total (gains)

losses

included in

net (income)

attributable

to liabilities

still held

(Amounts in millions)

2018

(income)

in OCI Purchases Sales Issuances Settlements

Level 3

derivatives (1)

. . . .

$250

$ 59

$—

$—

$— $ 28

$—

$—

$ —

$337

$ 61

Policyholder account

balances:

GMWB embedded

Fixed index annuity

embedded

Indexed universal life

embedded

Total policyholder

account

derivatives . . . . . .

419

(15)

derivatives . . . . . .

14

(13)

balances . . . . . . . .

683

31

—

—

—

$—

—

—

—

$—

—

—

—

—

11

39

—

—

—

$—

—

—

—

$—

(15)

389

—

12

(15)

$(15)

738

$738

(15)

(13)

33

$ 33

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

The following table presents the gains and losses included in net (income) from liabilities measured at fair

value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine

fair value and the related income statement line item in which these gains and losses were presented for the years

ended December 31:

(Amounts in millions)

2020

2019

2018

Total realized and unrealized (gains) losses included in net (income):

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$— $— $—

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66

47

31

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 66

$ 47

$ 31

Total (gains) losses included in net (income) attributable to liabilities still held:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$— $— $—

Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72

52

33

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 72

$ 52

$ 33

Purchases, sales, issuances and settlements represent the activity that occurred during the period that results

in a change of the asset or liability but does not represent changes in fair value for the instruments held at the

beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity and

equity securities and purchases, issuances and settlements of derivative instruments.

Issuances presented for GMWB embedded derivative liabilities are characterized as the change in fair value

associated with the product fees recognized that are attributed to the embedded derivative to equal the expected

future benefit costs upon issuance. Issuances for fixed index annuity and indexed universal life embedded

derivative liabilities represent the amount of the premium received that is attributed to the value of the embedded

derivative. Settlements of embedded derivatives are characterized as the change in fair value upon exercising the

embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following tables present additional information about liabilities measured at fair value on a recurring

basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for

the dates indicated:

Total realized and

unrealized (gains)

losses

Beginning

balance

as of

Included

January 1,

in net

Included

Total (gains) losses

attributable to

liabilities still held

Ending

balance

as of

Transfer

Transfer

Included

into

out of

Level 3

December 31,

in net

2020

(income)

Included

in OCI

(Amounts in millions)

2020

(income)

in OCI Purchases Sales Issuances Settlements

Level 3

Policyholder account

balances:

GMWB embedded

Fixed index annuity

embedded

Indexed universal

life embedded

Total policyholder

account

derivatives (1) . . . .

$323

$ 32

$—

$— $— $ 24

$ —

$—

$—

$379

$ 38

$—

derivatives . . . . . .

452

51

—

—

—

(104)

399

51

—

—

—

24

48

—

—

—

—

balances . . . . . . . .

794

Total Level 3 liabilities . .

$794

66

$ 66

—

$—

—

—

$— $— $ 48

(104)

$(104)

—

$—

—

$—

804

$804

72

$ 72

—

$—

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

Total realized and

unrealized (gains)

losses

Beginning

balance

as of

Included

January 1,

in net

Included

Ending

balance

as of

Transfer

Transfer

into

out of

Level 3

December 31,

2019

Total (gains)

losses

included in

net (income)

attributable

to liabilities

still held

(Amounts in millions)

2019

(income)

in OCI Purchases Sales Issuances Settlements

Level 3

Policyholder account

balances:

GMWB embedded

Fixed index annuity

embedded

derivatives . . . . . .

389

Indexed universal

life embedded

derivatives . . . . . .

12

Total policyholder

account

balances . . . . . . .

738

derivatives (1) . . . .

$337

$(39)

$—

$—

$— $ 25

$ —

$—

$—

$323

$(34)

90

(4)

47

—

—

—

$—

—

—

—

$—

—

—

—

—

(27)

11

36

—

(27)

$(27)

—

—

—

$—

—

—

—

$—

452

19

794

$794

90

(4)

52

$ 52

Total Level 3 liabilities . .

$738

$ 47

$— $ 36

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

Beginning
balance
as of
January 1,
2018

Total realized and
unrealized (gains)
losses

Included
in net
(income)

Included
in OCI Purchases Sales Issuances Settlements

Transfer
into
Level 3

Transfer
out of
Level 3

Ending
balance
as of
December 31,
2018

Total (gains)
losses
included in
net (income)
attributable
to liabilities
still held

$250

$ 59

$—

$—

$— $ 28

$—

$—

$ —

$337

$ 61

419

(15)

14

(13)

683

31

—

—

—

$—

—

—

—

$—

—

—

—

—

11

39

$— $ 39

—

—

—

$—

—

—

—

$—

(15)

389

—

12

(15)

$(15)

738

$738

(15)

(13)

33

$ 33

(Amounts in millions)

Policyholder account

balances:

GMWB embedded
derivatives (1)
Fixed index annuity

. . . .

embedded
derivatives . . . . . .
Indexed universal life

embedded
derivatives . . . . . .

Total policyholder

account
balances . . . . . . . .

derivatives . . . . . .

19

(17)

—

—

—

26

(17)

—

Total Level 3 liabilities . .

$683

$ 31

(1) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

The following table presents the gains and losses included in net (income) from liabilities measured at fair
value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine
fair value and the related income statement line item in which these gains and losses were presented for the years
ended December 31:

(Amounts in millions)

2020

2019

2018

Total realized and unrealized (gains) losses included in net (income):

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$— $— $—
31

66

47

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 66

$ 47

$ 31

Total (gains) losses included in net (income) attributable to liabilities still held:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$— $— $—
33

52

72

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 72

$ 52

$ 33

Purchases, sales, issuances and settlements represent the activity that occurred during the period that results

in a change of the asset or liability but does not represent changes in fair value for the instruments held at the
beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity and
equity securities and purchases, issuances and settlements of derivative instruments.

Issuances presented for GMWB embedded derivative liabilities are characterized as the change in fair value

associated with the product fees recognized that are attributed to the embedded derivative to equal the expected
future benefit costs upon issuance. Issuances for fixed index annuity and indexed universal life embedded
derivative liabilities represent the amount of the premium received that is attributed to the value of the embedded
derivative. Settlements of embedded derivatives are characterized as the change in fair value upon exercising the
embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We

286

287

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

have shown these changes in fair value separately based on the classification of this activity as effectively issuing
and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded
derivative instruments being shown separately in the category labeled “included in net (income)” in the tables
presented above.

The following table presents a summary of the significant unobservable inputs used for certain liability fair

value measurements that are based on internal models and classified as Level 3 as of December 31, 2020:

(Amounts in millions)

Policyholder account balances:

Valuation
technique

Fair
value

Unobservable input

Range

Weighted-
average (1)

GMWB embedded
derivatives (2)
Fixed index annuity

. . . . . . . . . . .

embedded derivatives . . . .

Indexed universal life

embedded derivatives . . . .

Stochastic cash
flow model
Option budget
method
Option budget
method

$379

$399

$ 26

Withdrawal
utilization rate
Lapse rate
Non-performance risk
(credit spreads)
Equity index
volatility
Expected future
interest credited
Expected future
interest credited

56% – 88%
2% – 9%

74%
4%

10bps – 83bps

65bps

19% – 27%

23%

—% – 3%

3% – 10%

1%

5%

(1) Unobservable inputs weighted by the policyholder account balances associated with the instrument.
(2) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of

reinsurance. The unobservable inputs associated with GMWB embedded derivatives are not interrelated and
therefore, a directional change in one input will not affect the other inputs.

Assets and Liabilities Not Required to Be Carried at Fair Value

Assets and liabilities that are reflected in the accompanying consolidated financial statements at fair value
are not included in the following disclosure of fair value. Such items include cash, cash equivalents and restricted
cash, short-term investments, investment securities, separate accounts, securities held as collateral and derivative
instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are
actively traded and their fair values must often be determined using models. The fair value estimates are made at
a specific point in time, based upon available market information and judgments about the financial instruments,
including estimates of the timing and amount of expected future cash flows and the credit standing of
counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at
one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the
realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by
comparison to independent markets.

The following represents our estimated fair value of financial assets and liabilities that are not required to be

carried at fair value as of December 31:

Notional

amount

Carrying

amount

Total

Level 1

Level 2

Level 3

2020

Fair value

(Amounts in millions)

Assets:

Liabilities:

Commercial mortgage loans, net . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . .

$ 6,743

$ 7,145

$— $ — $ 7,145

368

378 —

24

354

Long-term borrowings (2) . . . . . . . . . . . . . . . . . . .

Investment contracts . . . . . . . . . . . . . . . . . . . . . .

3,548

10,276

3,240 —

11,353 —

3,090

150

11,353

Other firm commitments:

Commitments to fund limited partnerships . . . . .

1,090

Commitments to fund bank loan investments . . .

32

Ordinary course of business lending

commitments . . . . . . . . . . . . . . . . . . . . . . . . . .

117

—

—

—

—

—

—

—

—

—

Notional

amount

Carrying

amount

Total

Level 1

Level 2

Level 3

2019

Fair value

Commercial mortgage loans, net . . . . . . . . . . . . .

Other invested assets . . . . . . . . . . . . . . . . . . . . . .

$ 6,963

$ 7,239

$— $ — $ 7,239

432

432 —

49

(Amounts in millions)

Assets:

Liabilities:

Long-term borrowings (2) . . . . . . . . . . . . . . . . . . .

Non-recourse funding obligations (2) . . . . . . . . . .

Investment contracts . . . . . . . . . . . . . . . . . . . . . .

3,277

311

3,093 —

207 —

11,466

12,086 —

Other firm commitments:

Commitments to fund limited partnerships . . . . .

Commitments to fund bank loan investments . . .

976

52

Ordinary course of business lending

commitments . . . . . . . . . . . . . . . . . . . . . . . . . .

69

—

—

—

—

—

—

—

—

—

(1)

(2)

These financial instruments do not have notional amounts.

See note 12 for additional information related to borrowings.

—

—

—

—

—

—

—

12,086

383

142

207

—

—

—

2,951

—

—

—

—

—

(1)

(1)

(1)

(1)

(1)

(1)

(1)

(1)

(1)

(17) Insurance Subsidiary Financial Information and Regulatory Matters

Dividends

Our insurance subsidiaries are subject to oversight by applicable insurance laws and regulations as to the

amount of dividends they may pay to their parent in any year, the purpose of which is to protect affected

insurance policyholders or contractholders, not stockholders. In general, dividends in excess of prescribed limits

are deemed “extraordinary” and require insurance regulatory approval. Based on estimated statutory results as of

December 31, 2020, in accordance with applicable dividend restrictions, our insurance subsidiaries could pay

dividends of approximately $190 million to us in 2021. While the approximately $190 million is considered

unrestricted, our insurance subsidiaries may not pay dividends to us in 2021 at this level if they need to preserve

288

289

have shown these changes in fair value separately based on the classification of this activity as effectively issuing

and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded

derivative instruments being shown separately in the category labeled “included in net (income)” in the tables

presented above.

(Amounts in millions)

Policyholder account balances:

Valuation

technique

Fair

value

Unobservable input

Range

Weighted-

average (1)

Withdrawal

utilization rate

Lapse rate

Non-performance risk

(credit spreads)

Equity index

56% – 88%

2% – 9%

74%

4%

10bps – 83bps

65bps

GMWB embedded

Stochastic cash

derivatives (2)

. . . . . . . . . . .

flow model

$379

volatility

19% – 27%

23%

Fixed index annuity

Option budget

embedded derivatives . . . .

method

$399

Indexed universal life

Option budget

embedded derivatives . . . .

method

$ 26

Expected future

interest credited

Expected future

interest credited

—% – 3%

3% – 10%

1%

5%

(1) Unobservable inputs weighted by the policyholder account balances associated with the instrument.

(2) Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of

reinsurance. The unobservable inputs associated with GMWB embedded derivatives are not interrelated and

therefore, a directional change in one input will not affect the other inputs.

Assets and Liabilities Not Required to Be Carried at Fair Value

Assets and liabilities that are reflected in the accompanying consolidated financial statements at fair value

are not included in the following disclosure of fair value. Such items include cash, cash equivalents and restricted

cash, short-term investments, investment securities, separate accounts, securities held as collateral and derivative

instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are

actively traded and their fair values must often be determined using models. The fair value estimates are made at

a specific point in time, based upon available market information and judgments about the financial instruments,

including estimates of the timing and amount of expected future cash flows and the credit standing of

counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at

one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the

realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by

comparison to independent markets.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following table presents a summary of the significant unobservable inputs used for certain liability fair

value measurements that are based on internal models and classified as Level 3 as of December 31, 2020:

(Amounts in millions)

Assets:

Notional
amount

Carrying
amount

2020

Fair value

Total

Level 1

Level 2

Level 3

The following represents our estimated fair value of financial assets and liabilities that are not required to be

carried at fair value as of December 31:

Commercial mortgage loans, net . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . .

Liabilities:

Long-term borrowings (2) . . . . . . . . . . . . . . . . . . .
Investment contracts . . . . . . . . . . . . . . . . . . . . . .

Other firm commitments:

(1)

(1)

(1)

(1)

$ 6,743
368

$ 7,145

$— $ — $ 7,145
354
24

378 —

3,548
10,276

3,240 —
11,353 —

3,090
—

150
11,353

Commitments to fund limited partnerships . . . . .
Commitments to fund bank loan investments . . .
Ordinary course of business lending

1,090
32

commitments . . . . . . . . . . . . . . . . . . . . . . . . . .

117

—
—

—

(Amounts in millions)

Assets:

Notional
amount

Carrying
amount

—
—

—

—
—

—

—
—

—

2019

Fair value

—
—

—

Total

Level 1

Level 2

Level 3

Commercial mortgage loans, net . . . . . . . . . . . . .
Other invested assets . . . . . . . . . . . . . . . . . . . . . .

Liabilities:

Long-term borrowings (2) . . . . . . . . . . . . . . . . . . .
Non-recourse funding obligations (2) . . . . . . . . . .
Investment contracts . . . . . . . . . . . . . . . . . . . . . .

Other firm commitments:

(1)

(1)

(1)

(1)

(1)

$ 6,963
432

$ 7,239

$— $ — $ 7,239
383
49

432 —

3,277
311
11,466

3,093 —
207 —
12,086 —

2,951
—
—

142
207
12,086

Commitments to fund limited partnerships . . . . .
Commitments to fund bank loan investments . . .
Ordinary course of business lending

976
52

commitments . . . . . . . . . . . . . . . . . . . . . . . . . .

69

—
—

—

—
—

—

—
—

—

—
—

—

—
—

—

(1)

(2)

These financial instruments do not have notional amounts.
See note 12 for additional information related to borrowings.

(17) Insurance Subsidiary Financial Information and Regulatory Matters

Dividends

Our insurance subsidiaries are subject to oversight by applicable insurance laws and regulations as to the

amount of dividends they may pay to their parent in any year, the purpose of which is to protect affected
insurance policyholders or contractholders, not stockholders. In general, dividends in excess of prescribed limits
are deemed “extraordinary” and require insurance regulatory approval. Based on estimated statutory results as of
December 31, 2020, in accordance with applicable dividend restrictions, our insurance subsidiaries could pay
dividends of approximately $190 million to us in 2021. While the approximately $190 million is considered
unrestricted, our insurance subsidiaries may not pay dividends to us in 2021 at this level if they need to preserve

288

289

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

capital for regulatory purposes, including as the result of COVID-19, and retain capital for future growth or to
meet capital requirements. In addition, the receipt of dividends and sale proceeds above certain thresholds from
our mortgage insurance businesses, including the applicable insurance subsidiaries, are also subject to mandatory
prepayment conditions under the settlement agreement with AXA. See note 23 for additional details on the terms
of the settlement with AXA.

Dividends received from our domestic insurance subsidiaries is highly dependent on the performance of our

U.S. mortgage insurance subsidiaries and their ability to pay dividends to us as anticipated. Given the
performance of our U.S. life insurance subsidiaries, dividends will not be paid by these subsidiaries for the
foreseeable future.

Our domestic insurance subsidiaries paid dividends during 2020, 2019 and 2018 (none of which were

deemed “extraordinary”) of $437 million, $250 million and $60 million, respectively. During 2020, our U.S.
mortgage insurance subsidiaries paid $437 million dividends from net proceeds received from GMHI’s issuance
of its 2025 Senior Notes. Our Australian mortgage insurance subsidiaries paid dividends of $21 million,
$212 million and $129 million during 2020, 2019 and 2018, respectively. The reduced dividends in 2020 were
predominantly in response to COVID-19. Given the uncertainty around the length of recovery from the
pandemic, its potential impact on capital levels and in response to APRA’s requirements to preserve capital,
dividends were deferred for the majority of 2020.

U.S. domiciled insurance subsidiaries—statutory financial information

Our U.S. domiciled insurance subsidiaries file financial statements with state insurance regulatory

authorities and the NAIC that are prepared on an accounting basis either prescribed or permitted by such
authorities. Statutory accounting practices differ from U.S. GAAP in several respects, causing differences in
reported net income (loss) and stockholders’ equity.

Permitted statutory accounting practices encompass all accounting practices not so prescribed but that have

been specifically allowed by individual state insurance authorities. Our U.S. domiciled insurance subsidiaries
have no material permitted accounting practices, except for River Lake Insurance Company VI (“River Lake
VI”), River Lake Insurance Company VII (“River Lake VII”), River Lake Insurance Company VIII (“River Lake
VIII”) and River Lake Insurance Company X (“River Lake X”), together with River Lake VI, River Lake VII,
River Lake VIII and River Lake X, the “SPFCs.” The permitted practices of the SPFCs were an essential element
of their design and were expressly included in their plans of operation and in the licensing orders issued by their
domiciliary state regulators and without those permitted accounting practices, these entities could be subject to
regulatory action. Accordingly, we believe that the permitted accounting practices will remain in effect for so
long as we maintain the SPFCs. The material permitted accounting practices for the SPFCs were as follows:

•

•

In 2020 and 2019, River Lake VI had a permitted accounting practice from the State of Delaware to
carry its excess of loss reinsurance agreement with The Canada Life Assurance Company for its
universal life insurance business assumed from GLAIC as an admitted asset. In 2020 and 2019 River
Lake VI also had a permitted accounting practice from the State of Delaware to carry its term life
insurance reserves on a basis similar to U.S. GAAP, including an extension of this permitted
accounting practice to include additional term life insurance policies assumed from GLAIC in 2019.

In 2020 and 2019, River Lake VII, River Lake VIII and River Lake X each had a permitted accounting
practice from the State of Vermont to carry their reserves on a basis similar to U.S. GAAP. In addition,
in 2019, River Lake Insurance Company IX (“River Lake IX”) also had a permitted accounting

practice from the State of Vermont to carry its reserves on a basis similar to U.S. GAAP. However, as

of December 31, 2019, there were no remaining reserves in River Lake IX as discussed below.

In 2020, Genworth Life Insurance Company of New York (“GLICNY”) and Genworth Life and Annuity

Insurance Company (“GLAIC”) were also granted the following permitted practices:

• GLICNY was granted a permitted accounting practice from the New York State Department of

Financial Services (“NYDFS”) whereby GLICNY is exempt from the requirements of principle-based

reserves (“PBR”) as prescribed in the NAIC Valuation Manual under New York Regulation. The

permitted practice is limited to term life insurance conversion policies issued in 2020 where existing

policyholders exercised their contract options prior to the enactment of PBR requirements.

• GLAIC was granted a permitted accounting practice from the Commonwealth of Virginia State

Corporation Commission Bureau of Insurance whereby GLAIC is exempt from the requirements of

PBR as prescribed in the NAIC Valuation Manual. The permitted practice is limited to ordinary life

insurance business issued in 2020 on revised contracts where existing policyholders exercised their

contract options prior to the enactment of PBR requirements.

The impact of these permitted accounting practices of the SPFCs on our combined U.S. domiciled life

insurance subsidiaries’ statutory capital and surplus was zero as of December 31, 2020 and 2019. The impact of

these permitted accounting practices of GLICNY and GLAIC on our combined U.S. domiciled life insurance

subsidiaries’ statutory capital and surplus was not significant as of December 31, 2020. If these permitted

accounting practices had not been used, no regulatory event would have been triggered.

The tables below include the combined statutory net income and statutory capital and surplus for our U.S.

domiciled insurance subsidiaries for the periods indicated:

(Amounts in millions)

Combined statutory net income (loss):

Life insurance subsidiaries, excluding captive life reinsurance subsidiaries . . . . . .

Mortgage insurance subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$197

404

$ 740

$ (895)

847

697

Combined statutory net income (loss), excluding captive reinsurance

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Captive life insurance subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

601

9

1,587

(198)

(350)

1,520

Combined statutory net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $610

$1,237

$1,322

Years ended December 31,

2020

2019

2018

(Amounts in millions)

Combined statutory capital and surplus:

Life insurance subsidiaries, excluding captive life reinsurance subsidiaries . . . . . . . . . . . .

$2,131

$2,188

Mortgage insurance subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,073

3,664

Combined statutory capital and surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,204

$5,852

As of December 31,

2020

2019

The statutory net income (loss) from our captive life reinsurance subsidiaries relates to the reinsurance of

term and universal life insurance statutory reserves assumed from our U.S. domiciled life insurance companies.

290

291

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

capital for regulatory purposes, including as the result of COVID-19, and retain capital for future growth or to

meet capital requirements. In addition, the receipt of dividends and sale proceeds above certain thresholds from

our mortgage insurance businesses, including the applicable insurance subsidiaries, are also subject to mandatory

prepayment conditions under the settlement agreement with AXA. See note 23 for additional details on the terms

of the settlement with AXA.

Dividends received from our domestic insurance subsidiaries is highly dependent on the performance of our

U.S. mortgage insurance subsidiaries and their ability to pay dividends to us as anticipated. Given the

performance of our U.S. life insurance subsidiaries, dividends will not be paid by these subsidiaries for the

foreseeable future.

Our domestic insurance subsidiaries paid dividends during 2020, 2019 and 2018 (none of which were

deemed “extraordinary”) of $437 million, $250 million and $60 million, respectively. During 2020, our U.S.

mortgage insurance subsidiaries paid $437 million dividends from net proceeds received from GMHI’s issuance

of its 2025 Senior Notes. Our Australian mortgage insurance subsidiaries paid dividends of $21 million,

$212 million and $129 million during 2020, 2019 and 2018, respectively. The reduced dividends in 2020 were

predominantly in response to COVID-19. Given the uncertainty around the length of recovery from the

pandemic, its potential impact on capital levels and in response to APRA’s requirements to preserve capital,

dividends were deferred for the majority of 2020.

U.S. domiciled insurance subsidiaries—statutory financial information

Our U.S. domiciled insurance subsidiaries file financial statements with state insurance regulatory

authorities and the NAIC that are prepared on an accounting basis either prescribed or permitted by such

authorities. Statutory accounting practices differ from U.S. GAAP in several respects, causing differences in

reported net income (loss) and stockholders’ equity.

Permitted statutory accounting practices encompass all accounting practices not so prescribed but that have

been specifically allowed by individual state insurance authorities. Our U.S. domiciled insurance subsidiaries

have no material permitted accounting practices, except for River Lake Insurance Company VI (“River Lake

VI”), River Lake Insurance Company VII (“River Lake VII”), River Lake Insurance Company VIII (“River Lake

VIII”) and River Lake Insurance Company X (“River Lake X”), together with River Lake VI, River Lake VII,

River Lake VIII and River Lake X, the “SPFCs.” The permitted practices of the SPFCs were an essential element

of their design and were expressly included in their plans of operation and in the licensing orders issued by their

domiciliary state regulators and without those permitted accounting practices, these entities could be subject to

regulatory action. Accordingly, we believe that the permitted accounting practices will remain in effect for so

long as we maintain the SPFCs. The material permitted accounting practices for the SPFCs were as follows:

•

In 2020 and 2019, River Lake VI had a permitted accounting practice from the State of Delaware to

carry its excess of loss reinsurance agreement with The Canada Life Assurance Company for its

universal life insurance business assumed from GLAIC as an admitted asset. In 2020 and 2019 River

Lake VI also had a permitted accounting practice from the State of Delaware to carry its term life

insurance reserves on a basis similar to U.S. GAAP, including an extension of this permitted

accounting practice to include additional term life insurance policies assumed from GLAIC in 2019.

•

In 2020 and 2019, River Lake VII, River Lake VIII and River Lake X each had a permitted accounting

practice from the State of Vermont to carry their reserves on a basis similar to U.S. GAAP. In addition,

in 2019, River Lake Insurance Company IX (“River Lake IX”) also had a permitted accounting

practice from the State of Vermont to carry its reserves on a basis similar to U.S. GAAP. However, as
of December 31, 2019, there were no remaining reserves in River Lake IX as discussed below.

In 2020, Genworth Life Insurance Company of New York (“GLICNY”) and Genworth Life and Annuity

Insurance Company (“GLAIC”) were also granted the following permitted practices:

• GLICNY was granted a permitted accounting practice from the New York State Department of

Financial Services (“NYDFS”) whereby GLICNY is exempt from the requirements of principle-based
reserves (“PBR”) as prescribed in the NAIC Valuation Manual under New York Regulation. The
permitted practice is limited to term life insurance conversion policies issued in 2020 where existing
policyholders exercised their contract options prior to the enactment of PBR requirements.

• GLAIC was granted a permitted accounting practice from the Commonwealth of Virginia State

Corporation Commission Bureau of Insurance whereby GLAIC is exempt from the requirements of
PBR as prescribed in the NAIC Valuation Manual. The permitted practice is limited to ordinary life
insurance business issued in 2020 on revised contracts where existing policyholders exercised their
contract options prior to the enactment of PBR requirements.

The impact of these permitted accounting practices of the SPFCs on our combined U.S. domiciled life
insurance subsidiaries’ statutory capital and surplus was zero as of December 31, 2020 and 2019. The impact of
these permitted accounting practices of GLICNY and GLAIC on our combined U.S. domiciled life insurance
subsidiaries’ statutory capital and surplus was not significant as of December 31, 2020. If these permitted
accounting practices had not been used, no regulatory event would have been triggered.

The tables below include the combined statutory net income and statutory capital and surplus for our U.S.

domiciled insurance subsidiaries for the periods indicated:

(Amounts in millions)

Combined statutory net income (loss):

Years ended December 31,
2018
2019
2020

Life insurance subsidiaries, excluding captive life reinsurance subsidiaries . . . . . .
Mortgage insurance subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$197
404

$ 740
847

$ (895)
697

Combined statutory net income (loss), excluding captive reinsurance

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Captive life insurance subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

601
9

1,587
(350)

(198)
1,520

Combined statutory net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$610

$1,237

$1,322

(Amounts in millions)

Combined statutory capital and surplus:

As of December 31,

2020

2019

Life insurance subsidiaries, excluding captive life reinsurance subsidiaries . . . . . . . . . . . .
Mortgage insurance subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,131
4,073

$2,188
3,664

Combined statutory capital and surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,204

$5,852

The statutory net income (loss) from our captive life reinsurance subsidiaries relates to the reinsurance of
term and universal life insurance statutory reserves assumed from our U.S. domiciled life insurance companies.

290

291

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

These reserves are, in turn, secured by excess of loss reinsurance treaties with third parties or, in the case of
Rivermont I previously, funded through the issuance of non-recourse funding obligations to third parties.
Additionally, the life insurance subsidiaries’ combined statutory net income (loss) and distributable income (loss)
are not affected by the statutory net income (loss) of the captives, except to the extent dividends are received
from the captives. The combined statutory capital and surplus of our life insurance subsidiaries does not include
the capital and surplus of our captive life reinsurance subsidiaries of $106 million and $447 million as of
December 31, 2020 and 2019, respectively.

In December 2019, GLAIC, one of our U.S. domiciled life insurance companies, recaptured its term life
insurance business previously ceded to River Lake IX and its universal life insurance business previously ceded
to Rivermont I. GLAIC then immediately ceded that recaptured business to River Lake VI. Prior to the GLAIC
recapture, River Lake IX also recaptured all external reinsurance with third parties and terminated those
agreements. As a result, there was no remaining reinsurance (assumed or ceded) in River Lake IX or Rivermont I
as of December 31, 2019. River Lake IX also returned capital of $20 million to GLAIC in December 2019. In
2020, River Lake IX was dissolved and is no longer included as a SPFC. Additionally, the capital and surplus
(excluding non-recourse funding obligations) in Rivermont I was positive and, therefore, GLAIC recorded an
investment in Rivermont I as of December 31, 2019. In January 2020, Rivermont I redeemed all of its
outstanding non-recourse funding obligations and returned contributed surplus of $198 million to GLAIC in
February 2020.

The NAIC has adopted RBC requirements to evaluate the adequacy of statutory capital and surplus in
relation to risks associated with: (i) asset risk; (ii) insurance risk; (iii) interest rate and equity market risk; and
(iv) business risk. The RBC formula is designated as an early warning tool for the states to identify possible
undercapitalized companies for the purpose of initiating regulatory action. In the course of operations, we
periodically monitor the RBC level of each of our life insurance subsidiaries. As of December 31, 2020 and
2019, each of our life insurance subsidiaries exceeded the minimum required RBC levels in their respective
domiciliary state. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries was
approximately 229% and 213% as of December 31, 2020 and 2019, respectively.

During 2020, 2019 and 2018, we established $232 million, $54 million and $120 million, respectively, of
additional statutory reserves resulting from updates to our universal and term universal life insurance products
with secondary guarantees in our Virginia and Delaware licensed life insurance subsidiaries.

As a part of our cash flow testing process for our life insurance subsidiaries, we consider incremental

benefits from expected future in-force rate actions in our long-term care insurance products that would help
mitigate the impact of deteriorating experience. The NYDFS, which regulates GLICNY, annually informs the
industry that it does not permit in-force rate increases for long-term care insurance to be used in asset adequacy
analysis until such increases have been approved. However, the NYDFS has allowed GLICNY to incorporate
recently filed in-force rate actions in its asset adequacy analysis prior to approval in the past. Moreover, the
NYDFS has consistently granted approval for GLICNY to spread asset adequacy analysis reserve deficiencies
related to its long-term care insurance business over future years. The NYDFS also requires specific adequacy
testing scenarios that are generally more severe than those deemed acceptable in other states. Moreover, the
required testing scenarios by the NYDFS have a disproportionate impact on our long-term care insurance
products. In addition, we have historically used nationwide experience for setting assumptions in our long-term
care insurance products in cash flow testing for all of our legal entities, including GLICNY.

However, we have been monitoring emerging experience with our New York policyholders, which
experience has been adverse as compared to our nationwide experience. With the benefit of additional data and

analysis, and based on discussions with the NYDFS, we are using assumptions that reflect New York specific

experience in GLICNY’s asset adequacy analysis in 2020. After discussions with the NYDFS and through the

exercise of professional actuarial judgment, GLICNY also incorporated in its 2020 assets adequacy analysis

assumptions for future in-force rate actions for long-term care insurance products to offset the emerging adverse

experience for these products. With these assumption updates, GLICNY’s 2020 asset adequacy analysis

produced a negative margin. To address this negative margin, GLICNY recorded an incremental $100 million of

additional statutory reserves for long-term care insurance in 2020. During 2020, GLICNY also reallocated

$66 million of asset adequacy deficiency reserves from long-term care insurance to asset adequacy deficiency

reserves of $35 million to variable annuities and formulaic statutory reserves of $31 million for structured

settlements. As a result of the 2020 activity, the aggregate amount of statutory reserves established by GLICNY

for asset adequacy deficits increased to $539 million as of December 31, 2020. Of this amount, $504 million

related to long-term care insurance and $35 million related to variable annuities.

In 2019, after discussions with the NYDFS and through the exercise of professional actuarial judgment,

GLICNY incorporated in its 2019 asset adequacy analysis recently filed in-force rate actions for newer long-term

care insurance products to offset emerging adverse experience for those products. As a result, GLICNY’s 2019

asset adequacy analysis would have produced a very modest positive margin at the end of 2019. However, there

is an actuarial opinion requirement to address events subsequent to year end through the signing of the actuarial

opinion. Given the decrease in the Treasury yield curve rate across all maturities from December 31, 2019

through February 13, 2020, the date that GLICNY’s actuarial opinion was signed, GLICNY’s asset adequacy

testing resulted in a deficit of $16 million. GLICNY did not spread the deficit over future years. The incremental

$16 million of additional statutory reserves established in 2019, when combined with the $454 million of

previously established asset adequacy deficiency reserves as of December 31, 2018, increased the aggregate

amount of additional actuarial statutory reserves established by GLICNY for asset adequacy deficits to

$470 million as of December 31, 2019.

For regulatory purposes, our U.S. mortgage insurers are required to establish a special statutory contingency

reserve. Annual additions to the statutory contingency reserve must equal 50% of net earned premiums, as

defined by state insurance laws. These contingency reserves generally are held until the earlier of (i) the time that

loss ratios exceed 35% or (ii) 10 years. However, approval by the North Carolina Department of Insurance

(“NCDOI”) is required for contingency reserve releases when loss ratios exceed 35%. The statutory contingency

reserve for our U.S. mortgage insurers was approximately $2.5 billion and $2.0 billion, respectively, as of

December 31, 2020 and 2019 and was included in the table above containing combined statutory capital and

surplus balances.

Mortgage insurers are not subject to the NAIC’s RBC requirements but certain states and other regulators

impose another form of capital requirement on mortgage insurers requiring maintenance of a risk-to-capital ratio

not to exceed 25:1. Fifteen other states maintain similar risk-to-capital requirements. As of December 31, 2020

and 2019, Genworth Mortgage Insurance Corporation’s (“GMICO”) risk-to-capital ratio under the current

regulatory framework as established under North Carolina law and enforced by the NCDOI, GMICO’s domestic

insurance regulator, was approximately 12.3:1 and 12.5:1, respectively.

Private mortgage insurers must meet the operational and financial requirements under PMIERs as set forth

by the GSEs in order to remain eligible to insure loans that are purchased by the GSEs. Each approved mortgage

insurer is required to provide the GSEs with an annual certification and a quarterly report evidencing its

compliance with PMIERs.

292

293

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

These reserves are, in turn, secured by excess of loss reinsurance treaties with third parties or, in the case of

Rivermont I previously, funded through the issuance of non-recourse funding obligations to third parties.

Additionally, the life insurance subsidiaries’ combined statutory net income (loss) and distributable income (loss)

are not affected by the statutory net income (loss) of the captives, except to the extent dividends are received

from the captives. The combined statutory capital and surplus of our life insurance subsidiaries does not include

the capital and surplus of our captive life reinsurance subsidiaries of $106 million and $447 million as of

December 31, 2020 and 2019, respectively.

In December 2019, GLAIC, one of our U.S. domiciled life insurance companies, recaptured its term life

insurance business previously ceded to River Lake IX and its universal life insurance business previously ceded

to Rivermont I. GLAIC then immediately ceded that recaptured business to River Lake VI. Prior to the GLAIC

recapture, River Lake IX also recaptured all external reinsurance with third parties and terminated those

agreements. As a result, there was no remaining reinsurance (assumed or ceded) in River Lake IX or Rivermont I

as of December 31, 2019. River Lake IX also returned capital of $20 million to GLAIC in December 2019. In

2020, River Lake IX was dissolved and is no longer included as a SPFC. Additionally, the capital and surplus

(excluding non-recourse funding obligations) in Rivermont I was positive and, therefore, GLAIC recorded an

investment in Rivermont I as of December 31, 2019. In January 2020, Rivermont I redeemed all of its

outstanding non-recourse funding obligations and returned contributed surplus of $198 million to GLAIC in

February 2020.

The NAIC has adopted RBC requirements to evaluate the adequacy of statutory capital and surplus in

relation to risks associated with: (i) asset risk; (ii) insurance risk; (iii) interest rate and equity market risk; and

(iv) business risk. The RBC formula is designated as an early warning tool for the states to identify possible

undercapitalized companies for the purpose of initiating regulatory action. In the course of operations, we

periodically monitor the RBC level of each of our life insurance subsidiaries. As of December 31, 2020 and

2019, each of our life insurance subsidiaries exceeded the minimum required RBC levels in their respective

domiciliary state. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries was

approximately 229% and 213% as of December 31, 2020 and 2019, respectively.

During 2020, 2019 and 2018, we established $232 million, $54 million and $120 million, respectively, of

additional statutory reserves resulting from updates to our universal and term universal life insurance products

with secondary guarantees in our Virginia and Delaware licensed life insurance subsidiaries.

As a part of our cash flow testing process for our life insurance subsidiaries, we consider incremental

benefits from expected future in-force rate actions in our long-term care insurance products that would help

mitigate the impact of deteriorating experience. The NYDFS, which regulates GLICNY, annually informs the

industry that it does not permit in-force rate increases for long-term care insurance to be used in asset adequacy

analysis until such increases have been approved. However, the NYDFS has allowed GLICNY to incorporate

recently filed in-force rate actions in its asset adequacy analysis prior to approval in the past. Moreover, the

NYDFS has consistently granted approval for GLICNY to spread asset adequacy analysis reserve deficiencies

related to its long-term care insurance business over future years. The NYDFS also requires specific adequacy

testing scenarios that are generally more severe than those deemed acceptable in other states. Moreover, the

required testing scenarios by the NYDFS have a disproportionate impact on our long-term care insurance

products. In addition, we have historically used nationwide experience for setting assumptions in our long-term

care insurance products in cash flow testing for all of our legal entities, including GLICNY.

However, we have been monitoring emerging experience with our New York policyholders, which

experience has been adverse as compared to our nationwide experience. With the benefit of additional data and

analysis, and based on discussions with the NYDFS, we are using assumptions that reflect New York specific
experience in GLICNY’s asset adequacy analysis in 2020. After discussions with the NYDFS and through the
exercise of professional actuarial judgment, GLICNY also incorporated in its 2020 assets adequacy analysis
assumptions for future in-force rate actions for long-term care insurance products to offset the emerging adverse
experience for these products. With these assumption updates, GLICNY’s 2020 asset adequacy analysis
produced a negative margin. To address this negative margin, GLICNY recorded an incremental $100 million of
additional statutory reserves for long-term care insurance in 2020. During 2020, GLICNY also reallocated
$66 million of asset adequacy deficiency reserves from long-term care insurance to asset adequacy deficiency
reserves of $35 million to variable annuities and formulaic statutory reserves of $31 million for structured
settlements. As a result of the 2020 activity, the aggregate amount of statutory reserves established by GLICNY
for asset adequacy deficits increased to $539 million as of December 31, 2020. Of this amount, $504 million
related to long-term care insurance and $35 million related to variable annuities.

In 2019, after discussions with the NYDFS and through the exercise of professional actuarial judgment,
GLICNY incorporated in its 2019 asset adequacy analysis recently filed in-force rate actions for newer long-term
care insurance products to offset emerging adverse experience for those products. As a result, GLICNY’s 2019
asset adequacy analysis would have produced a very modest positive margin at the end of 2019. However, there
is an actuarial opinion requirement to address events subsequent to year end through the signing of the actuarial
opinion. Given the decrease in the Treasury yield curve rate across all maturities from December 31, 2019
through February 13, 2020, the date that GLICNY’s actuarial opinion was signed, GLICNY’s asset adequacy
testing resulted in a deficit of $16 million. GLICNY did not spread the deficit over future years. The incremental
$16 million of additional statutory reserves established in 2019, when combined with the $454 million of
previously established asset adequacy deficiency reserves as of December 31, 2018, increased the aggregate
amount of additional actuarial statutory reserves established by GLICNY for asset adequacy deficits to
$470 million as of December 31, 2019.

For regulatory purposes, our U.S. mortgage insurers are required to establish a special statutory contingency

reserve. Annual additions to the statutory contingency reserve must equal 50% of net earned premiums, as
defined by state insurance laws. These contingency reserves generally are held until the earlier of (i) the time that
loss ratios exceed 35% or (ii) 10 years. However, approval by the North Carolina Department of Insurance
(“NCDOI”) is required for contingency reserve releases when loss ratios exceed 35%. The statutory contingency
reserve for our U.S. mortgage insurers was approximately $2.5 billion and $2.0 billion, respectively, as of
December 31, 2020 and 2019 and was included in the table above containing combined statutory capital and
surplus balances.

Mortgage insurers are not subject to the NAIC’s RBC requirements but certain states and other regulators

impose another form of capital requirement on mortgage insurers requiring maintenance of a risk-to-capital ratio
not to exceed 25:1. Fifteen other states maintain similar risk-to-capital requirements. As of December 31, 2020
and 2019, Genworth Mortgage Insurance Corporation’s (“GMICO”) risk-to-capital ratio under the current
regulatory framework as established under North Carolina law and enforced by the NCDOI, GMICO’s domestic
insurance regulator, was approximately 12.3:1 and 12.5:1, respectively.

Private mortgage insurers must meet the operational and financial requirements under PMIERs as set forth
by the GSEs in order to remain eligible to insure loans that are purchased by the GSEs. Each approved mortgage
insurer is required to provide the GSEs with an annual certification and a quarterly report evidencing its
compliance with PMIERs.

292

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GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

On June 29, 2020, the GSEs issued guidance amending PMIERs in light of COVID-19 (the “PMIERs
Amendment”), which included both temporary and permanent amendments to PMIERs and became effective on
June 30, 2020. In September 2020, the GSEs issued an amended and restated version of the PMIERs Amendment
that was effective retroactively on June 30, 2020 and included new reporting requirements that became effective
on December 31, 2020. The GSEs issued another revised and restated version in December 2020 that extended
certain defined periods within the PMIERs Amendment. For loans that became non-performing due to a
COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) has an
initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to
a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are
materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount
factor for the non-performing loan will be the greater of (a) the applicable risk-based required asset amount
factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable
risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being
subject to a forbearance plan described in (ii) above, the 0.30 multiplier will be applicable for no longer than
three calendar months beginning with the month in which the loan became a non-performing loan due to having
missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are
either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the
approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial
period. The PMIERs Amendment also imposes temporary capital preservation provisions through June 30, 2021
that require an approved insurer to obtain prior written GSE approval before paying any dividends, pledging or
transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax
sharing and intercompany expense-sharing agreements, even if such insurer has a surplus of available assets.
Lastly, the PMIERs Amendment imposes permanent revisions to the risk-based required asset amount factor for
non-performing loans for properties located in future Federal Emergency Management Agency (“FEMA”)
Declared Major Disaster Areas eligible for individual assistance.

In September 2020, the GSEs imposed certain restrictions (“GSE Restrictions”) with respect to capital on
our U.S. mortgage insurance business. These restrictions will remain in effect until the later of six quarters or
until the following collective (“GSE Conditions”) are met: a) approval of GMICO’s plan to secure additional
capital, if needed, b) GMICO obtains “BBB+”/“Baa1” (or higher) rating from Standard & Poor’s Financial
Services, LLC, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. for two consecutive quarters and c)
Genworth achieves certain financial metrics. Prior to the satisfaction of the GSE Conditions, the GSE
Restrictions require:

• GMICO to maintain 115% of PMIERs Minimum Required Assets through 2021, 120% during 2022

and 125% thereafter;

• GMHI to retain $300 million of its holding company cash that can be drawn down exclusively for its
debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs; and

• written approval must be received from the GSEs before any additional debt issuance by either GMICO

or GMHI.

We have met all PMIERs reporting requirements as required by the GSEs. As of December 31, 2020 and
2019, our U.S. mortgage insurance business had estimated available assets of $4,588 million and $3,811 million,
respectively, against $3,359 million and $2,754 million, respectively, net required assets under PMIERs. The
estimated sufficiency as of December 31, 2020 and 2019 was $1,229 million and $1,057 million, respectively, or
137% and 138%, respectively, above the published PMIERs requirements. PMIERs sufficiency is based on the
published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions
recently imposed on our U.S. mortgage insurance business. Our PMIERs required assets as of December 31,

2020 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for

certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided

$1,046 million of benefit to our December 31, 2020 PMIERs required assets. Our credit risk transfer transactions

provided an estimated aggregate of $936 million of PMIERs capital credit as of December 31, 2020.

International insurance subsidiaries—statutory financial information

Our international insurance subsidiaries also prepare financial statements in accordance with local

regulatory requirements. Our international insurance subsidiaries have accounting practices under local

regulatory requirements that differ from U.S. GAAP, such as the application of accounting changes resulting

from premium earnings pattern and liability adequacy reviews. As of December 31, 2020 and 2019, combined

local statutory capital and surplus of our international insurance subsidiaries was $1.3 billion and $1.2 billion,

respectively. Combined local statutory net income included in continuing operations for our international

insurance subsidiaries was $108 million, $87 million and $57 million for the years ended December 31, 2020,

2019 and 2018, respectively. The regulatory authorities in these international jurisdictions generally establish

supervisory solvency requirements. Our international insurance subsidiaries had combined surplus levels that

exceeded local solvency requirements by $272 million and $384 million as of December 31, 2020 and 2019,

respectively.

Certain of our insurance subsidiaries have securities on deposit with various state or foreign government

insurance departments in order to comply with relevant insurance regulations. See note 4(d) for additional

information related to these deposits. Additionally, under the terms of certain reinsurance agreements that our life

insurance subsidiaries have with external parties, we pledged assets in either separate portfolios or in trust for the

benefit of external reinsurers. These assets support the reserves ceded to those external reinsurers. See note 8 for

additional information related to these pledged assets under reinsurance agreements. Certain of our U.S. life

insurance subsidiaries are also members of regional FHLBs and the FHLBs have been granted a lien on certain of

our invested assets to collateralize our obligations. See note 9 for additional information related to these pledged

assets with the FHLBs.

Guarantees of obligations

In addition to the commitments discussed in note 20, we have provided guarantees to third parties for the

performance of certain obligations of our subsidiaries. We estimate that our potential obligations under such

guarantees was $4 million and $5 million as of December 31, 2020 and 2019, respectively.

Genworth Holdings provides capital support of up to $175 million, subject to adjustments, to one of its

insurance subsidiaries to fund claims to support its mortgage insurance business in Mexico. We believe this

insurance subsidiary has adequate reserves to cover its underlying obligations.

Genworth Holdings also provided an unlimited guarantee for the benefit of policyholders for the payment of

valid claims by our European mortgage insurance subsidiary prior to its sale in May 2016. Following the sale of

this United Kingdom subsidiary to AmTrust Financial Services, Inc., the guarantee was limited to the payment of

valid claims on policies in-force prior to the sale date and those written approximately 90 days subsequent to the

date of the sale, and AmTrust Financial Services, Inc. has agreed to provide us with a limited indemnification in

the event there is any exposure under the guarantee. As of December 31, 2020, the risk in-force of active policies

was approximately $1.3 billion.

294

295

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

On June 29, 2020, the GSEs issued guidance amending PMIERs in light of COVID-19 (the “PMIERs

Amendment”), which included both temporary and permanent amendments to PMIERs and became effective on

June 30, 2020. In September 2020, the GSEs issued an amended and restated version of the PMIERs Amendment

that was effective retroactively on June 30, 2020 and included new reporting requirements that became effective

on December 31, 2020. The GSEs issued another revised and restated version in December 2020 that extended

certain defined periods within the PMIERs Amendment. For loans that became non-performing due to a

COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) has an

initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to

a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are

materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount

factor for the non-performing loan will be the greater of (a) the applicable risk-based required asset amount

factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable

risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being

subject to a forbearance plan described in (ii) above, the 0.30 multiplier will be applicable for no longer than

three calendar months beginning with the month in which the loan became a non-performing loan due to having

missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are

either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the

approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial

period. The PMIERs Amendment also imposes temporary capital preservation provisions through June 30, 2021

that require an approved insurer to obtain prior written GSE approval before paying any dividends, pledging or

transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax

sharing and intercompany expense-sharing agreements, even if such insurer has a surplus of available assets.

Lastly, the PMIERs Amendment imposes permanent revisions to the risk-based required asset amount factor for

non-performing loans for properties located in future Federal Emergency Management Agency (“FEMA”)

Declared Major Disaster Areas eligible for individual assistance.

In September 2020, the GSEs imposed certain restrictions (“GSE Restrictions”) with respect to capital on

our U.S. mortgage insurance business. These restrictions will remain in effect until the later of six quarters or

until the following collective (“GSE Conditions”) are met: a) approval of GMICO’s plan to secure additional

capital, if needed, b) GMICO obtains “BBB+”/“Baa1” (or higher) rating from Standard & Poor’s Financial

Services, LLC, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. for two consecutive quarters and c)

Genworth achieves certain financial metrics. Prior to the satisfaction of the GSE Conditions, the GSE

Restrictions require:

and 125% thereafter;

• GMICO to maintain 115% of PMIERs Minimum Required Assets through 2021, 120% during 2022

• GMHI to retain $300 million of its holding company cash that can be drawn down exclusively for its

debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs; and

• written approval must be received from the GSEs before any additional debt issuance by either GMICO

or GMHI.

We have met all PMIERs reporting requirements as required by the GSEs. As of December 31, 2020 and

2019, our U.S. mortgage insurance business had estimated available assets of $4,588 million and $3,811 million,

respectively, against $3,359 million and $2,754 million, respectively, net required assets under PMIERs. The

estimated sufficiency as of December 31, 2020 and 2019 was $1,229 million and $1,057 million, respectively, or

137% and 138%, respectively, above the published PMIERs requirements. PMIERs sufficiency is based on the

published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions

recently imposed on our U.S. mortgage insurance business. Our PMIERs required assets as of December 31,

2020 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for
certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided
$1,046 million of benefit to our December 31, 2020 PMIERs required assets. Our credit risk transfer transactions
provided an estimated aggregate of $936 million of PMIERs capital credit as of December 31, 2020.

International insurance subsidiaries—statutory financial information

Our international insurance subsidiaries also prepare financial statements in accordance with local
regulatory requirements. Our international insurance subsidiaries have accounting practices under local
regulatory requirements that differ from U.S. GAAP, such as the application of accounting changes resulting
from premium earnings pattern and liability adequacy reviews. As of December 31, 2020 and 2019, combined
local statutory capital and surplus of our international insurance subsidiaries was $1.3 billion and $1.2 billion,
respectively. Combined local statutory net income included in continuing operations for our international
insurance subsidiaries was $108 million, $87 million and $57 million for the years ended December 31, 2020,
2019 and 2018, respectively. The regulatory authorities in these international jurisdictions generally establish
supervisory solvency requirements. Our international insurance subsidiaries had combined surplus levels that
exceeded local solvency requirements by $272 million and $384 million as of December 31, 2020 and 2019,
respectively.

Certain of our insurance subsidiaries have securities on deposit with various state or foreign government

insurance departments in order to comply with relevant insurance regulations. See note 4(d) for additional
information related to these deposits. Additionally, under the terms of certain reinsurance agreements that our life
insurance subsidiaries have with external parties, we pledged assets in either separate portfolios or in trust for the
benefit of external reinsurers. These assets support the reserves ceded to those external reinsurers. See note 8 for
additional information related to these pledged assets under reinsurance agreements. Certain of our U.S. life
insurance subsidiaries are also members of regional FHLBs and the FHLBs have been granted a lien on certain of
our invested assets to collateralize our obligations. See note 9 for additional information related to these pledged
assets with the FHLBs.

Guarantees of obligations

In addition to the commitments discussed in note 20, we have provided guarantees to third parties for the

performance of certain obligations of our subsidiaries. We estimate that our potential obligations under such
guarantees was $4 million and $5 million as of December 31, 2020 and 2019, respectively.

Genworth Holdings provides capital support of up to $175 million, subject to adjustments, to one of its
insurance subsidiaries to fund claims to support its mortgage insurance business in Mexico. We believe this
insurance subsidiary has adequate reserves to cover its underlying obligations.

Genworth Holdings also provided an unlimited guarantee for the benefit of policyholders for the payment of

valid claims by our European mortgage insurance subsidiary prior to its sale in May 2016. Following the sale of
this United Kingdom subsidiary to AmTrust Financial Services, Inc., the guarantee was limited to the payment of
valid claims on policies in-force prior to the sale date and those written approximately 90 days subsequent to the
date of the sale, and AmTrust Financial Services, Inc. has agreed to provide us with a limited indemnification in
the event there is any exposure under the guarantee. As of December 31, 2020, the risk in-force of active policies
was approximately $1.3 billion.

294

295

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(18) Segment Information

(a) Operating Segment Information

We have the following four operating business segments: U.S. Mortgage Insurance; Australia Mortgage

Insurance; U.S. Life Insurance (which includes our long-term care insurance, life insurance and fixed annuities
businesses); and Runoff (which includes the results of products which have not been actively sold since 2011). In
addition to our four operating business segments, we also have Corporate and Other activities which include debt
financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses,
eliminations of inter-segment transactions and the results of other businesses that are managed outside of our
operating segments, including certain smaller international mortgage insurance businesses and discontinued
operations.

We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the

U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional
or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to
reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent
differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income
taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other
activities.

We use the same accounting policies and procedures to measure segment income (loss) and assets as our
consolidated net income (loss) and assets. Our chief operating decision maker evaluates segment performance
and allocates resources on the basis of “adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders.” We define adjusted operating income (loss) available to Genworth Financial, Inc.’s
common stockholders as 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 infrequent or unusual non-operating items. Gains
(losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse
funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on
reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent
or unusual non-operating items because we do not consider them to be related to the operating performance of
our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result
of estimated future credit losses, the size and timing of which can vary significantly depending on market credit
cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are
influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments,
gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on
insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss)
available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of
overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not
indicative of overall operating trends.

While some of these items may be significant components of net income (loss) available to Genworth
Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating
income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from
or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders,

are appropriate measures that are useful to investors because they identify the income (loss) attributable to the

ongoing operations of the business. Management also uses adjusted operating income (loss) available to

Genworth Financial, Inc.’s common stockholders as a basis for determining awards and compensation for senior

management and to evaluate performance on a basis comparable to that used by analysts. However, the items

excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss)

available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to

Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our

definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may

differ from the definitions used by other companies.

Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to

adjusted operating income (loss) assume a 21% tax rate for our domestic segments and a 30% tax rate for our

Australia Mortgage Insurance segment and are net of the portion attributable to noncontrolling interests. In 2018,

we assumed a flat 21% tax rate on adjustments for all of our segments. Net investment gains (losses) are also

adjusted for DAC and other intangible amortization and certain benefit reserves.

In 2020, we recorded a goodwill impairment of $3 million, net of the portion attributable to noncontrolling

interests, in our Australia mortgage insurance business.

During 2020, we repurchased $84 million principal amount of Genworth Holdings’ senior notes with 2021

maturity dates for a pre-tax gain of $4 million. In January 2020, we paid a pre-tax make-whole expense of

$9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in

June 2020 and Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance

subsidiary, early redeemed all of its $315 million outstanding non-recourse funding obligations originally due in

2050 resulting in a pre-tax loss of $4 million from the write-off of deferred borrowing costs. These transactions

were excluded from adjusted operating income (loss) as they relate to gains (losses) on the early extinguishment

of debt.

needs and expenses.

In 2020, 2019 and 2018, we recorded a pre-tax expense of $3 million, $4 million and $2 million,

respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational

There were no infrequent or unusual items excluded from adjusted operating income (loss) during the

periods presented other than fees incurred in 2018 related to Genworth Holdings’ bond consent solicitation of

$6 million for broker, advisor and investment banking fees.

296

297

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(18) Segment Information

(a) Operating Segment Information

We have the following four operating business segments: U.S. Mortgage Insurance; Australia Mortgage

Insurance; U.S. Life Insurance (which includes our long-term care insurance, life insurance and fixed annuities

businesses); and Runoff (which includes the results of products which have not been actively sold since 2011). In

addition to our four operating business segments, we also have Corporate and Other activities which include debt

financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses,

eliminations of inter-segment transactions and the results of other businesses that are managed outside of our

operating segments, including certain smaller international mortgage insurance businesses and discontinued

operations.

activities.

We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the

U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional

or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to

reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent

differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income

taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other

We use the same accounting policies and procedures to measure segment income (loss) and assets as our

consolidated net income (loss) and assets. Our chief operating decision maker evaluates segment performance

and allocates resources on the basis of “adjusted operating income (loss) available to Genworth Financial, Inc.’s

common stockholders.” We define adjusted operating income (loss) available to Genworth Financial, Inc.’s

common stockholders as 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 infrequent or unusual non-operating items. Gains

(losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse

funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on

reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent

or unusual non-operating items because we do not consider them to be related to the operating performance of

our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result

of estimated future credit losses, the size and timing of which can vary significantly depending on market credit

cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are

influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments,

gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on

insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss)

available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of

overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not

indicative of overall operating trends.

While some of these items may be significant components of net income (loss) available to Genworth

Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating

income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from

or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders,

are appropriate measures that are useful to investors because they identify the income (loss) attributable to the
ongoing operations of the business. Management also uses adjusted operating income (loss) available to
Genworth Financial, Inc.’s common stockholders as a basis for determining awards and compensation for senior
management and to evaluate performance on a basis comparable to that used by analysts. However, the items
excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss)
available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to
Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our
definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may
differ from the definitions used by other companies.

Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to

adjusted operating income (loss) assume a 21% tax rate for our domestic segments and a 30% tax rate for our
Australia Mortgage Insurance segment and are net of the portion attributable to noncontrolling interests. In 2018,
we assumed a flat 21% tax rate on adjustments for all of our segments. Net investment gains (losses) are also
adjusted for DAC and other intangible amortization and certain benefit reserves.

In 2020, we recorded a goodwill impairment of $3 million, net of the portion attributable to noncontrolling

interests, in our Australia mortgage insurance business.

During 2020, we repurchased $84 million principal amount of Genworth Holdings’ senior notes with 2021

maturity dates for a pre-tax gain of $4 million. In January 2020, we paid a pre-tax make-whole expense of
$9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in
June 2020 and Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance
subsidiary, early redeemed all of its $315 million outstanding non-recourse funding obligations originally due in
2050 resulting in a pre-tax loss of $4 million from the write-off of deferred borrowing costs. These transactions
were excluded from adjusted operating income (loss) as they relate to gains (losses) on the early extinguishment
of debt.

In 2020, 2019 and 2018, we recorded a pre-tax expense of $3 million, $4 million and $2 million,

respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational
needs and expenses.

There were no infrequent or unusual items excluded from adjusted operating income (loss) during the
periods presented other than fees incurred in 2018 related to Genworth Holdings’ bond consent solicitation of
$6 million for broker, advisor and investment banking fees.

296

297

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The following is a summary of our segments and Corporate and Other activities as of or for the years ended

December 31:

2020

(Amounts in millions)

U.S.
Mortgage
Insurance

Australia
Mortgage
Insurance

U.S. Life
Insurance

Runoff

Corporate
and Other

Total

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 856

$ 312 $ 2,861 $ — $

8 $

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . .

$ 971
133
(4)
6

$ 274
32
66
1

$ 2,858
2,878
517
595

$ — $
210
(26)
130

Total revenues . . . . . . . . . . . . . . . . . . . . . .

1,106

373

6,848

314

$

7
7
5
(2)

17

Benefits and other changes in policy

reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . .

Income (loss) from continuing operations

before income taxes . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . .

Income (loss) from continuing operations . . . . .
Loss from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations

attributable to noncontrolling interests . . . . .

Net income (loss) available to Genworth

381
—

206

21
—
18

626

480
102

378

—

378

—

177
—

74

29
5
7

4,781
383

620

418
—

5

292

6,207

81
24

57

—

57

34

641
163

478

—

478

—

48
166

48

23
—
—

285

29
4

25

—

25

—

4
—

40

1

—
172

217

(200)
(23)

(177)

(549)

(726)

—

4,110
3,260
558
730

8,658

5,391
549

988

492
5
202

7,627

1,031
270

761

(549)

212

34

Financial, Inc.’s common stockholders . . . . .

$ 378

$

23

$

478

$

25

$ (726)

$

178

Net income (loss) available to Genworth

Financial, Inc.’s common stockholders:

Income (loss) from continuing operations
available to Genworth Financial, Inc.’s
common stockholders . . . . . . . . . . . . . .

Loss from discontinued operations

available to Genworth Financial, Inc.’s
common stockholders . . . . . . . . . . . . . .

Net income (loss) available to Genworth

Financial, Inc.’s common
stockholders . . . . . . . . . . . . . . . . . . . . . .

$ 378

$

23

$

478

$

25

$ (177)

$

727

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

—

(112)

(112)

—

—

—

—

(549)

(549)

$ 378

$

23

$

478

$

25

$ (726)

$

178

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,627

$2,884

$84,671

$9,735

$2,830

$105,747

298

299

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Total benefits and expenses . . . . . . . . . . . . . . . . . .

214

6,391

255

U.S.

Mortgage

Insurance

Australia

Mortgage

Insurance

U.S. Life

Insurance Runoff

Corporate

and Other

Total

1

4

978

50

—

191

15

—

256

722

153

569

—

569

—

—

55

23

—

390

104

—

69

33

8

176

53

123

—

123

64

—

17 —

2,852

82

643

6,438

4,979

419

604

372

47

34

13

13

—

—

—

187

(25)

140

302

27

158

52

18

47

8

39

39

—

—

—

(31)

(12)

9

2

3

—

46

3

214

266

(278)

(53)

(225)

11

(214)

—

123

4,037

3,220

50

789

8,096

5,163

577

962

441

239

7,382

714

195

519

11

530

64

123

2019

(Amounts in millions)

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . .

117

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and other changes in policy reserves . . . . . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision (benefit) for income taxes . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . .

Income from discontinued operations, net of taxes . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . . . . .

Net income (loss) available to Genworth Financial,

Net income (loss) available to Genworth Financial,

Inc.’s common stockholders:

Income (loss) from continuing operations

available to Genworth Financial, Inc.’s

Loss from discontinued operations available to

Genworth Financial, Inc.’s common

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . $ 569

$

59 $

13 $

39 $ (337) $

343

common stockholders . . . . . . . . . . . . . . . . . . . . $ 569

$

59 $

13 $

39 $ (225) $

455

Net income (loss) available to Genworth

Financial, Inc.’s common stockholders . . . . . . . $ 569

$

59 $

13 $

39 $ (337) $

343

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,504

$2,406 $81,640 $9,953 $2,839 $101,342

Total benefits and expenses . . . . . . . . . . . .

292

6,207

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following is a summary of our segments and Corporate and Other activities as of or for the years ended

December 31:

2020

(Amounts in millions)

U.S.

Mortgage

Insurance

Australia

Mortgage

Insurance

U.S. Life

Insurance

Runoff

Corporate

and Other

Total

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 971

$ 274

$ 2,858

$ — $

$

Net investment income . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . .

133

(4)

6

Total revenues . . . . . . . . . . . . . . . . . . . . . .

1,106

32

66

1

373

177

—

74

29

5

7

81

24

57

57

34

—

2,878

517

595

6,848

4,781

383

620

418

—

5

641

163

478

—

478

—

210

(26)

130

314

48

166

48

23

—

—

285

29

4

25

—

25

—

7

7

5

(2)

17

4

—

40

1

—

172

217

(200)

(23)

(177)

(549)

(726)

—

4,110

3,260

558

730

8,658

5,391

549

988

492

5

202

7,627

1,031

270

761

(549)

212

34

Benefits and other changes in policy

reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill impairment . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations

before income taxes . . . . . . . . . . . . . . . . . . . .

Provision (benefit) for income taxes . . . . . . . . .

Income (loss) from continuing operations . . . . .

Loss from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations

attributable to noncontrolling interests . . . . .

Net income (loss) available to Genworth

Net income (loss) available to Genworth

Financial, Inc.’s common stockholders:

Income (loss) from continuing operations

available to Genworth Financial, Inc.’s

Loss from discontinued operations

available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . .

Net income (loss) available to Genworth

Financial, Inc.’s common

381

—

206

21

—

18

626

480

102

378

—

378

—

298

Financial, Inc.’s common stockholders . . . . .

$ 378

$

23

$

478

$

25

$ (726)

$

178

common stockholders . . . . . . . . . . . . . .

$ 378

$

23

$

478

$

25

$ (177)

$

727

stockholders . . . . . . . . . . . . . . . . . . . . . .

$ 378

$

23

$

478

$

25

$ (726)

$

178

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,627

$2,884

$84,671

$9,735

$2,830

$105,747

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

2019

(Amounts in millions)

U.S.
Mortgage
Insurance

Australia
Mortgage
Insurance

U.S. Life
Insurance Runoff

Corporate
and Other

Total

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 856
117
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . .
1
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . .
4
Policy fees and other income . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and other changes in policy reserves . . . . . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . .
Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . .
Income from discontinued operations, net of taxes . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . . . . .

Net income (loss) available to Genworth Financial,

978

50
—
191

15
—

256

722
153

569
—

569

—

—

$ 312 $ 2,861 $ — $
2,852
82
643

187
(25)
140

55
23
—

390

104
—

69

33
8

6,438

4,979
419
604

302

27
158
52

372
18
17 —

214

6,391

255

176
53

123
—

123

64

—

47
34

13

—

13

—

—

47
8

39

—

39

—

—

8 $
9
(31)
2

(12)

3
—

46

3
214

266

(278)
(53)

(225)
11

(214)

—

123

4,037
3,220
50
789

8,096

5,163
577
962

441
239

7,382

714
195

519
11

530

64

123

Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . $ 569

$

59 $

13 $

39 $ (337) $

343

Net income (loss) available to Genworth Financial,

Inc.’s common stockholders:

Income (loss) from continuing operations
available to Genworth Financial, Inc.’s
common stockholders . . . . . . . . . . . . . . . . . . . . $ 569

$

59 $

13 $

39 $ (225) $

455

Loss from discontinued operations available to

Genworth Financial, Inc.’s common
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) available to Genworth

—

—

—

—

(112)

(112)

—

—

—

—

(549)

(549)

Financial, Inc.’s common stockholders . . . . . . . $ 569

$

59 $

13 $

39 $ (337) $

343

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,504

$2,406 $81,640 $9,953 $2,839 $101,342

299

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

2018

(Amounts in millions)

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . .
Policy fees and other income . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and other changes in policy reserves . . . .
Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . .
Income from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . .

Net income (loss) available to Genworth Financial,
Inc.’s common stockholders . . . . . . . . . . . . . . . .

Net income (loss) available to Genworth Financial,

Inc.’s common stockholders:

Income (loss) from continuing operations
available to Genworth Financial, Inc.’s
common stockholders . . . . . . . . . . . . . . . . .

Income from discontinued operations

available to Genworth Financial, Inc.’s
common stockholders . . . . . . . . . . . . . . . . .

Net income (loss) available to Genworth

U.S.
Mortgage
Insurance

Australia
Mortgage
Insurance

U.S. Life
Insurance Runoff

Corporate
and Other

Total

$

$—
174
(33)
153

$746
93
—

2

841

36
—

169

14
—

219

622
132

490

—

490

—

—

$373
67
(15)
2

427

110
—

65

43
9

$2,867
2,781
29
641

6,318

5,416
461

584

257
16

227

6,734

200
60

140

—

140

70

—

(416)
(68)

(348)

—

(348)

—

—

294

39
150

57

33
—

279

15
2

13

—

13

—

—

8
6
10
(3)

21

5
—

68

1
231

305

$3,994
3,121
(9)
795

7,901

5,606
611

943

348
256

7,764

(284)
(56)

(228)

230

2

—

108

137
70

67

230

297

70

108

$490

$ 70

$ (348)

$ 13

$(106)

$ 119

$490

$ 70

$ (348)

$ 13

$(228)

$

(3)

—

—

—

—

122

122

Financial, Inc.’s common stockholders . . . .

$490

$ 70

$ (348)

$ 13

$(106)

$ 119

300

301

The following is a summary of revenues of major product groups for our segments and Corporate and Other

(b) Revenues of Major Product Groups

activities for the years ended December 31:

(Amounts in millions)

Revenues:

2020

2019

2018

U.S. Mortgage Insurance segment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Australia Mortgage Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,106

373

$ 978

390

$ 841

427

U.S. Life Insurance segment:

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Life Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Runoff segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate and Other activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,960

1,357

531

6,848

314

17

4,385

1,444

609

6,438

302

(12)

4,197

1,430

691

6,318

294

21

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,658

$8,096

$7,901

(c) Reconciliations

The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s

common stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders and a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders for our segments and Corporate and Other activities for the years ended December 31:

(Amounts in millions)

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . .

$ 178

$343

$119

Add: net income from continuing operations attributable to noncontrolling interests . . . . . . . . . . . . . . .

34

Add: net income from discontinued operations attributable to noncontrolling interests . . . . . . . . . . . . . —

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations attributable to noncontrolling interests . . . . . . . . . . . . . . .

2020

2019

2018

64

123

530

11

519

64

70

108

297

230

67

70

212

(549)

761

34

Income (loss) from continuing operations available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

727

455

(3)

Adjustments to income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders:

Net investment (gains) losses, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(538)

(50)

(10)

Goodwill impairment, net (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Gains) losses on early extinguishment of debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fees associated with bond consent solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113

11 —

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders . . . . .

$ 317

$420

$ (5)

3 —

9 —

3

4

—

—

—

2

6

(1)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other

intangible amortization and certain benefit reserves of $(11) million, $(11) million and $(12) million, respectively, and

adjusted for net investment gains (losses) attributable to noncontrolling interests of $31 million, $11 million and $(7)

(2)

For the year ended December 31, 2020, goodwill impairment was adjusted for the portion attributable to noncontrolling

million, respectively.

interests of $2 million.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(b) Revenues of Major Product Groups

The following is a summary of revenues of major product groups for our segments and Corporate and Other

activities for the years ended December 31:

(Amounts in millions)

2020

2019

2018

Revenues:
U.S. Mortgage Insurance segment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australia Mortgage Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Life Insurance segment:
Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Life Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Runoff segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,106
373

$ 978
390

$ 841
427

4,960
1,357
531

6,848

314
17

4,385
1,444
609

6,438

302
(12)

4,197
1,430
691

6,318

294
21

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,658

$8,096

$7,901

(c) Reconciliations

The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s
common stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common
stockholders and a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common
stockholders for our segments and Corporate and Other activities for the years ended December 31:

(Amounts in millions)

2020

2019

2018

$ 178
Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . . . .
Add: net income from continuing operations attributable to noncontrolling interests . . . . . . . . . . . . . . .
34
Add: net income from discontinued operations attributable to noncontrolling interests . . . . . . . . . . . . . —

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: income (loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income from continuing operations attributable to noncontrolling interests . . . . . . . . . . . . . . .

212
(549)

761
34

$343
64
123

530
11

519
64

$119
70
108

297
230

67
70

Income (loss) from continuing operations available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

727

455

(3)

Adjustments to income (loss) from continuing operations available to Genworth Financial, Inc.’s

common stockholders:

Total benefits and expenses . . . . . . . . . . . . . . .

227

6,734

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$746

$373

$—

$

U.S.

Mortgage

Insurance

Australia

Mortgage

Insurance

U.S. Life

Insurance Runoff

Corporate

and Other

Total

93

—

2

841

36

—

169

14

—

219

622

132

490

—

490

—

—

$2,867

2,781

29

641

6,318

5,416

461

584

257

16

(416)

(68)

(348)

—

(348)

—

—

174

(33)

153

294

39

150

57

33

—

279

15

2

13

—

13

—

—

67

(15)

2

427

110

—

65

43

9

200

60

140

—

140

70

—

8

6

10

(3)

21

5

—

68

1

231

305

(284)

(56)

(228)

230

2

—

108

$3,994

3,121

(9)

795

7,901

5,606

611

943

348

256

7,764

137

70

67

230

297

70

108

2018

(Amounts in millions)

Net investment income . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . .

Policy fees and other income . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and other changes in policy reserves . . . .

Interest credited . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of

deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision (benefit) for income taxes . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . .

Income from discontinued operations, net of

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from continuing operations

attributable to noncontrolling interests . . . . . . . .

Less: net income from discontinued operations

attributable to noncontrolling interests . . . . . . . .

Net income (loss) available to Genworth Financial,

Net income (loss) available to Genworth Financial,

Inc.’s common stockholders:

Income (loss) from continuing operations

available to Genworth Financial, Inc.’s

Income from discontinued operations

available to Genworth Financial, Inc.’s

Net income (loss) available to Genworth

Inc.’s common stockholders . . . . . . . . . . . . . . . .

$490

$ 70

$ (348)

$ 13

$(106)

$ 119

common stockholders . . . . . . . . . . . . . . . . .

$490

$ 70

$ (348)

$ 13

$(228)

$

(3)

common stockholders . . . . . . . . . . . . . . . . .

—

—

—

—

122

122

Financial, Inc.’s common stockholders . . . .

$490

$ 70

$ (348)

$ 13

$(106)

$ 119

Net investment (gains) losses, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment, net (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on early extinguishment of debt
Expenses related to restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees associated with bond consent solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
113
Taxes on adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders . . . . .

$ 317

$420

$ (5)

(1)

(2)

For the years ended December 31, 2020, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other
intangible amortization and certain benefit reserves of $(11) million, $(11) million and $(12) million, respectively, and
adjusted for net investment gains (losses) attributable to noncontrolling interests of $31 million, $11 million and $(7)
million, respectively.
For the year ended December 31, 2020, goodwill impairment was adjusted for the portion attributable to noncontrolling
interests of $2 million.

300

301

3 —
9 —
3

—
11 —

(10)
—
—

(538)

(50)

2
6

4

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(Amounts in millions)

2020

2019

2018

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Mortgage Insurance segment
Australia Mortgage Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Life Insurance segment:
Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 381
1

$ 568
51

$ 490
76

237
(247)
78

57
(181)
69

(348)
(107)
79

U.S. Life Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68

(55)

(376)

Runoff segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43
(176)

56
(200)

35
(230)

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 317

$ 420

$

(5)

(d) Geographic Segment Information

We conduct our operations in the following geographic regions: (1) United States (2) Australia and

(3) Other Countries.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The following is a summary of geographic region activity as of or for the years ended December 31:

2020

2019

2018

(Amounts in millions)

United States Australia

Countries

International

Total

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,276

$ 373

$

9

$ 382

8,658

Other

Total

Income (loss) from continuing operations . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

706

157

$

$

57

57

$ (2)

$ (2)

$

$

55

55

761

212

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$102,804

$2,884

$ 59

$2,943

$105,747

(Amounts in millions)

United States Australia

Countries

International

Total

Other

Total

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,701

$ 390

$

5

Income (loss) from continuing operations . . . . . . . . .

$ 123

$ (2)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 123

398

398

$ 395

$ 121

$ 132

8,096

519

530

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 98,881

$2,406

$2,461

$101,342

$

9

$ 55

(Amounts in millions)

United States Australia

Countries

International

Total

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,469

$ 427

$

5

Income (loss) from continuing operations . . . . . . . . .

(69)

$ 140

$ (4)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(69)

$ 140

$226

$ 432

$ 136

$ 366

7,901

67

297

Other

Total

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

302

303

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(Amounts in millions)

stockholders:

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

U.S. Life Insurance segment:

U.S. Mortgage Insurance segment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 381

$ 568

$ 490

Australia Mortgage Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Long-term care insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(181)

Fixed annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Life Insurance segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(55)

(376)

Runoff segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate and Other activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(176)

(200)

(230)

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 317

$ 420

$

(5)

51

57

69

56

76

(348)

(107)

79

35

237

(247)

78

68

43

(d) Geographic Segment Information

We conduct our operations in the following geographic regions: (1) United States (2) Australia and

(3) Other Countries.

2020

2019

2018

The following is a summary of geographic region activity as of or for the years ended December 31:

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

2020

(Amounts in millions)

United States Australia

Other
Countries

Total
International

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

8,276

$ 373

$

9

$ 382

706

157

$

$

57

57

$ (2)

$ (2)

$

$

55

55

Total

8,658

761

212

$

$

$

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$102,804

$2,884

$ 59

$2,943

$105,747

2019

(Amounts in millions)

United States Australia

Other
Countries

Total
International

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

7,701

$ 390

$

5

$ 123

$ (2)

398

398

$ 123

$ 395

$ 121

$ 132

Total

8,096

519

530

$

$

$

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 98,881

$2,406

$2,461

$101,342

$

9

$ 55

2018

(Amounts in millions)

United States Australia

Other
Countries

Total
International

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

7,469

$ 427

$

5

(69)

$ 140

$ (4)

(69)

$ 140

$226

$ 432

$ 136

$ 366

Total

7,901

67

297

$

$

$

302

303

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(19) Quarterly Results of Operations (unaudited)

Our unaudited quarterly results of operations for the year ended December 31, 2020 are summarized in the

table below.

(Amounts in millions, except per share amounts)

Three months ended

March 31,
2020

June 30,
2020

September 30,
2020

December 31,
2020

Total revenues (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,837

$2,138

Total benefits and expenses (2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,919

$1,990

Income (loss) from continuing operations (1), (2), (3)

. . . . . . . . . . . . . . . . .

$ (72)

$ 102

$2,420

$1,835

$ 435

Income (loss) from discontinued operations, net of taxes (4)

. . . . . . . . .

$ —

$ (520)

$

1

Net income (loss) (1), (2), (3), (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (72)

$ (418)

$ 436

$2,263

$1,883

$ 296

$ (30)

$ 266

Net income (loss) from continuing operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(6)

$

23

$

18

$

(1)

Net income from discontinued operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

$ —

$ —

$ —

Net income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (66)

$ (441)

$ 418

$ 267

Net income (loss) available to Genworth Financial, Inc.’s common

stockholders:

Income (loss) from continuing operations available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . .

$ (66)

$

79

$ 417

$ 297

(5) Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common

Income (loss) from discontinued operations available to

Genworth Financial, Inc.’s common stockholders . . . . . . . . . . .

—

(520)

1

(30)

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (66)

$ (441)

$ 418

$ 267

Income (loss) from continuing operations available to Genworth

Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ 0.16

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ 0.15

$ 0.83

$ 0.82

Net income (loss) available to Genworth Financial, Inc.’s common

stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ (0.87)

$ 0.83

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ (0.86)

$ 0.82

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

504.3
504.3

505.4
512.5

505.6
511.5

$ 0.59

$ 0.58

$ 0.53

$ 0.52

505.6
512.5

(1)

In the fourth quarter of 2020, we recorded lower net investment gains as compared to the third quarter of 2020. The
higher net investment gains recorded in the third quarter of 2020 related to the sale of available-for-sale fixed maturity
securities of $330 million driven primarily from the sale of U.S. government securities due to portfolio rebalancing and
asset exposure management as a result of the prolonged low interest rate environment. This decrease to total revenues
was partially offset by higher net investment income recorded in the fourth quarter of 2020 largely driven by bond calls
and mortgage loan repayments of $40 million and limited partnerships of $38 million.

304

305

(2) Given our assumption that COVID-19 has temporarily decreased the number of new claims submitted, our long-term

care insurance business strengthened IBNR reserves in the fourth quarter of 2020 by $47 million. Additionally, our long-

term care insurance business recorded a $91 million increase to claim reserves reflecting our assumption that COVID-19

accelerated mortality experience on the most vulnerable claimants, leaving the remaining claim population less likely to

terminate compared to the pre-pandemic average population. Our U.S. mortgage insurance business recorded an

unfavorable reserve adjustment of $37 million primarily due to slowing cure emergence patterns impacting the frequency

of claim. Our Australia mortgage insurance business strengthened its loss reserves by $88 million, including its IBNR

reserves, due to a refinement in methodology to more closely align with historical delinquency behavior and for loans in

payment deferral programs. Our life insurance business completed its annual review of assumptions in the fourth quarter

of 2020. This review resulted in lower total benefits and expenses of $82 million from a net favorable unlocking in our

term universal and universal life insurance products largely attributable to a model refinement in our term universal life

insurance product related to persistency and grace period timing and lower projected cost of insurance assessments on

our universal life insurance products. In addition, we recorded a DAC impairment of $63 million in our universal life

insurance products due principally to lower future estimated gross profits.

(3)

In the fourth quarter of 2020, our long-term care insurance business strengthened its reserves by $109 million after-tax.

Our U.S. mortgage insurance and Australia mortgage insurance businesses strengthened their loss reserves by

$29 million and $62 million, respectively, after-tax. Our life insurance business recorded a $60 million net favorable

unlocking, net of taxes, related to its annual review of assumptions. This favorable unlocking in our life insurance

business was partially offset by a DAC impairment of $50 million, net of taxes, as a result of recoverability testing. For

all of the aforementioned transactions, see above under superscript (2) for additional details.

(4)

In the fourth quarter of 2020, we recorded a loss from discontinued operations, net of taxes, of $30 million principally

attributed to foreign currency remeasurement losses of $26 million, unfavorable tax charges of $17 million and other

expenses of $8 million, mostly consisting of interest expense attributable to the promissory note owed to AXA. These

losses were partially offset by derivative hedge gains of $21 million associated with foreign currency forward contracts

entered into to mitigate our exposure to the installment payments to be made in British Pounds in 2022. See note 23 for

additional details on discontinued operations.

shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing

operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, we

were required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share for

the three months ended March 31, 2020, as the inclusion of shares for stock options, RSUs and SARs of 5.4 million

would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to

Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, dilutive potential

weighted-average common shares outstanding would have been 509.7 million.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(2) Given our assumption that COVID-19 has temporarily decreased the number of new claims submitted, our long-term

care insurance business strengthened IBNR reserves in the fourth quarter of 2020 by $47 million. Additionally, our long-
term care insurance business recorded a $91 million increase to claim reserves reflecting our assumption that COVID-19
accelerated mortality experience on the most vulnerable claimants, leaving the remaining claim population less likely to
terminate compared to the pre-pandemic average population. Our U.S. mortgage insurance business recorded an
unfavorable reserve adjustment of $37 million primarily due to slowing cure emergence patterns impacting the frequency
of claim. Our Australia mortgage insurance business strengthened its loss reserves by $88 million, including its IBNR
reserves, due to a refinement in methodology to more closely align with historical delinquency behavior and for loans in
payment deferral programs. Our life insurance business completed its annual review of assumptions in the fourth quarter
of 2020. This review resulted in lower total benefits and expenses of $82 million from a net favorable unlocking in our
term universal and universal life insurance products largely attributable to a model refinement in our term universal life
insurance product related to persistency and grace period timing and lower projected cost of insurance assessments on
our universal life insurance products. In addition, we recorded a DAC impairment of $63 million in our universal life
insurance products due principally to lower future estimated gross profits.
In the fourth quarter of 2020, our long-term care insurance business strengthened its reserves by $109 million after-tax.
Our U.S. mortgage insurance and Australia mortgage insurance businesses strengthened their loss reserves by
$29 million and $62 million, respectively, after-tax. Our life insurance business recorded a $60 million net favorable
unlocking, net of taxes, related to its annual review of assumptions. This favorable unlocking in our life insurance
business was partially offset by a DAC impairment of $50 million, net of taxes, as a result of recoverability testing. For
all of the aforementioned transactions, see above under superscript (2) for additional details.
In the fourth quarter of 2020, we recorded a loss from discontinued operations, net of taxes, of $30 million principally
attributed to foreign currency remeasurement losses of $26 million, unfavorable tax charges of $17 million and other
expenses of $8 million, mostly consisting of interest expense attributable to the promissory note owed to AXA. These
losses were partially offset by derivative hedge gains of $21 million associated with foreign currency forward contracts
entered into to mitigate our exposure to the installment payments to be made in British Pounds in 2022. See note 23 for
additional details on discontinued operations.

(3)

(4)

Financial, Inc.’s common stockholders . . . . . . . . . . . . . . . . . . . .

$ (66)

$

79

$ 417

$ 297

(5) Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common

shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing
operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, we
were required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share for
the three months ended March 31, 2020, as the inclusion of shares for stock options, RSUs and SARs of 5.4 million
would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to
Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, dilutive potential
weighted-average common shares outstanding would have been 509.7 million.

(19) Quarterly Results of Operations (unaudited)

Our unaudited quarterly results of operations for the year ended December 31, 2020 are summarized in the

table below.

Three months ended

March 31,

June 30,

September 30,

December 31,

(Amounts in millions, except per share amounts)

2020

2020

Total revenues (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,837

$2,138

Total benefits and expenses (2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,919

$1,990

Income (loss) from continuing operations (1), (2), (3)

. . . . . . . . . . . . . . . . .

$ (72)

$ 102

2020

$2,420

$1,835

$ 435

Income (loss) from discontinued operations, net of taxes (4)

. . . . . . . . .

$ —

$ (520)

$

1

Net income (loss) (1), (2), (3), (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (72)

$ (418)

$ 436

2020

$2,263

$1,883

$ 296

$ (30)

$ 266

Net income (loss) from continuing operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(6)

$

23

$

18

$

(1)

Net income from discontinued operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

$ —

$ —

$ —

Net income (loss) available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (66)

$ (441)

$ 418

$ 267

Net income (loss) available to Genworth Financial, Inc.’s common

stockholders:

Income (loss) from continuing operations available to Genworth

Income (loss) from discontinued operations available to

Genworth Financial, Inc.’s common stockholders . . . . . . . . . . .

—

(520)

1

(30)

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (66)

$ (441)

$ 418

$ 267

Income (loss) from continuing operations available to Genworth

Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ 0.16

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ 0.15

$ 0.83

$ 0.82

Net income (loss) available to Genworth Financial, Inc.’s common

stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ (0.87)

$ 0.83

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.13)

$ (0.86)

$ 0.82

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

504.3

504.3

505.4

512.5

505.6

511.5

$ 0.59

$ 0.58

$ 0.53

$ 0.52

505.6

512.5

(1)

In the fourth quarter of 2020, we recorded lower net investment gains as compared to the third quarter of 2020. The

higher net investment gains recorded in the third quarter of 2020 related to the sale of available-for-sale fixed maturity

securities of $330 million driven primarily from the sale of U.S. government securities due to portfolio rebalancing and

asset exposure management as a result of the prolonged low interest rate environment. This decrease to total revenues

was partially offset by higher net investment income recorded in the fourth quarter of 2020 largely driven by bond calls

and mortgage loan repayments of $40 million and limited partnerships of $38 million.

304

305

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Our unaudited quarterly results of operations for the year ended December 31, 2019 are summarized in the

(2)

In the fourth quarter of 2019, our life insurance business recorded a $107 million unfavorable unlocking, net

table below.

(Amounts in millions, except per share amounts)

Three months ended

March 31,
2019

June 30,
2019

September 30,
2019

December 31,
2019

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,044

$1,994

$2,020

Total benefits and expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,807

$1,770

$1,848

Income from continuing operations (2) . . . . . . . . . . . . . . . . . . . . .

$ 168

$ 158

$ 138

$2,038

$1,957

$

55

Income (loss) from discontinued operations, net of taxes (3) . . . .

$

62

$

60

$ (80)

$ (31)

Net income (2), (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 230

$ 218

Net income from continuing operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income from discontinued operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

20

36

$

$

15

35

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 174

$ 168

$

$

$

$

58

10

30

18

$

$

$

24

19

22

$ (17)

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders:

Income from continuing operations available to Genworth
Financial, Inc.’s common stockholders . . . . . . . . . . . . . .

Income (loss) from discontinued operations available to

$ 148

$ 143

$ 128

$

36

Genworth Financial, Inc.’s common stockholders . . . . .

26

25

(110)

(53)

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 174

$ 168

$

18

$ (17)

Income from continuing operations available to Genworth

Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.29

$ 0.29

$ 0.25

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.29

$ 0.28

$ 0.25

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.33

$ 0.04

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.34

$ 0.33

$ 0.04

$ 0.07

$ 0.07

$ (0.03)

$ (0.03)

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

501.2
508.6

503.4
508.7

503.5
511.2

503.5
510.4

operations.

(1) Our life insurance business completed its annual review of assumptions in the fourth quarter of 2019, which

resulted in higher total benefits and expenses of $145 million from an unfavorable unlocking in our
universal and term universal life insurance products driven mostly by the lower interest rate environment.

306

307

of taxes, related to its annual review of assumptions in our universal and term universal life insurance

products, as described above. This unfavorable unlocking in our life insurance business was partially offset

by a favorable update of $11 million, net of taxes, in our U.S. mortgage insurance business in connection

with a review of its single premium earnings pattern and from a favorable reserve adjustment of $10 million,

net of taxes.

(3)

In the fourth quarter of 2019, we recorded an after-tax loss of approximately $110 million principally in

connection with pending litigation involving our former lifestyle protection insurance business. See note 20

for additional information related to asserted claims regarding the sale of our lifestyle protection insurance

business. We completed the sale of Genworth MI Canada Inc. (“Genworth Canada”) on December 12, 2019

and recorded an incremental gain of $43 million in the fourth quarter of 2019 predominantly related to a

favorable tax position refinement. In addition, during the fourth quarter of 2019 through the sale closing

date of December 12, 2019, we recorded $36 million of income from discontinued operations attributed to

Genworth Canada.

(20) Commitments and Contingencies

(a) Litigation and Regulatory Matters

We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating

our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include

proceedings specific to us and others generally applicable to business practices in the industries in which we

operate. In our insurance operations, we are, have been, or may become subject to class actions and individual

suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-

term care insurance premiums, payment of contingent or other sales commissions, claims payments and

procedures, product design, product disclosure, product administration, additional premium charges for

premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on

products, recommending unsuitable products to customers, our pricing structures and business practices in our

mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting

services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement

laws, and mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to

customers, including but not limited to breach of customer information. Plaintiffs in class action and other

lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial

periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes

with counterparties. We are also subject to litigation arising out of our general business activities such as our

contractual and employment relationships, post-closing obligations associated with previous dispositions and

securities lawsuits. In addition, we are also subject to various regulatory inquiries, such as information requests,

subpoenas, books and record examinations and market conduct and financial examinations from state, federal

and international regulators and other authorities. A substantial legal liability or a significant regulatory action

against us could have an adverse effect on our business, financial condition and results of operations. Moreover,

even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant

reputational harm, which could have an adverse effect on our business, financial condition or results of

In January 2016, Genworth Financial, its current chief executive officer, its former chief executive officer,

its then former chief financial officer and current and former members of its board of directors were named in a

shareholder derivative suit filed by International Union of Operating Engineers Local No. 478 Pension Fund,

Richard L. Salberg and David Pinkoski in the Court of Chancery of the State of Delaware. The case was

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

2019

$2,038

$1,957

$

55

$

$

$

24

19

22

$

$

$

$

58

10

30

18

Our unaudited quarterly results of operations for the year ended December 31, 2019 are summarized in the

table below.

Three months ended

March 31,

June 30,

September 30,

December 31,

2019

2019

2019

(Amounts in millions, except per share amounts)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,044

$1,994

$2,020

Total benefits and expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,807

$1,770

$1,848

Income from continuing operations (2) . . . . . . . . . . . . . . . . . . . . .

$ 168

$ 158

$ 138

Income (loss) from discontinued operations, net of taxes (3) . . . .

$

62

$

60

$ (80)

$ (31)

Net income (2), (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 230

$ 218

Net income from continuing operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income from discontinued operations attributable to

noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

20

36

$

$

15

35

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 174

$ 168

$ (17)

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders:

Income from continuing operations available to Genworth

Financial, Inc.’s common stockholders . . . . . . . . . . . . . .

$ 148

$ 143

$ 128

$

36

Income (loss) from discontinued operations available to

Genworth Financial, Inc.’s common stockholders . . . . .

26

25

(110)

(53)

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 174

$ 168

$

18

$ (17)

Income from continuing operations available to Genworth

Financial, Inc.’s common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.29

$ 0.29

$ 0.25

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.29

$ 0.28

$ 0.25

Net income (loss) available to Genworth Financial, Inc.’s

common stockholders per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.35

$ 0.33

$ 0.04

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.34

$ 0.33

$ 0.04

$ 0.07

$ 0.07

$ (0.03)

$ (0.03)

Weighted-average common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

501.2

508.6

503.4

508.7

503.5

511.2

503.5

510.4

(1) Our life insurance business completed its annual review of assumptions in the fourth quarter of 2019, which

resulted in higher total benefits and expenses of $145 million from an unfavorable unlocking in our

universal and term universal life insurance products driven mostly by the lower interest rate environment.

(2)

(3)

In the fourth quarter of 2019, our life insurance business recorded a $107 million unfavorable unlocking, net
of taxes, related to its annual review of assumptions in our universal and term universal life insurance
products, as described above. This unfavorable unlocking in our life insurance business was partially offset
by a favorable update of $11 million, net of taxes, in our U.S. mortgage insurance business in connection
with a review of its single premium earnings pattern and from a favorable reserve adjustment of $10 million,
net of taxes.
In the fourth quarter of 2019, we recorded an after-tax loss of approximately $110 million principally in
connection with pending litigation involving our former lifestyle protection insurance business. See note 20
for additional information related to asserted claims regarding the sale of our lifestyle protection insurance
business. We completed the sale of Genworth MI Canada Inc. (“Genworth Canada”) on December 12, 2019
and recorded an incremental gain of $43 million in the fourth quarter of 2019 predominantly related to a
favorable tax position refinement. In addition, during the fourth quarter of 2019 through the sale closing
date of December 12, 2019, we recorded $36 million of income from discontinued operations attributed to
Genworth Canada.

(20) Commitments and Contingencies

(a) Litigation and Regulatory Matters

We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating

our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include
proceedings specific to us and others generally applicable to business practices in the industries in which we
operate. In our insurance operations, we are, have been, or may become subject to class actions and individual
suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-
term care insurance premiums, payment of contingent or other sales commissions, claims payments and
procedures, product design, product disclosure, product administration, additional premium charges for
premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on
products, recommending unsuitable products to customers, our pricing structures and business practices in our
mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting
services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement
laws, and mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to
customers, including but not limited to breach of customer information. Plaintiffs in class action and other
lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial
periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes
with counterparties. We are also subject to litigation arising out of our general business activities such as our
contractual and employment relationships, post-closing obligations associated with previous dispositions and
securities lawsuits. In addition, we are also subject to various regulatory inquiries, such as information requests,
subpoenas, books and record examinations and market conduct and financial examinations from state, federal
and international regulators and other authorities. A substantial legal liability or a significant regulatory action
against us could have an adverse effect on our business, financial condition and results of operations. Moreover,
even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant
reputational harm, which could have an adverse effect on our business, financial condition or results of
operations.

In January 2016, Genworth Financial, its current chief executive officer, its former chief executive officer,
its then former chief financial officer and current and former members of its board of directors were named in a
shareholder derivative suit filed by International Union of Operating Engineers Local No. 478 Pension Fund,
Richard L. Salberg and David Pinkoski in the Court of Chancery of the State of Delaware. The case was

306

307

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

captioned Int’l Union of Operating Engineers Local No. 478 Pension Fund, et al v. McInerney, et al. In February
2016, Genworth Financial, its current chief executive officer, its former chief executive officer, its then former
chief financial officer and current and former members of its board of directors were named in a second
shareholder derivative suit filed by Martin Cohen in the Court of Chancery of the State of Delaware. The case
was captioned Cohen v. McInerney, et al. On February 23, 2016, the Court of Chancery of the State of Delaware
consolidated these derivative suits under the caption Genworth Financial, Inc. Consolidated Derivative
Litigation. On March 28, 2016, plaintiffs in the consolidated action filed an amended complaint. The amended
complaint alleges breaches of fiduciary duties concerning Genworth’s long-term care insurance reserves and
concerning Genworth’s Australian mortgage insurance business, including our plans for an IPO of the business
and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the Court may deem proper.
The amended consolidated complaint also added Genworth’s then current chief financial officer as a defendant,
based on alleged conduct in her former capacity as Genworth’s controller and principal accounting officer. We
moved to dismiss the consolidated action on May 27, 2016. Thereafter, plaintiffs filed a substantially similar
second amended complaint which we moved to dismiss on September 16, 2016. The motion is fully briefed and
awaiting disposition by the Court. The action was stayed pending the outcome of the proposed China Oceanwide
transaction. On January 14, 2021, the parties submitted a joint letter to the Court requesting that the action
remain stayed until April 15, 2021, or until the closing or termination of the merger in the event the merger
closes or is terminated prior to April 15, 2021.

In October 2016, Genworth Financial, its current chief executive officer, its former chief executive officer,
its then current chief financial officer, its then former chief financial officer and current and former members of
its board of directors were named in a shareholder derivative suit filed by Esther Chopp in the Court of Chancery
of the State of Delaware. The case is captioned Chopp v. McInerney, et al. The complaint alleges that
Genworth’s board of directors wrongfully refused plaintiff’s demand to commence litigation on behalf of
Genworth and asserts claims for breaches of fiduciary duties, waste, contribution and indemnification, and unjust
enrichment concerning Genworth’s long-term care insurance reserves and concerning Genworth’s Australian
mortgage insurance business, including our plans for an IPO of the business, and seeks unspecified damages,
costs, attorneys’ fees and such equitable relief as the Court may deem proper. We filed a motion to dismiss on
November 14, 2016. The action was stayed pending the outcome of the proposed China Oceanwide transaction.
On January 14, 2021, the parties submitted a joint letter to the Court requesting that the action remain stayed
until April 15, 2021, or until the closing or termination of the merger in the event the merger closes or is
terminated prior to April 15, 2021.

In December 2017, Genworth Financial International Holdings, LLC (“GFIH”) and Genworth Financial
were named as defendants in an action captioned AXA S.A. v. Genworth Financial International Holdings, LLC et
al., in the High Court of Justice, Business and Property Courts of England and Wales. In the action, AXA
initially sought in excess of £28 million on an indemnity provided for in the 2015 agreement pursuant to which
Genworth sold to AXA two insurance companies, Financial Insurance Company Limited (“FICL”) and Financial
Assurance Company Limited (“FACL”), relating to alleged remediation it has paid to customers who purchased
payment protection insurance (“PPI”). The hearing on liability and subrogation matters commenced on
November 4, 2019 and concluded on November 12, 2019. On December 6, 2019, the Court issued its judgment,
ruling in AXA’s favor with respect to its claim against Genworth for 90% of AXA’s payment of PPI mis-selling
losses. The Court further ruled, among other matters, that Genworth is not entitled to be subrogated to the rights
of FICL/FACL against Santander Cards UK Limited or require AXA to assert reasonable defenses with respect
to PPI mis-selling claims. In January 2020, we made an interim payment to AXA for £100 million ($134
million), which was previously accrued in December 2019 in connection with the aforementioned Court ruling.
On June 8, 2020, AXA amended its claim and updated its demand to £499 million, excluding an alleged claim
for a tax gross up for a possible additional amount of £117 million or more. The damages hearing took place

from June 15, 2020 through June 23, 2020. On July 20, 2020, Genworth and GFIH entered into a settlement

agreement with AXA pursuant to which the parties have agreed, pending satisfaction of certain conditions, not to

enforce, appeal or set aside the liability judgment of December 6, 2019 and the subsequently issued damages

judgment of July 27, 2020. See note 23 for additional details on the terms of the settlement with AXA, the sale of

our former lifestyle protection insurance business and amounts recorded related to loss from discontinued

operations.

In September 2018, GLAIC, our indirect wholly-owned subsidiary, was named as a defendant in a putative

class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned

TVPX ARX INC., as Securities Intermediary for Consolidated Wealth Management, LTD. on behalf of itself and

all others similarly situated v. Genworth Life and Annuity Insurance Company. Plaintiff alleges unlawful and

excessive cost of insurance charges were imposed on policyholders. The complaint asserts claims for breach of

contract, alleging that Genworth improperly considered non-mortality factors when calculating cost of insurance

rates and failed to decrease cost of insurance charges in light of improved expectations of future mortality, and

seeks unspecified compensatory damages, costs, and equitable relief. On October 29, 2018, we filed a motion to

enjoin the case in the Middle District of Georgia, and a motion to dismiss and motion to stay in the Eastern

District of Virginia. We moved to enjoin the prosecution of the Eastern District of Virginia action on the basis

that it involves claims released in a prior nationwide class action settlement (the “McBride settlement”) that was

approved by the Middle District of Georgia. Plaintiff filed an amended complaint on November 13, 2018. On

December 6, 2018, we moved the Middle District of Georgia for leave to file our counterclaim, which alleges

that plaintiff breached the covenant not to sue contained in the prior settlement agreement by filing its current

action. On March 15, 2019, the Middle District of Georgia granted our motion to enjoin and denied our motion

for leave to file our counterclaim. As such, plaintiff is enjoined from pursuing its class action in the Eastern

District of Virginia. On March 29, 2019, plaintiff filed a notice of appeal in the Middle District of Georgia,

notifying the Court of its appeal to the United States Court of Appeals for the Eleventh Circuit from the order

granting our motion to enjoin. On March 29, 2019, we filed our notice of cross-appeal in the Middle District of

Georgia, notifying the Court of our cross-appeal to the Eleventh Circuit from the portion of the order denying our

motion for leave to file our counterclaim. On April 8, 2019, the Eastern District of Virginia dismissed the case

without prejudice, with leave for plaintiff to refile an amended complaint only if a final appellate Court decision

vacates the injunction and reverses the Middle District of Georgia’s opinion. On May 21, 2019, plaintiff filed its

appeal and memorandum in support in the Eleventh Circuit. We filed our response to plaintiff’s appeal

memorandum on July 3, 2019. The Eleventh Circuit Court of Appeals heard oral argument on plaintiff’s appeal

and our cross-appeal on April 21, 2020. On May 26, 2020, the Eleventh Circuit Court of Appeals vacated the

Middle District of Georgia’s order enjoining Plaintiff’s class action and remanded the case back to the Middle

District of Georgia for further factual development as to whether Genworth has altered how it calculates or

charges cost of insurance since the McBride settlement. The Eleventh Circuit Court of Appeals did not reach a

decision on Genworth’s counterclaim. We intend to continue to vigorously defend the dismissal of this action.

In September 2018, Genworth Financial, Genworth Holdings, Genworth North America Corporation, GFIH

and GLIC were named as defendants in a putative class action lawsuit pending in the Court of Chancery of the

State of Delaware captioned Richard F. Burkhart, William E. Kelly, Richard S. Lavery, Thomas R. Pratt, Gerald

Green, individually and on behalf of all other persons similarly situated v. Genworth et al. Plaintiffs allege that

GLIC paid dividends to its parent and engaged in certain reinsurance transactions causing it to maintain

inadequate capital capable of meeting its obligations to GLIC policyholders and agents. The complaint alleges

causes of action for intentional fraudulent transfer and constructive fraudulent transfer, and seeks injunctive

relief. We moved to dismiss this action in December 2018. On January 29, 2019, plaintiffs exercised their right to

amend their complaint. On March 12, 2019, we moved to dismiss plaintiffs’ amended complaint. On April 26,

308

309

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

captioned Int’l Union of Operating Engineers Local No. 478 Pension Fund, et al v. McInerney, et al. In February

2016, Genworth Financial, its current chief executive officer, its former chief executive officer, its then former

chief financial officer and current and former members of its board of directors were named in a second

shareholder derivative suit filed by Martin Cohen in the Court of Chancery of the State of Delaware. The case

was captioned Cohen v. McInerney, et al. On February 23, 2016, the Court of Chancery of the State of Delaware

consolidated these derivative suits under the caption Genworth Financial, Inc. Consolidated Derivative

Litigation. On March 28, 2016, plaintiffs in the consolidated action filed an amended complaint. The amended

complaint alleges breaches of fiduciary duties concerning Genworth’s long-term care insurance reserves and

concerning Genworth’s Australian mortgage insurance business, including our plans for an IPO of the business

and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the Court may deem proper.

The amended consolidated complaint also added Genworth’s then current chief financial officer as a defendant,

based on alleged conduct in her former capacity as Genworth’s controller and principal accounting officer. We

moved to dismiss the consolidated action on May 27, 2016. Thereafter, plaintiffs filed a substantially similar

second amended complaint which we moved to dismiss on September 16, 2016. The motion is fully briefed and

awaiting disposition by the Court. The action was stayed pending the outcome of the proposed China Oceanwide

transaction. On January 14, 2021, the parties submitted a joint letter to the Court requesting that the action

remain stayed until April 15, 2021, or until the closing or termination of the merger in the event the merger

closes or is terminated prior to April 15, 2021.

In October 2016, Genworth Financial, its current chief executive officer, its former chief executive officer,

its then current chief financial officer, its then former chief financial officer and current and former members of

its board of directors were named in a shareholder derivative suit filed by Esther Chopp in the Court of Chancery

of the State of Delaware. The case is captioned Chopp v. McInerney, et al. The complaint alleges that

Genworth’s board of directors wrongfully refused plaintiff’s demand to commence litigation on behalf of

Genworth and asserts claims for breaches of fiduciary duties, waste, contribution and indemnification, and unjust

enrichment concerning Genworth’s long-term care insurance reserves and concerning Genworth’s Australian

mortgage insurance business, including our plans for an IPO of the business, and seeks unspecified damages,

costs, attorneys’ fees and such equitable relief as the Court may deem proper. We filed a motion to dismiss on

November 14, 2016. The action was stayed pending the outcome of the proposed China Oceanwide transaction.

On January 14, 2021, the parties submitted a joint letter to the Court requesting that the action remain stayed

until April 15, 2021, or until the closing or termination of the merger in the event the merger closes or is

terminated prior to April 15, 2021.

In December 2017, Genworth Financial International Holdings, LLC (“GFIH”) and Genworth Financial

were named as defendants in an action captioned AXA S.A. v. Genworth Financial International Holdings, LLC et

al., in the High Court of Justice, Business and Property Courts of England and Wales. In the action, AXA

initially sought in excess of £28 million on an indemnity provided for in the 2015 agreement pursuant to which

Genworth sold to AXA two insurance companies, Financial Insurance Company Limited (“FICL”) and Financial

Assurance Company Limited (“FACL”), relating to alleged remediation it has paid to customers who purchased

payment protection insurance (“PPI”). The hearing on liability and subrogation matters commenced on

November 4, 2019 and concluded on November 12, 2019. On December 6, 2019, the Court issued its judgment,

ruling in AXA’s favor with respect to its claim against Genworth for 90% of AXA’s payment of PPI mis-selling

losses. The Court further ruled, among other matters, that Genworth is not entitled to be subrogated to the rights

of FICL/FACL against Santander Cards UK Limited or require AXA to assert reasonable defenses with respect

to PPI mis-selling claims. In January 2020, we made an interim payment to AXA for £100 million ($134

million), which was previously accrued in December 2019 in connection with the aforementioned Court ruling.

On June 8, 2020, AXA amended its claim and updated its demand to £499 million, excluding an alleged claim

for a tax gross up for a possible additional amount of £117 million or more. The damages hearing took place

from June 15, 2020 through June 23, 2020. On July 20, 2020, Genworth and GFIH entered into a settlement
agreement with AXA pursuant to which the parties have agreed, pending satisfaction of certain conditions, not to
enforce, appeal or set aside the liability judgment of December 6, 2019 and the subsequently issued damages
judgment of July 27, 2020. See note 23 for additional details on the terms of the settlement with AXA, the sale of
our former lifestyle protection insurance business and amounts recorded related to loss from discontinued
operations.

In September 2018, GLAIC, our indirect wholly-owned subsidiary, was named as a defendant in a putative

class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned
TVPX ARX INC., as Securities Intermediary for Consolidated Wealth Management, LTD. on behalf of itself and
all others similarly situated v. Genworth Life and Annuity Insurance Company. Plaintiff alleges unlawful and
excessive cost of insurance charges were imposed on policyholders. The complaint asserts claims for breach of
contract, alleging that Genworth improperly considered non-mortality factors when calculating cost of insurance
rates and failed to decrease cost of insurance charges in light of improved expectations of future mortality, and
seeks unspecified compensatory damages, costs, and equitable relief. On October 29, 2018, we filed a motion to
enjoin the case in the Middle District of Georgia, and a motion to dismiss and motion to stay in the Eastern
District of Virginia. We moved to enjoin the prosecution of the Eastern District of Virginia action on the basis
that it involves claims released in a prior nationwide class action settlement (the “McBride settlement”) that was
approved by the Middle District of Georgia. Plaintiff filed an amended complaint on November 13, 2018. On
December 6, 2018, we moved the Middle District of Georgia for leave to file our counterclaim, which alleges
that plaintiff breached the covenant not to sue contained in the prior settlement agreement by filing its current
action. On March 15, 2019, the Middle District of Georgia granted our motion to enjoin and denied our motion
for leave to file our counterclaim. As such, plaintiff is enjoined from pursuing its class action in the Eastern
District of Virginia. On March 29, 2019, plaintiff filed a notice of appeal in the Middle District of Georgia,
notifying the Court of its appeal to the United States Court of Appeals for the Eleventh Circuit from the order
granting our motion to enjoin. On March 29, 2019, we filed our notice of cross-appeal in the Middle District of
Georgia, notifying the Court of our cross-appeal to the Eleventh Circuit from the portion of the order denying our
motion for leave to file our counterclaim. On April 8, 2019, the Eastern District of Virginia dismissed the case
without prejudice, with leave for plaintiff to refile an amended complaint only if a final appellate Court decision
vacates the injunction and reverses the Middle District of Georgia’s opinion. On May 21, 2019, plaintiff filed its
appeal and memorandum in support in the Eleventh Circuit. We filed our response to plaintiff’s appeal
memorandum on July 3, 2019. The Eleventh Circuit Court of Appeals heard oral argument on plaintiff’s appeal
and our cross-appeal on April 21, 2020. On May 26, 2020, the Eleventh Circuit Court of Appeals vacated the
Middle District of Georgia’s order enjoining Plaintiff’s class action and remanded the case back to the Middle
District of Georgia for further factual development as to whether Genworth has altered how it calculates or
charges cost of insurance since the McBride settlement. The Eleventh Circuit Court of Appeals did not reach a
decision on Genworth’s counterclaim. We intend to continue to vigorously defend the dismissal of this action.

In September 2018, Genworth Financial, Genworth Holdings, Genworth North America Corporation, GFIH

and GLIC were named as defendants in a putative class action lawsuit pending in the Court of Chancery of the
State of Delaware captioned Richard F. Burkhart, William E. Kelly, Richard S. Lavery, Thomas R. Pratt, Gerald
Green, individually and on behalf of all other persons similarly situated v. Genworth et al. Plaintiffs allege that
GLIC paid dividends to its parent and engaged in certain reinsurance transactions causing it to maintain
inadequate capital capable of meeting its obligations to GLIC policyholders and agents. The complaint alleges
causes of action for intentional fraudulent transfer and constructive fraudulent transfer, and seeks injunctive
relief. We moved to dismiss this action in December 2018. On January 29, 2019, plaintiffs exercised their right to
amend their complaint. On March 12, 2019, we moved to dismiss plaintiffs’ amended complaint. On April 26,

308

309

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

2019, plaintiffs filed a memorandum in opposition to our motion to dismiss, which we replied to on June 14,
2019. On August 7, 2019, plaintiffs filed a motion seeking to prevent proceeds that GFIH expected to receive
from the then planned sale of its shares in Genworth Canada from being transferred out of GFIH. On
September 11, 2019, plaintiffs filed a renewed motion seeking the same relief from their August 7, 2019 motion
with an exception that allowed GFIH to transfer $450 million of expected proceeds from the sale of Genworth
Canada through a dividend to Genworth Holdings to allow the pay-off of a senior secured term loan facility
(“Term Loan”) dated March 7, 2018 among Genworth Holdings as the borrower, GFIH as the limited guarantor
and the lending parties thereto. Oral arguments on our motion to dismiss and plaintiffs’ motion occurred on
October 21, 2019, and plaintiffs’ motion was denied. On January 31, 2020, the Court granted in part our motion
to dismiss, dismissing claims relating to $395 million in dividends GLIC paid to its parent from 2012 to 2014
(out of the $410 million in total dividends subject to plaintiffs’ claims). The Court denied the balance of the
motion to dismiss leaving a claim relating to $15 million in dividends and unquantified claims relating to the
2016 termination of a reinsurance transaction. On March 27, 2020, we filed our answer to plaintiffs’ amended
complaint. We intend to continue to vigorously defend this action.

In January 2019, Genworth Financial and GLIC were named as defendants in a putative class action lawsuit
pending in the United States District Court for the Eastern District of Virginia captioned Jerome Skochin, Susan
Skochin, and Larry Huber, individually and on behalf of all other persons similarly situated v. Genworth
Financial, Inc. and Genworth Life Insurance Company. Plaintiffs seek to represent long-term care insurance
policyholders, alleging that Genworth made misleading and inadequate disclosures regarding premium increases
for long-term care insurance policies. The complaint asserts claims for breach of contract, fraud, fraudulent
inducement and violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (on behalf of
the two named plaintiffs who are Pennsylvania residents), and seeks damages (including statutory treble damages
under Pennsylvania law) in excess of $5 million. On March 12, 2019, we moved to dismiss plaintiffs’ complaint.
On March 26, 2019, plaintiffs filed a memorandum in opposition to our motion to dismiss, which we replied to
on April 1, 2019. In July 2019, the Court heard oral arguments on our motion to dismiss. On August 29, 2019,
the Court issued an order granting our motion to dismiss the claim with regard to breach of contract, but denied
our motion with regard to fraudulent omission, fraudulent inducement and violation of the Pennsylvania Unfair
Trade Practices and Consumer Protection law. On September 20, 2019, plaintiffs filed an amended complaint,
dropping Genworth Financial as a defendant and reducing their causes of action from four counts to two:
fraudulent inducement by omission and violation of Pennsylvania’s Unfair Trade Practices and Consumer
Protection Law (on behalf of the two named plaintiffs who are Pennsylvania residents). The parties engaged in a
mediation process and, on October 22, 2019, reached an agreement in principle to settle this matter on a
nationwide basis. On November 22, 2019, plaintiffs filed an amended complaint, adding GLICNY as a defendant
and expanding the class to all fifty states and the District of Columbia. On January 15, 2020, the Court
preliminarily approved the settlement and set the final approval hearing for July 10, 2020. On March 26, 2020,
the parties filed a Joint Motion for Leave to Amend certain aspects of the settlement, which was approved by the
Court on March 31, 2020. On April 10, 2020, the Indiana Department of Insurance filed a Motion to Intervene
and Motion to Stay, seeking to stay the current schedule for class settlement and delay the date of the final
approval hearing in light of disruptions caused by COVID-19. On April 14, 2020, the class administrator sent out
class notices to potential settlement class members. On April 17, 2020, plaintiffs filed their opposition to the
Indiana Department of Insurance’s motion to stay. The Court conducted final approval hearings on July 10, 2020,
July 14, 2020 and September 11, 2020. In November 2020, the Court issued various opinions and orders,
including denying various individual objections to the settlement agreement, approving the plaintiffs’ motion for
class counsel attorney’s fees, with certain modifications and granting final approval of the settlement. The
settlement became final on December 14, 2020, when the appeals period expired and no appeal was filed. We
began implementation of the special election letters in accordance with the approved settlement terms on

January 4, 2021. Based on the Court’s final approval of the settlement, we do not anticipate the outcome of this

matter to have a material adverse impact on our results of operations or financial position.

On April 6, 2020, GLAIC, our indirect wholly-owned subsidiary, was named as a defendant in a putative

class action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned

Brighton Trustees, LLC, on behalf of and as trustee for Diamond LS Trust; and Bank of Utah, solely as securities

intermediary for Diamond LS Trust; on behalf of themselves and all others similarly situated v. Genworth Life

and Annuity Insurance Company. On May 13, 2020, GLAIC was also named as a defendant in a putative class

action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned Ronald L.

Daubenmier, individually and on behalf of himself and all others similarly situated v. Genworth Life and Annuity

Insurance Company. On June 26, 2020, plaintiffs filed a consent motion to consolidate the two cases. On

June 30, 2020, the United States District Court for the Eastern District of Virginia issued an order consolidating

the Brighton Trustees and Daubenmier cases. On July 17, 2020, the Brighton Trustees and Daubenmier plaintiffs

filed a consolidated complaint, alleging that GLAIC subjected policyholders to an unlawful and excessive cost of

insurance increase. The consolidated complaint asserts claims for breach of contract and injunctive relief, and

seeks damages in excess of $5 million. On August 31, 2020, we filed an answer to plaintiffs’ consolidated

complaint. The trial is scheduled to commence on April 1, 2022. We intend to continue to vigorously defend this

action.

In January 2021, GLIC and GLICNY were named as defendants in a putative class action lawsuit pending in

the United States District Court for the Eastern District of Virginia captioned Judy Halcom, Hugh Penson,

Harold Cherry, and Richard Landino, individually, and on behalf of all others similarly situated v. Genworth

Life Insurance Company and Genworth Life Insurance Company of New York. Plaintiffs seek to represent long-

term care insurance policyholders, alleging that the defendants made misleading and inadequate disclosures

regarding premium increases for long-term care insurance policies. The complaint asserts claims for breach of

contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. Our

responsive pleading is due on March 15, 2021. We intend to vigorously defend this action.

In January 2021, GLAIC, our indirect wholly-owned subsidiary, was named as a defendant in a putative

class action lawsuit pending in the United States District Court for the District of Oregon captioned Patsy H.

McMillan, Individually and On Behalf Of All Others Similarly Situated, v. Genworth Life and Annuity Insurance

Company. Plaintiff seeks to represent life insurance policyholders, alleging that GLAIC impermissibly calculated

cost of insurance rates to be higher than that permitted by her policy. The complaint asserts claims for breach of

contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. We intend

to vigorously defend this action.

At this time we cannot determine or predict the ultimate outcome of any of the pending legal and regulatory

matters specifically identified above or the likelihood of potential future legal and regulatory matters against us.

Except as disclosed above, we are not able to provide an estimate or range of reasonably possible losses related

to these matters. Therefore, we cannot ensure that the current investigations and proceedings will not have a

material adverse effect on our business, financial condition or results of operations. In addition, it is possible that

related investigations and proceedings may be commenced in the future, and we could become subject to

additional unrelated investigations and lawsuits. Increased regulatory scrutiny and any resulting investigations or

proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely

affect our business, financial condition and results of operations.

310

311

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

2019, plaintiffs filed a memorandum in opposition to our motion to dismiss, which we replied to on June 14,

2019. On August 7, 2019, plaintiffs filed a motion seeking to prevent proceeds that GFIH expected to receive

from the then planned sale of its shares in Genworth Canada from being transferred out of GFIH. On

September 11, 2019, plaintiffs filed a renewed motion seeking the same relief from their August 7, 2019 motion

with an exception that allowed GFIH to transfer $450 million of expected proceeds from the sale of Genworth

Canada through a dividend to Genworth Holdings to allow the pay-off of a senior secured term loan facility

(“Term Loan”) dated March 7, 2018 among Genworth Holdings as the borrower, GFIH as the limited guarantor

and the lending parties thereto. Oral arguments on our motion to dismiss and plaintiffs’ motion occurred on

October 21, 2019, and plaintiffs’ motion was denied. On January 31, 2020, the Court granted in part our motion

to dismiss, dismissing claims relating to $395 million in dividends GLIC paid to its parent from 2012 to 2014

(out of the $410 million in total dividends subject to plaintiffs’ claims). The Court denied the balance of the

motion to dismiss leaving a claim relating to $15 million in dividends and unquantified claims relating to the

2016 termination of a reinsurance transaction. On March 27, 2020, we filed our answer to plaintiffs’ amended

complaint. We intend to continue to vigorously defend this action.

In January 2019, Genworth Financial and GLIC were named as defendants in a putative class action lawsuit

pending in the United States District Court for the Eastern District of Virginia captioned Jerome Skochin, Susan

Skochin, and Larry Huber, individually and on behalf of all other persons similarly situated v. Genworth

Financial, Inc. and Genworth Life Insurance Company. Plaintiffs seek to represent long-term care insurance

policyholders, alleging that Genworth made misleading and inadequate disclosures regarding premium increases

for long-term care insurance policies. The complaint asserts claims for breach of contract, fraud, fraudulent

inducement and violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (on behalf of

the two named plaintiffs who are Pennsylvania residents), and seeks damages (including statutory treble damages

under Pennsylvania law) in excess of $5 million. On March 12, 2019, we moved to dismiss plaintiffs’ complaint.

On March 26, 2019, plaintiffs filed a memorandum in opposition to our motion to dismiss, which we replied to

on April 1, 2019. In July 2019, the Court heard oral arguments on our motion to dismiss. On August 29, 2019,

the Court issued an order granting our motion to dismiss the claim with regard to breach of contract, but denied

our motion with regard to fraudulent omission, fraudulent inducement and violation of the Pennsylvania Unfair

Trade Practices and Consumer Protection law. On September 20, 2019, plaintiffs filed an amended complaint,

dropping Genworth Financial as a defendant and reducing their causes of action from four counts to two:

fraudulent inducement by omission and violation of Pennsylvania’s Unfair Trade Practices and Consumer

Protection Law (on behalf of the two named plaintiffs who are Pennsylvania residents). The parties engaged in a

mediation process and, on October 22, 2019, reached an agreement in principle to settle this matter on a

nationwide basis. On November 22, 2019, plaintiffs filed an amended complaint, adding GLICNY as a defendant

and expanding the class to all fifty states and the District of Columbia. On January 15, 2020, the Court

preliminarily approved the settlement and set the final approval hearing for July 10, 2020. On March 26, 2020,

the parties filed a Joint Motion for Leave to Amend certain aspects of the settlement, which was approved by the

Court on March 31, 2020. On April 10, 2020, the Indiana Department of Insurance filed a Motion to Intervene

and Motion to Stay, seeking to stay the current schedule for class settlement and delay the date of the final

approval hearing in light of disruptions caused by COVID-19. On April 14, 2020, the class administrator sent out

class notices to potential settlement class members. On April 17, 2020, plaintiffs filed their opposition to the

Indiana Department of Insurance’s motion to stay. The Court conducted final approval hearings on July 10, 2020,

July 14, 2020 and September 11, 2020. In November 2020, the Court issued various opinions and orders,

including denying various individual objections to the settlement agreement, approving the plaintiffs’ motion for

class counsel attorney’s fees, with certain modifications and granting final approval of the settlement. The

settlement became final on December 14, 2020, when the appeals period expired and no appeal was filed. We

began implementation of the special election letters in accordance with the approved settlement terms on

January 4, 2021. Based on the Court’s final approval of the settlement, we do not anticipate the outcome of this
matter to have a material adverse impact on our results of operations or financial position.

On April 6, 2020, GLAIC, our indirect wholly-owned subsidiary, was named as a defendant in a putative

class action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned
Brighton Trustees, LLC, on behalf of and as trustee for Diamond LS Trust; and Bank of Utah, solely as securities
intermediary for Diamond LS Trust; on behalf of themselves and all others similarly situated v. Genworth Life
and Annuity Insurance Company. On May 13, 2020, GLAIC was also named as a defendant in a putative class
action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned Ronald L.
Daubenmier, individually and on behalf of himself and all others similarly situated v. Genworth Life and Annuity
Insurance Company. On June 26, 2020, plaintiffs filed a consent motion to consolidate the two cases. On
June 30, 2020, the United States District Court for the Eastern District of Virginia issued an order consolidating
the Brighton Trustees and Daubenmier cases. On July 17, 2020, the Brighton Trustees and Daubenmier plaintiffs
filed a consolidated complaint, alleging that GLAIC subjected policyholders to an unlawful and excessive cost of
insurance increase. The consolidated complaint asserts claims for breach of contract and injunctive relief, and
seeks damages in excess of $5 million. On August 31, 2020, we filed an answer to plaintiffs’ consolidated
complaint. The trial is scheduled to commence on April 1, 2022. We intend to continue to vigorously defend this
action.

In January 2021, GLIC and GLICNY were named as defendants in a putative class action lawsuit pending in

the United States District Court for the Eastern District of Virginia captioned Judy Halcom, Hugh Penson,
Harold Cherry, and Richard Landino, individually, and on behalf of all others similarly situated v. Genworth
Life Insurance Company and Genworth Life Insurance Company of New York. Plaintiffs seek to represent long-
term care insurance policyholders, alleging that the defendants made misleading and inadequate disclosures
regarding premium increases for long-term care insurance policies. The complaint asserts claims for breach of
contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. Our
responsive pleading is due on March 15, 2021. We intend to vigorously defend this action.

In January 2021, GLAIC, our indirect wholly-owned subsidiary, was named as a defendant in a putative
class action lawsuit pending in the United States District Court for the District of Oregon captioned Patsy H.
McMillan, Individually and On Behalf Of All Others Similarly Situated, v. Genworth Life and Annuity Insurance
Company. Plaintiff seeks to represent life insurance policyholders, alleging that GLAIC impermissibly calculated
cost of insurance rates to be higher than that permitted by her policy. The complaint asserts claims for breach of
contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. We intend
to vigorously defend this action.

At this time we cannot determine or predict the ultimate outcome of any of the pending legal and regulatory
matters specifically identified above or the likelihood of potential future legal and regulatory matters against us.
Except as disclosed above, we are not able to provide an estimate or range of reasonably possible losses related
to these matters. Therefore, we cannot ensure that the current investigations and proceedings will not have a
material adverse effect on our business, financial condition or results of operations. In addition, it is possible that
related investigations and proceedings may be commenced in the future, and we could become subject to
additional unrelated investigations and lawsuits. Increased regulatory scrutiny and any resulting investigations or
proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely
affect our business, financial condition and results of operations.

310

311

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(b) Commitments

As of December 31, 2020, we were committed to fund $1,090 million in limited partnership investments,
$32 million in U.S. commercial mortgage loan investments and $85 million in private placement investments. As
of December 31, 2020, we were also committed to fund $32 million of bank loan investments which had not yet
been drawn. Amounts disclosed are net of an allowance for credit losses, see note 2 for additional information
related to credit losses on off-balance sheet credit exposures.

(21) Changes in Accumulated Other Comprehensive Income (Loss)

The following tables show the changes in accumulated other comprehensive income (loss), net of taxes, by

component as of and for the periods indicated:

(Amounts in millions)

Balances as of January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OCI before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from (to) OCI . . . . . . . . . . . . . . . . . . . .

Net
unrealized
investment
gains
(losses) (1)

$1,456
1,132
(374)

Current period OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

758

Derivatives
qualifying as
hedges (2)

$2,002
344
(135)

209

Balances as of December 31, 2020 before noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: change in OCI attributable to noncontrolling interests . . . . .

2,214
—

2,211
—

Foreign
currency
translation
and other
adjustments

$ (25)
55
—

55

30
30

Total

$3,433
1,531
(509)

1,022

4,455
30

Balances as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . .

$2,214

$2,211

$—

$4,425

(1) Net of adjustments to DAC, PVFP, sales inducements and benefit reserves. See note 4 for additional

taxes, for the periods presented:

information.
See note 5 for additional information.

(2)

(Amounts in millions)

Balances as of January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OCI before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from (to) OCI . . . . . . . . . . . . . . . . . . . .

Net
unrealized
investment
gains
(losses) (1)

$ 595
910
(62)

Current period OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

848

Balances as of December 31, 2019 before noncontrolling

Derivatives
qualifying as
hedges (2)

$1,781
331
(110)

221

Foreign
currency
translation
and other
adjustments

$(332)
487
—

Total

$2,044
1,728
(172)

487

1,556

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: change in OCI attributable to noncontrolling interests . . . . .

1,443
(13)

2,002
—

155
180

3,600
167

Balances as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .

$1,456

$2,002

$ (25)

$3,433

(1) Net of adjustments to DAC, PVFP, sales inducements and benefit reserves. See note 4 for additional

information.
See note 5 for additional information.

(2)

312

313

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

Net

unrealized

investment

gains

(losses) (1)

Derivatives

qualifying as

hedges (2)

Foreign

currency

translation

and other

adjustments

(Amounts in millions)

Balances as of January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,085

$2,065

$(123)

$ 3,027

Cumulative effect of changes in accounting . . . . . . . . . . . . . . . . .

OCI before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts reclassified from (to) OCI . . . . . . . . . . . . . . . . . . .

Current period OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balances as of December 31, 2018 before noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: change in OCI attributable to noncontrolling interests . . . .

164

(653)

(18)

(671)

578

(17)

14

(194)

(104)

(298)

1,781

—

(47)

(301)

—

(301)

(471)

(139)

Balances as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . .

$ 595

$1,781

$(332)

$ 2,044

Total

131

(1,148)

(122)

(1,270)

1,888

(156)

(1) Net of adjustments to DAC, PVFP, sales inducements and benefit reserves. See note 4 for additional

information.

(2)

See note 5 for additional information.

The foreign currency translation and other adjustments balance in the charts above included $(15) million,

$(4) million and $(2) million, respectively, net of taxes of $4 million, $1 million and $1 million, respectively,

related to a net unrecognized postretirement benefit obligation as of December 31, 2020, 2019 and 2018. The

balance also included taxes of $21 million, $22 and $(45) million, respectively, related to foreign currency

translation adjustments as of December 31, 2020, 2019 and 2018. The 2018 balances also include the impact of

adopting new accounting guidance related to stranded tax effects.

The following table shows reclassifications out of accumulated other comprehensive income (loss), net of

Amount reclassified from

accumulated other comprehensive

income (loss)

Years ended December 31,

2020

2019

2018

(Amounts in millions)

Net unrealized investment (gains) losses:

Unrealized (gains) losses on investments (1) . . .

$(474)

$ (79)

$ (23)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .

100

17

5

taxes

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(374)

$ (62)

$ (18)

Derivatives qualifying as hedges:

Interest rate swaps hedging assets . . . . . . . . . . .

$(196)

$(164)

$(153)

Interest rate swaps hedging assets . . . . . . . . . . .

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12)

73

(6)

60

(9)

58

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(135)

$(110)

$(104)

(1) Amounts exclude adjustments to DAC, PVFP, sales inducements and benefit reserves.

Affected line item in the

consolidated statements

of income

Net investment

(gains) losses

Provision for income

Net investment

income

Net investment

(gains) losses

Provision for income

taxes

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(b) Commitments

As of December 31, 2020, we were committed to fund $1,090 million in limited partnership investments,

$32 million in U.S. commercial mortgage loan investments and $85 million in private placement investments. As

of December 31, 2020, we were also committed to fund $32 million of bank loan investments which had not yet

been drawn. Amounts disclosed are net of an allowance for credit losses, see note 2 for additional information

related to credit losses on off-balance sheet credit exposures.

(21) Changes in Accumulated Other Comprehensive Income (Loss)

The following tables show the changes in accumulated other comprehensive income (loss), net of taxes, by

component as of and for the periods indicated:

(Amounts in millions)

Balances as of January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,002

$ (25)

OCI before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts reclassified from (to) OCI . . . . . . . . . . . . . . . . . . . .

Current period OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

344

(135)

209

Balances as of December 31, 2020 before noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: change in OCI attributable to noncontrolling interests . . . . .

2,214

—

2,211

—

Total

$3,433

1,531

(509)

1,022

4,455

30

55

—

55

30

30

Balances as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . .

$2,214

$2,211

$—

$4,425

Derivatives

qualifying as

hedges (2)

Foreign

currency

translation

and other

adjustments

Net

unrealized

investment

gains

(losses) (1)

$1,456

1,132

(374)

758

information.

(2)

See note 5 for additional information.

Net

unrealized

investment

gains

(losses) (1)

Derivatives

qualifying as

hedges (2)

Foreign

currency

translation

and other

adjustments

(Amounts in millions)

Balances as of January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 595

$1,781

$(332)

OCI before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts reclassified from (to) OCI . . . . . . . . . . . . . . . . . . . .

Current period OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

910

(62)

848

331

(110)

221

Balances as of December 31, 2019 before noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: change in OCI attributable to noncontrolling interests . . . . .

1,443

(13)

2,002

—

Total

$2,044

1,728

(172)

1,556

3,600

167

487

—

487

155

180

Balances as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .

$1,456

$2,002

$ (25)

$3,433

(1) Net of adjustments to DAC, PVFP, sales inducements and benefit reserves. See note 4 for additional

information.

(2)

See note 5 for additional information.

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(Amounts in millions)

Balances as of January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of changes in accounting . . . . . . . . . . . . . . . . .
OCI before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from (to) OCI . . . . . . . . . . . . . . . . . . .

Net
unrealized
investment
gains
(losses) (1)

$1,085
164
(653)
(18)

Current period OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(671)

Balances as of December 31, 2018 before noncontrolling

Derivatives
qualifying as
hedges (2)

$2,065
14
(194)
(104)

(298)

Foreign
currency
translation
and other
adjustments

$(123)
(47)
(301)
—

Total

$ 3,027
131
(1,148)
(122)

(301)

(1,270)

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: change in OCI attributable to noncontrolling interests . . . .

578
(17)

1,781
—

(471)
(139)

1,888
(156)

Balances as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . .

$ 595

$1,781

$(332)

$ 2,044

(1) Net of adjustments to DAC, PVFP, sales inducements and benefit reserves. See note 4 for additional

information.
See note 5 for additional information.

(2)

The foreign currency translation and other adjustments balance in the charts above included $(15) million,

$(4) million and $(2) million, respectively, net of taxes of $4 million, $1 million and $1 million, respectively,
related to a net unrecognized postretirement benefit obligation as of December 31, 2020, 2019 and 2018. The
balance also included taxes of $21 million, $22 and $(45) million, respectively, related to foreign currency
translation adjustments as of December 31, 2020, 2019 and 2018. The 2018 balances also include the impact of
adopting new accounting guidance related to stranded tax effects.

The following table shows reclassifications out of accumulated other comprehensive income (loss), net of

(1) Net of adjustments to DAC, PVFP, sales inducements and benefit reserves. See note 4 for additional

taxes, for the periods presented:

(Amounts in millions)
Net unrealized investment (gains) losses:

Amount reclassified from
accumulated other comprehensive
income (loss)

Years ended December 31,

2020

2019

2018

Unrealized (gains) losses on investments (1) . . .

$(474)

$ (79)

$ (23)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

100
$(374)

17
$ (62)

5
$ (18)

Derivatives qualifying as hedges:

Interest rate swaps hedging assets . . . . . . . . . . .

$(196)

$(164)

$(153)

Interest rate swaps hedging assets . . . . . . . . . . .

(12)

(6)

(9)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

73
$(135)

60
$(110)

58
$(104)

(1) Amounts exclude adjustments to DAC, PVFP, sales inducements and benefit reserves.

Affected line item in the
consolidated statements
of income

Net investment
(gains) losses
Provision for income
taxes

Net investment
income
Net investment
(gains) losses
Provision for income
taxes

312

313

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

(22) Noncontrolling Interests

Australia

In May 2014, Genworth Australia, a holding company for our Australian mortgage insurance business,

completed an IPO of its ordinary shares and we beneficially owned 66.2% of the ordinary shares of Genworth
Australia through subsidiaries. In May 2015, we sold 92.3 million of our shares in Genworth Australia and we
beneficially owned approximately 52.0% of the ordinary shares of Genworth Australia through subsidiaries.

In February 2019, Genworth Australia announced its intention to commence an on-market share buy-back
program for shares up to a maximum aggregate amount of AUD$100 million. Pursuant to the program, Genworth
Australia repurchased approximately 25 million of its shares for AUD$64 million. As the majority shareholder,
we participated in on-market sales transactions during the buy-back period to maintain our ownership position of
approximately 52.0% and received $23 million in cash. In lieu of continuing with further share buy-backs under
this program, Genworth Australia paid an unfranked special dividend of AUD$0.219 per share in the third
quarter of 2019, part of which constituted the remaining AUD$36 million of the buy-back program. In November
2019, Genworth Australia completed a further capital management initiative via an unfranked special dividend of
AUD$0.242 per share, which represented an aggregate distribution of approximately AUD$100 million.

In May 2018, Genworth Australia announced its intention to commence an on-market share buy-back
program for shares up to a maximum aggregate amount of AUD$100 million. Pursuant to the program, Genworth
Australia repurchased approximately 36 million of its shares for AUD$100 million. As the majority shareholder,
we participated in on-market sales transactions during the buy-back period to maintain our ownership position
and received $37 million in cash.

In February 2018, Genworth Australia repurchased approximately 19 million of its shares for

AUD$49 million under a previous on-market share buy-back program. We participated in on-market sales
transactions to maintain our ownership position and received $20 million in cash.

In 2020, 2019 and 2018, dividends of $9 million, $87 million and $40 million, respectively, were paid to the

noncontrolling interests of Genworth Australia.

Canada

Prior to the sale of Genworth Canada on December 12, 2019, we held approximately 57% of its common
shares on a consolidated basis through subsidiaries and accounted for the portion attributable to noncontrolling
interests as a component of total equity. Upon sale closing, we deconsolidated Genworth Canada, which included
removing the carrying value of ownership interest attributable to noncontrolling interests of $1.3 billion from
total equity in our consolidated balance sheet as of December 31, 2019.

(23) Sale of Businesses

Lifestyle protection insurance

On December 1, 2015, we completed the sale of our lifestyle protection insurance business to AXA. In
2017, AXA sued us for damages on an indemnity in the 2015 agreement related to alleged remediation it paid to
customers who purchased PPI. On July 20, 2020, we reached a settlement agreement related to losses incurred
from mis-selling complaints on policies sold from 1970 through 2004 and paid an initial amount of £100 million
($125 million) to AXA. As part of the settlement agreement, we agreed to make payments for certain PPI

mis-selling claims, along with a significant portion of future claims that are still being processed. Under the

settlement agreement, we issued a secured promissory note to AXA, in which we agreed to make deferred cash

payments in two installments in June 2022 and September 2022. Future claims that are still being processed will

be added to the September 2022 installment payment.

The following table presents the amounts owed to AXA under the settlement agreement, which are reflected

as liabilities related to discontinued operations in our consolidated balance sheet for the year ended December 31,

2020:

British

Pounds

U.S. Dollar

(Amounts in millions)

Installment payments due to AXA:

September 2022:

June 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

£159

$217

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts billed as future losses (1)

. . . . . . . . . . . . . . . . .

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total amounts due under the promissory note . . . . . . . .

Future claims:

Estimated beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in estimated future claims . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Amounts billed to date (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated future billings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

158

29

187

346

107

1

(29)

79

217

39

256

473

146

1

(39)

108

Total amounts due to AXA under the settlement agreement . . . . . . . . .

£425

$581

(1)

In January 2021, we were billed an additional amount related to future losses of £35 million that will be

reflected as part of the September 2022 installment payment in our first quarter of 2021 financial results.

There was no significant change to our current estimate of future billings of £79 million based on this most

recent invoiced amount.

An after-tax loss of $572 million related to the settlement is included in income (loss) from discontinued

operations for the year ended December 31, 2020. The after-tax loss is comprised of $517 million of PPI

mis-selling claims, foreign currency remeasurement losses of $44 million, unfavorable tax charges of $17 million

and other expenses of $12 million, mostly consisting of interest expense attributable to the promissory note owed

to AXA. These losses were partially offset by derivative hedge gains of $18 million associated with foreign

currency forward contracts entered into to mitigate our exposure to the installment payments to be made in

British Pounds in 2022. The promissory note accrues interest at a fixed rate of 5.25% due quarterly, with a

potential for an interest rate decrease to 2.75% following certain prepayment trigger events.

To secure our obligation under the promissory note, we granted a 19.9% security interest in the outstanding

common stock of GMHI and Genworth Australia to AXA. AXA does not have the right to sell or repledge the

collateral and is not entitled to any voting rights. The collateral will be released back to us upon full repayment of

the promissory note. Accordingly, the collateral arrangement has no impact on our consolidated financial

statements. In the event AXA recovers amounts from third parties related to the mis-selling losses, including

from the distributor responsible for the sale of the policies, we have certain rights to share in those recoveries to

recoup payments for the underlying mis-selling losses. As of December 31, 2020, we have not recorded any

amounts associated with recoveries from third parties.

314

315

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

(22) Noncontrolling Interests

Australia

In May 2014, Genworth Australia, a holding company for our Australian mortgage insurance business,

completed an IPO of its ordinary shares and we beneficially owned 66.2% of the ordinary shares of Genworth

Australia through subsidiaries. In May 2015, we sold 92.3 million of our shares in Genworth Australia and we

beneficially owned approximately 52.0% of the ordinary shares of Genworth Australia through subsidiaries.

In February 2019, Genworth Australia announced its intention to commence an on-market share buy-back

program for shares up to a maximum aggregate amount of AUD$100 million. Pursuant to the program, Genworth

Australia repurchased approximately 25 million of its shares for AUD$64 million. As the majority shareholder,

we participated in on-market sales transactions during the buy-back period to maintain our ownership position of

approximately 52.0% and received $23 million in cash. In lieu of continuing with further share buy-backs under

this program, Genworth Australia paid an unfranked special dividend of AUD$0.219 per share in the third

quarter of 2019, part of which constituted the remaining AUD$36 million of the buy-back program. In November

2019, Genworth Australia completed a further capital management initiative via an unfranked special dividend of

AUD$0.242 per share, which represented an aggregate distribution of approximately AUD$100 million.

In May 2018, Genworth Australia announced its intention to commence an on-market share buy-back

program for shares up to a maximum aggregate amount of AUD$100 million. Pursuant to the program, Genworth

Australia repurchased approximately 36 million of its shares for AUD$100 million. As the majority shareholder,

we participated in on-market sales transactions during the buy-back period to maintain our ownership position

and received $37 million in cash.

In February 2018, Genworth Australia repurchased approximately 19 million of its shares for

AUD$49 million under a previous on-market share buy-back program. We participated in on-market sales

transactions to maintain our ownership position and received $20 million in cash.

In 2020, 2019 and 2018, dividends of $9 million, $87 million and $40 million, respectively, were paid to the

noncontrolling interests of Genworth Australia.

Canada

Prior to the sale of Genworth Canada on December 12, 2019, we held approximately 57% of its common

shares on a consolidated basis through subsidiaries and accounted for the portion attributable to noncontrolling

interests as a component of total equity. Upon sale closing, we deconsolidated Genworth Canada, which included

removing the carrying value of ownership interest attributable to noncontrolling interests of $1.3 billion from

total equity in our consolidated balance sheet as of December 31, 2019.

(23) Sale of Businesses

Lifestyle protection insurance

On December 1, 2015, we completed the sale of our lifestyle protection insurance business to AXA. In

2017, AXA sued us for damages on an indemnity in the 2015 agreement related to alleged remediation it paid to

customers who purchased PPI. On July 20, 2020, we reached a settlement agreement related to losses incurred

from mis-selling complaints on policies sold from 1970 through 2004 and paid an initial amount of £100 million

($125 million) to AXA. As part of the settlement agreement, we agreed to make payments for certain PPI

mis-selling claims, along with a significant portion of future claims that are still being processed. Under the
settlement agreement, we issued a secured promissory note to AXA, in which we agreed to make deferred cash
payments in two installments in June 2022 and September 2022. Future claims that are still being processed will
be added to the September 2022 installment payment.

The following table presents the amounts owed to AXA under the settlement agreement, which are reflected
as liabilities related to discontinued operations in our consolidated balance sheet for the year ended December 31,
2020:

(Amounts in millions)

Installment payments due to AXA:

June 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 2022:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .

Amounts billed as future losses (1)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total amounts due under the promissory note . . . . . . . .

Future claims:

Estimated beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in estimated future claims . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Amounts billed to date (1)

Estimated future billings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

British
Pounds

U.S. Dollar

£159

$217

158
29

187

346

107
1
(29)

79

217
39

256

473

146
1
(39)

108

Total amounts due to AXA under the settlement agreement . . . . . . . . .

£425

$581

(1)

In January 2021, we were billed an additional amount related to future losses of £35 million that will be
reflected as part of the September 2022 installment payment in our first quarter of 2021 financial results.
There was no significant change to our current estimate of future billings of £79 million based on this most
recent invoiced amount.

An after-tax loss of $572 million related to the settlement is included in income (loss) from discontinued

operations for the year ended December 31, 2020. The after-tax loss is comprised of $517 million of PPI
mis-selling claims, foreign currency remeasurement losses of $44 million, unfavorable tax charges of $17 million
and other expenses of $12 million, mostly consisting of interest expense attributable to the promissory note owed
to AXA. These losses were partially offset by derivative hedge gains of $18 million associated with foreign
currency forward contracts entered into to mitigate our exposure to the installment payments to be made in
British Pounds in 2022. The promissory note accrues interest at a fixed rate of 5.25% due quarterly, with a
potential for an interest rate decrease to 2.75% following certain prepayment trigger events.

To secure our obligation under the promissory note, we granted a 19.9% security interest in the outstanding

common stock of GMHI and Genworth Australia to AXA. AXA does not have the right to sell or repledge the
collateral and is not entitled to any voting rights. The collateral will be released back to us upon full repayment of
the promissory note. Accordingly, the collateral arrangement has no impact on our consolidated financial
statements. In the event AXA recovers amounts from third parties related to the mis-selling losses, including
from the distributor responsible for the sale of the policies, we have certain rights to share in those recoveries to
recoup payments for the underlying mis-selling losses. As of December 31, 2020, we have not recorded any
amounts associated with recoveries from third parties.

314

315

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

The promissory note is also subject to certain mandatory prepayments upon the occurrence of:

The following table provides a summary of the loss on sale recorded in connection with the disposition of

Genworth Canada for the year ended December 31, 2019:

(Amounts in millions)

Net cash proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Add: carrying value of noncontrolling interests(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total adjusted consideration(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Carrying value of the disposal group before accumulated other comprehensive loss . . . . . . . .

Add: total accumulated other comprehensive loss of disposal group(3) . . . . . . . . . . . . . . . . . . .

Total adjusted carrying value of the disposal group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-tax loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax benefit on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,736

1,417

3,153

3,022

325

3,347

(194)

73

After-tax loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (121)

(1)

In accordance with accounting guidance on the deconsolidation of a subsidiary or group of assets, the

carrying amount of any noncontrolling interests in the subsidiary sold (adjusted to reflect amounts in

accumulated other comprehensive income (loss) recognized upon final disposition) is added to the total fair

value of the consideration to be received.

(2) Represents the aggregate of the net cash proceeds received upon sale closing plus the adjusted carrying

amount of noncontrolling interests in the subsidiary sold.

(3) Consists primarily of cumulative losses on foreign currency translation adjustments of $369 million and

deferred tax losses of $71 million, partially offset by unrealized investment gains of $115 million.

•

•

•

•

•

•

the consummation of certain qualifying debt transactions in which total gross proceeds of at least
$750 million are raised;

the consummation of certain qualifying equity issuances or dispositions with respect to GMHI, or any
of our subsidiaries, in which total net cash proceeds of at least $475 million are raised;

certain dispositions of our U.S. mortgage insurance business;

the potential consummation of the China Oceanwide merger and the funding of the contemplated
capital investment plan;

transactions involving a change of control of Genworth, other than the China Oceanwide transaction;
and

receipt of dividends and sale proceeds from certain Genworth subsidiaries above certain threshold
amounts.

The promissory note also contains certain negative and affirmative covenants, restrictions imposed on the

collateral, representations and warranties and customary events of default.

In addition to the promissory note, we also have an unrelated liability that is owed to AXA associated with
underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business. As of
December 31, 2020 and 2019, the balance of the liability is $16 million and $42 million, respectively, and is
included as liabilities related to discontinued operations in our consolidated balance sheets. During the third
quarter of 2020, based on an updated estimate, we reduced the liability by $28 million which was recognized as
an after-tax benefit to earnings of $23 million and is included in income (loss) from discontinued operations for
the year ended December 31, 2020.

In January 2020, we made an interim payment to AXA for £100 million ($134 million), which was accrued

as a contingent liability and reflected as liabilities related to discontinued operations as of December 31, 2019.
This amount was also included in income (loss) from discontinued operations for the year ended December 31,
2019.

We have established our current best estimates for future claims that are still being processed under the
settlement agreement, as well as for the unrelated liability related to underwriting losses and other expenses;
however, there may be future adjustments to these estimates. If amounts are different from our estimates, it could
result in an adjustment to our liabilities and an additional amount reflected in income (loss) from discontinued
operations.

Canada mortgage insurance business

On December 12, 2019, we completed the sale of Genworth Canada to Brookfield Business Partners L.P.
(“Brookfield”) and received approximately $1.7 billion in net cash proceeds. In the fourth quarter of 2019 and
prior to sale closing, we also received a special dividend of approximately $54 million from Genworth Canada.
This special dividend reduced the sales price on a per purchased share basis by CAD$1.45 per common share.
During 2019, we recognized an after-tax loss on sale of $121 million principally driven by cumulative losses on
foreign currency translation adjustments and deferred tax losses, partially offset by unrealized investment gains.
These amounts, which were previously recorded in accumulated other comprehensive income, were recognized
as part of the loss on sale.

316

317

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

The promissory note is also subject to certain mandatory prepayments upon the occurrence of:

The following table provides a summary of the loss on sale recorded in connection with the disposition of

Genworth Canada for the year ended December 31, 2019:

(Amounts in millions)

Net cash proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: carrying value of noncontrolling interests(1)

$1,736
1,417

Total adjusted consideration(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Carrying value of the disposal group before accumulated other comprehensive loss . . . . . . . .
Add: total accumulated other comprehensive loss of disposal group(3) . . . . . . . . . . . . . . . . . . .

Total adjusted carrying value of the disposal group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-tax loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,153

3,022
325

3,347

(194)
73

After-tax loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (121)

(1)

In accordance with accounting guidance on the deconsolidation of a subsidiary or group of assets, the
carrying amount of any noncontrolling interests in the subsidiary sold (adjusted to reflect amounts in
accumulated other comprehensive income (loss) recognized upon final disposition) is added to the total fair
value of the consideration to be received.

(2) Represents the aggregate of the net cash proceeds received upon sale closing plus the adjusted carrying

amount of noncontrolling interests in the subsidiary sold.

(3) Consists primarily of cumulative losses on foreign currency translation adjustments of $369 million and
deferred tax losses of $71 million, partially offset by unrealized investment gains of $115 million.

the consummation of certain qualifying debt transactions in which total gross proceeds of at least

$750 million are raised;

the consummation of certain qualifying equity issuances or dispositions with respect to GMHI, or any

of our subsidiaries, in which total net cash proceeds of at least $475 million are raised;

certain dispositions of our U.S. mortgage insurance business;

the potential consummation of the China Oceanwide merger and the funding of the contemplated

capital investment plan;

transactions involving a change of control of Genworth, other than the China Oceanwide transaction;

receipt of dividends and sale proceeds from certain Genworth subsidiaries above certain threshold

•

•

•

•

•

•

and

amounts.

The promissory note also contains certain negative and affirmative covenants, restrictions imposed on the

collateral, representations and warranties and customary events of default.

In addition to the promissory note, we also have an unrelated liability that is owed to AXA associated with

underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business. As of

December 31, 2020 and 2019, the balance of the liability is $16 million and $42 million, respectively, and is

included as liabilities related to discontinued operations in our consolidated balance sheets. During the third

quarter of 2020, based on an updated estimate, we reduced the liability by $28 million which was recognized as

an after-tax benefit to earnings of $23 million and is included in income (loss) from discontinued operations for

the year ended December 31, 2020.

In January 2020, we made an interim payment to AXA for £100 million ($134 million), which was accrued

as a contingent liability and reflected as liabilities related to discontinued operations as of December 31, 2019.

This amount was also included in income (loss) from discontinued operations for the year ended December 31,

We have established our current best estimates for future claims that are still being processed under the

settlement agreement, as well as for the unrelated liability related to underwriting losses and other expenses;

however, there may be future adjustments to these estimates. If amounts are different from our estimates, it could

result in an adjustment to our liabilities and an additional amount reflected in income (loss) from discontinued

2019.

operations.

Canada mortgage insurance business

On December 12, 2019, we completed the sale of Genworth Canada to Brookfield Business Partners L.P.

(“Brookfield”) and received approximately $1.7 billion in net cash proceeds. In the fourth quarter of 2019 and

prior to sale closing, we also received a special dividend of approximately $54 million from Genworth Canada.

This special dividend reduced the sales price on a per purchased share basis by CAD$1.45 per common share.

During 2019, we recognized an after-tax loss on sale of $121 million principally driven by cumulative losses on

foreign currency translation adjustments and deferred tax losses, partially offset by unrealized investment gains.

These amounts, which were previously recorded in accumulated other comprehensive income, were recognized

as part of the loss on sale.

316

317

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2020, 2019 and 2018

A summary of operating results for Genworth Canada reported as discontinued operations were as follows

for the years ended December 31:

(Amounts in millions)

2019

2018

As of December 31, 2020, the amortized cost or cost, fair value and carrying value of our invested assets

Revenues:
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 466
132
(13)

$ 525
141
(137)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

585

529

Benefits and expenses:
Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred acquisition costs and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense (1)

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes and loss on sale (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79
64
39
50

232

353
111

78
54
43
43

218

311
81

Income before loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

242
230
(121) —

Income from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from discontinued operations attributable to noncontrolling interests . . . . . . . . .

121

123

230

108

Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(2) $ 122

(1)

(2)

Interest on debt assumed by Brookfield and interest on debt that was repaid as a result of the sale of
Genworth Canada was allocated and reported in discontinued operations. The Term Loan, owed by
Genworth Holdings and secured by GFIH’s ownership interest in Genworth Canada’s outstanding common
shares, was repaid in connection with the close of the Genworth Canada sale. Accordingly, interest expense
related to the Term Loan of $34 million and $25 million for the years ended December 31, 2019 and 2018,
respectively, was allocated and reported in discontinued operations.
The years ended December 31, 2019 and 2018 include pre-tax income from discontinued operations
available to Genworth Financial, Inc.’s common stockholders of $186 million and $167 million,
respectively.

Schedule I

Genworth Financial, Inc.

Summary of Investments—Other Than Investments in Related Parties

(Amounts in millions)

were as follows:

Type of investment

Fixed maturity securities:

Bonds:

Amortized cost

or cost

Fair

value

Carrying

value

U.S. government, agencies and authorities . . . . . . . . . . . . . . . . . . .

$ 3,401

$ 4,805

$ 4,805

State and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Public utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All other corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . .

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial mortgage loans, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other invested assets (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,627

1,420

5,143

43,085

55,676

468

6,743

1,978

1,738

50,061

50,061

65,790

65,790

3,170

1,559

6,195

476

xxxxx

xxxxx

xxxxx

3,170

1,559

6,195

476

6,743

1,978

2,253

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$66,603

xxxxx

$77,240

(1)

The amount shown in the consolidated balance sheet for other invested assets differs from amortized cost or

cost presented, as other invested assets include certain assets with a carrying amount that differs from

amortized cost or cost.

See Report of Independent Registered Public Accounting Firm

318

319

GENWORTH FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2020, 2019 and 2018

A summary of operating results for Genworth Canada reported as discontinued operations were as follows

for the years ended December 31:

(Amounts in millions)

Revenues:

2019

2018

132

(13)

585

141

(137)

529

79

64

39

50

232

353

111

242

121

123

78

54

43

43

218

311

81

230

230

108

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 466

$ 525

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefits and expenses:

Benefits and other changes in policy reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of deferred acquisition costs and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total benefits and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes and loss on sale (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss on sale, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(121) —

Income from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: net income from discontinued operations attributable to noncontrolling interests . . . . . . . . .

Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(2) $ 122

(1)

Interest on debt assumed by Brookfield and interest on debt that was repaid as a result of the sale of

Genworth Canada was allocated and reported in discontinued operations. The Term Loan, owed by

Genworth Holdings and secured by GFIH’s ownership interest in Genworth Canada’s outstanding common

shares, was repaid in connection with the close of the Genworth Canada sale. Accordingly, interest expense

related to the Term Loan of $34 million and $25 million for the years ended December 31, 2019 and 2018,

respectively, was allocated and reported in discontinued operations.

(2)

The years ended December 31, 2019 and 2018 include pre-tax income from discontinued operations

available to Genworth Financial, Inc.’s common stockholders of $186 million and $167 million,

respectively.

Schedule I

Genworth Financial, Inc.

Summary of Investments—Other Than Investments in Related Parties
(Amounts in millions)

As of December 31, 2020, the amortized cost or cost, fair value and carrying value of our invested assets

were as follows:

Type of investment

Fixed maturity securities:

Bonds:

Amortized cost
or cost

Fair
value

Carrying
value

U.S. government, agencies and authorities . . . . . . . . . . . . . . . . . . .
State and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other invested assets (1)

$ 3,401
2,627
1,420
5,143
43,085

55,676
468
6,743
1,978
1,738

$ 4,805
3,170
1,559
6,195
50,061

65,790
476
xxxxx
xxxxx
xxxxx

$ 4,805
3,170
1,559
6,195
50,061

65,790
476
6,743
1,978
2,253

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$66,603

xxxxx

$77,240

(1)

The amount shown in the consolidated balance sheet for other invested assets differs from amortized cost or
cost presented, as other invested assets include certain assets with a carrying amount that differs from
amortized cost or cost.

See Report of Independent Registered Public Accounting Firm

318

319

Schedule II

Genworth Financial, Inc.
(Parent Company Only)

Balance Sheets
(Amounts in millions)

Schedule II

Genworth Financial, Inc.

(Parent Company Only)

Statements of Income

(Amounts in millions)

December 31,

2020

2019

Years ended December 31,

2020

2019

2018

Assets:

Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,358
13
2

—

$14,079
13
4
119

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$14,215

Liabilities and stockholders’ equity

Liabilities:

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

55

55

30

30

Commitments and contingencies
Stockholders’ equity:

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Accumulated other comprehensive income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
12,008
4,425
1,584
(2,700)

1
11,990
3,433
1,461
(2,700)

Total Genworth Financial, Inc.’s stockholders’ equity . . . . . . . . . . . . . . . . . . .

15,318

14,185

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$14,215

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

Revenues:

Expenses:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (3)

$ (3)

$ (3)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

(3)

(3)

Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before income taxes and equity in income of subsidiaries . . . . . . . . . . . . . . . . . . .

Benefit from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity in income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31

1

32

(35)

(2)

210

177

1

20

3

23

(26)

(3)

366

343

—

33

2

35

(38)

(6)

151

119

—

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . . .

$178

$343

$119

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

320

321

Schedule II

Genworth Financial, Inc.

(Parent Company Only)

Balance Sheets

(Amounts in millions)

Assets:

Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,358

$14,079

Deferred tax asset

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

2

—

13

4

119

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$14,215

Liabilities and stockholders’ equity

Liabilities:

Commitments and contingencies

Stockholders’ equity:

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2020

2019

$

55

55

30

30

1

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Additional paid-in capital

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,008

11,990

Accumulated other comprehensive income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . .

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,425

1,584

3,433

1,461

Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,700)

(2,700)

Total Genworth Financial, Inc.’s stockholders’ equity . . . . . . . . . . . . . . . . . . .

15,318

14,185

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$15,373

$14,215

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

Schedule II

Genworth Financial, Inc.
(Parent Company Only)

Statements of Income
(Amounts in millions)

Years ended December 31,

2020

2019

2018

Revenues:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (3)

$ (3)

$ (3)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

(3)

(3)

Expenses:
Acquisition and operating expenses, net of deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before income taxes and equity in income of subsidiaries . . . . . . . . . . . . . . . . . . .
Benefit from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31
1

32

(35)
(2)
210

177
1

20
3

23

(26)
(3)
366

343
—

33
2

35

(38)
(6)
151

119
—

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . . . .

$178

$343

$119

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

320

321

Schedule II

Genworth Financial, Inc.
(Parent Company Only)

Statements of Comprehensive Income
(Amounts in millions)

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . .
Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities without an allowance for credit

Years ended December 31,

2020

2019

2018

$ 178

$ 343

$

119

losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

764

Net unrealized gains (losses) on securities with an allowance for credit

losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

Net unrealized gains (losses) on securities not other-than-temporarily

impaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on other-than-temporarily impaired securities . . .
Derivatives qualifying as hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
209
25

992

—

—

859
2
221
307

—

—

(652)
(2)
(298)
(162)

1,389

(1,114)

Total comprehensive income (loss) available to Genworth Financial, Inc.’s common
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,170

$1,732

$ (995)

Cash flows used by investing activities:

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

Cash flows used by financing activities:

Schedule II

Genworth Financial, Inc.

(Parent Company Only)

Statements of Cash Flows

(Amounts in millions)

Years ended December 31,

2020

2019

2018

Cash flows from operating activities:

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . .

$ 178

$ 343

$ 119

Less income from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . .

(1) —

—

Adjustments to reconcile net income available to Genworth Financial, Inc.’s

common stockholders to net cash from operating activities:

Equity in income from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(210)

Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 —

Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other liabilities and other policy-related balances . . . . . . . . . . . . . . . . . . . . . . .

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(119) —

Capital contributions paid to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

(129)

Effect of exchange rate changes on cash, cash equivalents and restricted cash . . . . . . . . . —

Cash, cash equivalents and restricted cash at beginning of year . . . . . . . . . . . . . . . . . . . . . —

Cash, cash equivalents and restricted cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $ —

(1)

39

(1)

11

17

(10)

(2)

(12)

(366)

250

1

26

16

(17)

253

(5)

(124)

(7)

(122)

—

—

(151)

50

13

35

—

(35)

(13)

18

(6)

(6)

(2)

(10)

(12)

—

—

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

322

323

Schedule II

Genworth Financial, Inc.

(Parent Company Only)

Statements of Comprehensive Income

(Amounts in millions)

Years ended December 31,

2020

2019

2018

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . . .

$ 178

$ 343

$

119

Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on securities without an allowance for credit

losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

764

Net unrealized gains (losses) on securities with an allowance for credit

losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

Net unrealized gains (losses) on securities not other-than-temporarily

impaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized gains (losses) on other-than-temporarily impaired securities . . .

Derivatives qualifying as hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . .

—

—

859

2

221

307

—

—

(652)

(2)

(298)

(162)

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,389

(1,114)

—

—

209

25

992

Total comprehensive income (loss) available to Genworth Financial, Inc.’s common

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

Schedule II

Genworth Financial, Inc.
(Parent Company Only)

Statements of Cash Flows
(Amounts in millions)

Cash flows from operating activities:

Net income available to Genworth Financial, Inc.’s common stockholders . . . . . . .
Less income from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income available to Genworth Financial, Inc.’s

$ 178 $ 343
(1) —

$ 119
—

common stockholders to net cash from operating activities:

Years ended December 31,

2020

2019

2018

Equity in income from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1)
39

(210)

(366)
250
1
26

Change in certain assets and liabilities:

Accrued investment income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and other policy-related balances . . . . . . . . . . . . . . . . . . . . . . .

2 —
16
(1)
(17)
11

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

253

(151)
50
13
35

—
(35)
(13)

18

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,170

$1,732

$ (995)

Cash flows used by investing activities:

Intercompany notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital contributions paid to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10)
(2)

(12)

(119) —

(5)

(124)

Cash flows used by financing activities:

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(5)

(7)
(122)

Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

(129)

Effect of exchange rate changes on cash, cash equivalents and restricted cash . . . . . . . . . —

Cash, cash equivalents and restricted cash at beginning of year . . . . . . . . . . . . . . . . . . . . . —

—

—

(6)

(6)

(2)
(10)

(12)

—

—

Cash, cash equivalents and restricted cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $ —

See Notes to Schedule II

See Report of Independent Registered Public Accounting Firm

322

323

Schedule II

Genworth Financial, Inc.
(Parent Company Only)

Notes to Schedule II
Years Ended December 31, 2020, 2019 and 2018

Schedule II

Genworth Financial, Inc.

(Parent Company Only)

Notes to Schedule II

Years Ended December 31, 2020, 2019 and 2018

(1) Organization and Purpose

(6) Sale of Business

On December 1, 2015, we completed the sale of our lifestyle protection insurance business to AXA through

our subsidiaries. In 2017, AXA sued GFIH, our wholly-owned indirect subsidiary, and Genworth Holdings for

damages on an indemnity in the 2015 agreement related to alleged remediation it paid to customers who

purchased PPI. On July 20, 2020, Genworth Holdings reached a settlement agreement related to losses incurred

from mis-selling complaints on policies sold from 1970 through 2004 and agreed to make payments for certain

PPI mis-selling claims, along with a significant portion of future claims that are still being processed. Under the

settlement agreement, Genworth Holdings issued a secured promissory note to AXA and agreed to make deferred

cash payments in two installments in 2022. The promissory note and associated loss from discontinued

operations of $549 million reflected in Genworth Financial’s consolidated statement of income for the year

ended December 31, 2020 relate primarily to Genworth Holdings as it was the entity named as the primary

defendant in the lawsuit and the obligor in the settlement agreement. Accordingly, the associated amounts

reported as discontinued operations are included within equity in income of subsidiaries in the parent company

statement of income for the year ended December 31, 2020. Income from discontinued operations presented in

the parent company statement of income for the year ended December 31, 2020 relates to tax adjustments

incurred by Genworth Financial related to previously disposed businesses.

Genworth Holdings (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in
preparation for an IPO of Genworth’s common stock, which was completed on May 28, 2004. On April 1, 2013,
Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became
a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding
company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, and was
renamed Genworth Financial upon the completion of the reorganization.

Genworth Financial is a holding company whose subsidiaries offer mortgage and long-term care insurance

products and service life insurance, as well as annuities and other investment products.

(2) Accounting Changes

On January 1, 2018, we adopted new accounting guidance related to the classification and presentation of

changes in restricted cash. The new guidance requires that changes in the total of cash, cash equivalents,
restricted cash and restricted cash equivalents be shown in the statements of cash flows and requires additional
disclosures related to restricted cash and restricted cash equivalents. We adopted this new accounting guidance
retrospectively and modified the line item descriptions on our balance sheets and statements of cash flows in our
financial statements. The other impacts from this new accounting guidance did not have a significant impact on
our financial statements or disclosures.

(3) Commitments

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’
outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured
unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of,
premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and
outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth
Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes.
Genworth Financial and Genworth Holdings have joint and several guarantees associated with the Tax Matters
Agreement.

(4) Income Taxes

As of December 31, 2020 and 2019, Genworth Financial had a deferred tax asset of $13 million primarily
comprised of share-based compensation. Genworth Financial’s current income tax payable was $3 million and
$4 million as of December 31, 2020 and 2019, respectively. Net cash received (paid) for taxes was $—,
$21 million and $(16) million for the years ended December 31, 2020, 2019 and 2018, respectively.

(5) Supplemental Cash Flow Information

In 2020, we forgave an intercompany loan of $129 million due from Genworth Holdings. The

extinguishment of the loan between the related parties was treated as a non-cash capital contribution to Genworth
Holdings and accordingly had no impact on our cash flows for the year ended December 31, 2020.

324

325

Schedule II

Genworth Financial, Inc.

(Parent Company Only)

Notes to Schedule II

Years Ended December 31, 2020, 2019 and 2018

Schedule II

Genworth Financial, Inc.
(Parent Company Only)

Notes to Schedule II
Years Ended December 31, 2020, 2019 and 2018

(1) Organization and Purpose

(6) Sale of Business

On December 1, 2015, we completed the sale of our lifestyle protection insurance business to AXA through

our subsidiaries. In 2017, AXA sued GFIH, our wholly-owned indirect subsidiary, and Genworth Holdings for
damages on an indemnity in the 2015 agreement related to alleged remediation it paid to customers who
purchased PPI. On July 20, 2020, Genworth Holdings reached a settlement agreement related to losses incurred
from mis-selling complaints on policies sold from 1970 through 2004 and agreed to make payments for certain
PPI mis-selling claims, along with a significant portion of future claims that are still being processed. Under the
settlement agreement, Genworth Holdings issued a secured promissory note to AXA and agreed to make deferred
cash payments in two installments in 2022. The promissory note and associated loss from discontinued
operations of $549 million reflected in Genworth Financial’s consolidated statement of income for the year
ended December 31, 2020 relate primarily to Genworth Holdings as it was the entity named as the primary
defendant in the lawsuit and the obligor in the settlement agreement. Accordingly, the associated amounts
reported as discontinued operations are included within equity in income of subsidiaries in the parent company
statement of income for the year ended December 31, 2020. Income from discontinued operations presented in
the parent company statement of income for the year ended December 31, 2020 relates to tax adjustments
incurred by Genworth Financial related to previously disposed businesses.

Genworth Holdings (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in

preparation for an IPO of Genworth’s common stock, which was completed on May 28, 2004. On April 1, 2013,

Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became

a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding

company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, and was

renamed Genworth Financial upon the completion of the reorganization.

Genworth Financial is a holding company whose subsidiaries offer mortgage and long-term care insurance

products and service life insurance, as well as annuities and other investment products.

(2) Accounting Changes

On January 1, 2018, we adopted new accounting guidance related to the classification and presentation of

changes in restricted cash. The new guidance requires that changes in the total of cash, cash equivalents,

restricted cash and restricted cash equivalents be shown in the statements of cash flows and requires additional

disclosures related to restricted cash and restricted cash equivalents. We adopted this new accounting guidance

retrospectively and modified the line item descriptions on our balance sheets and statements of cash flows in our

financial statements. The other impacts from this new accounting guidance did not have a significant impact on

our financial statements or disclosures.

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’

outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured

unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of,

premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and

outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth

Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes.

Genworth Financial and Genworth Holdings have joint and several guarantees associated with the Tax Matters

(3) Commitments

Agreement.

(4) Income Taxes

As of December 31, 2020 and 2019, Genworth Financial had a deferred tax asset of $13 million primarily

comprised of share-based compensation. Genworth Financial’s current income tax payable was $3 million and

$4 million as of December 31, 2020 and 2019, respectively. Net cash received (paid) for taxes was $—,

$21 million and $(16) million for the years ended December 31, 2020, 2019 and 2018, respectively.

(5) Supplemental Cash Flow Information

In 2020, we forgave an intercompany loan of $129 million due from Genworth Holdings. The

extinguishment of the loan between the related parties was treated as a non-cash capital contribution to Genworth

Holdings and accordingly had no impact on our cash flows for the year ended December 31, 2020.

324

325

Schedule III

Genworth Financial, Inc.

Supplemental Insurance Information
(Amounts in millions)

Segment

December 31, 2020

U.S. Mortgage Insurance . . . . . . .
Australia Mortgage Insurance . . .
U.S. Life Insurance . . . . . . . . . . .
Runoff
. . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . .

December 31, 2019

U.S. Mortgage Insurance . . . . . . .
Australia Mortgage Insurance . . .
U.S. Life Insurance . . . . . . . . . . .
Runoff
. . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . .

Deferred
Acquisition Costs

Future Policy
Benefits

Policyholder
Account
Balances

Liability for Policy
and Contract
Claims

Unearned
Premiums

$

29
42
1,319
139
—

$1,529

$

30
37
1,613
156
—

$1,836

$ —
—
42,693
2

—

$42,695

$ —
—
40,382
2

—

$40,384

$ —
—
18,385
3,118
—

$21,503

$ —
—
19,006
3,211
—

$22,217

$

555
331
10,908
12
11

$11,817

$

233
208
10,500
9
8

$10,958

$ 307
1,193
465
3

—

$1,968

$ 384
1,008
498
3

—

$1,893

See Report of Independent Registered Public Accounting Firm

Schedule III—Continued

Genworth Financial, Inc.

Supplemental Insurance Information

(Amounts in millions)

Net

Premium

Revenue

Investment

Income

Interest Credited

and Benefits and

Other Changes in

Policy Reserves

Amortization of

Deferred

Acquisition

Costs

Other

Operating

Expenses

Premiums

Written

U.S. Mortgage Insurance . . . .

$ 971

$ 133

$ 381

$ 14

$ 231

$ 894

Segment

December 31, 2020

Australia Mortgage

Insurance . . . . . . . . . . . . . .

U.S. Life Insurance . . . . . . . .

Runoff . . . . . . . . . . . . . . . . . .

Corporate and Other . . . . . . .

274

2,858

—

7

32

2,878

210

7

Total

. . . . . . . . . . . . . . .

$4,110

$3,260

$5,940

$448

$1,239

$4,091

December 31, 2019

U.S. Mortgage Insurance . . . .

$ 856

$ 117

$

50

$

8

$ 198

$ 818

177

5,164

214

4

104

5,398

185

3

110

5,877

189

5

11

400

23

—

13

340

16

—

16

218

33

—

104

643

48

213

97

653

54

263

101

639

57

300

353

2,837

—

7

272

2,834

—

8

242

2,843

—

8

Total

. . . . . . . . . . . . . . .

$4,037

$3,220

$5,740

$377

$1,265

$3,932

December 31, 2018

U.S. Mortgage Insurance . . . .

$ 746

$

93

$

36

$

9

$ 174

$ 764

Australia Mortgage

Insurance . . . . . . . . . . . . . .

U.S. Life Insurance . . . . . . . .

Runoff . . . . . . . . . . . . . . . . . .

Corporate and Other . . . . . . .

312

2,861

—

8

55

2,852

187

9

Australia Mortgage

Insurance . . . . . . . . . . . . . .

U.S. Life Insurance . . . . . . . .

Runoff . . . . . . . . . . . . . . . . . .

Corporate and Other . . . . . . .

373

2,867

—

8

67

2,781

174

6

Total

. . . . . . . . . . . . . . .

$3,994

$3,121

$6,217

$276

$1,271

$3,857

See Report of Independent Registered Public Accounting Firm

326

327

Schedule III

Genworth Financial, Inc.

Supplemental Insurance Information

(Amounts in millions)

Deferred

Acquisition Costs

Future Policy

Benefits

Account

Balances

and Contract

Claims

Unearned

Premiums

Policyholder

Liability for Policy

Segment

December 31, 2020

U.S. Mortgage Insurance . . . . . . .

$

Australia Mortgage Insurance . . .

U.S. Life Insurance . . . . . . . . . . .

Runoff

. . . . . . . . . . . . . . . . . . . . .

Corporate and Other . . . . . . . . . . .

December 31, 2019

U.S. Mortgage Insurance . . . . . . .

$

Australia Mortgage Insurance . . .

U.S. Life Insurance . . . . . . . . . . .

Runoff

. . . . . . . . . . . . . . . . . . . . .

Corporate and Other . . . . . . . . . . .

29

42

1,319

139

—

30

37

1,613

156

—

$ —

—

42,693

2

—

$ —

—

40,382

2

—

$ —

—

18,385

3,118

—

$ —

—

19,006

3,211

—

$

10,908

555

331

12

11

$

233

208

10,500

9

8

$ 307

1,193

465

3

—

$ 384

1,008

498

3

—

Total . . . . . . . . . . . . . . . . . . .

$1,529

$42,695

$21,503

$11,817

$1,968

Total . . . . . . . . . . . . . . . . . . .

$1,836

$40,384

$22,217

$10,958

$1,893

See Report of Independent Registered Public Accounting Firm

Schedule III—Continued

Genworth Financial, Inc.

Supplemental Insurance Information
(Amounts in millions)

Segment

December 31, 2020

U.S. Mortgage Insurance . . . .
Australia Mortgage

Insurance . . . . . . . . . . . . . .
U.S. Life Insurance . . . . . . . .
Runoff . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . .

Premium
Revenue

Net
Investment
Income

Interest Credited
and Benefits and
Other Changes in
Policy Reserves

Amortization of
Deferred
Acquisition
Costs

Other
Operating
Expenses

Premiums
Written

$ 971

$ 133

$ 381

$ 14

$ 231

$ 894

274
2,858
—

7

32
2,878
210
7

177
5,164
214
4

11
400
23
—

104
643
48
213

353
2,837
—

7

Total

. . . . . . . . . . . . . . .

$4,110

$3,260

$5,940

$448

$1,239

$4,091

December 31, 2019

U.S. Mortgage Insurance . . . .
Australia Mortgage

Insurance . . . . . . . . . . . . . .
U.S. Life Insurance . . . . . . . .
Runoff . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . .

$ 856

$ 117

$

50

$

8

$ 198

$ 818

312
2,861
—

8

55
2,852
187
9

104
5,398
185
3

13
340
16
—

97
653
54
263

272
2,834
—

8

Total

. . . . . . . . . . . . . . .

$4,037

$3,220

$5,740

$377

$1,265

$3,932

December 31, 2018

U.S. Mortgage Insurance . . . .
Australia Mortgage

Insurance . . . . . . . . . . . . . .
U.S. Life Insurance . . . . . . . .
Runoff . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . .

$ 746

$

93

$

36

$

9

$ 174

$ 764

373
2,867
—

8

67
2,781
174
6

110
5,877
189
5

16
218
33
—

101
639
57
300

242
2,843
—

8

Total

. . . . . . . . . . . . . . .

$3,994

$3,121

$6,217

$276

$1,271

$3,857

See Report of Independent Registered Public Accounting Firm

326

327

Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure

Report of Independent Registered Public Accounting Firm

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2020, an evaluation was conducted under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of December 31, 2020.

Management’s Annual Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting for our company.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles generally accepted in the United
States of America and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

With the participation of the Chief Executive Officer and the Chief Financial Officer, our management

conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework and criteria established in Internal Control—Integrated Framework (2013), issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has
concluded that our internal control over financial reporting was effective as of December 31, 2020.

Our independent auditor, KPMG LLP, a registered public accounting firm, has issued an attestation report

on the effectiveness of our internal control over financial reporting. This attestation report appears below.

/s/ Thomas J. McInerney

Thomas J. McInerney
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Daniel J. Sheehan IV

Daniel J. Sheehan IV
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

February 26, 2021

To the Stockholders and Board of Directors

Genworth Financial, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Genworth Financial, Inc.’s (the Company) internal control over financial reporting as of

December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company

maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,

based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019,

the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each

of the years in the three-year period ended December 31, 2020, and the related notes and financial statement

schedules I to III (collectively, the consolidated financial statements), and our report dated February 26, 2021

expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and

for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying

Management’s Annual Report On Internal Control Over Financial Reporting. Our responsibility is to express an

opinion on the Company’s internal control over financial reporting based on our audit. We are a public

accounting firm registered with the PCAOB and are required to be independent with respect to the Company in

accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether effective internal control over financial

reporting was maintained in all material respects. Our audit of internal control over financial reporting included

obtaining an understanding of internal control over financial reporting, assessing the risk that a material

weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on

the assessed risk. Our audit also included performing such other procedures as we considered necessary in the

circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles. A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company; and (3) provide reasonable

assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the

company’s assets that could have a material effect on the financial statements.

328

329

Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure

Report of Independent Registered Public Accounting Firm

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2020, an evaluation was conducted under the supervision and with the participation of

our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our

disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange

Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded

that our disclosure controls and procedures were effective as of December 31, 2020.

Management’s Annual Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting for our company.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of

the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with accounting principles generally accepted in the United

States of America and that receipts and expenditures of the company are being made only in accordance with

authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could

have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

With the participation of the Chief Executive Officer and the Chief Financial Officer, our management

conducted an evaluation of the effectiveness of our internal control over financial reporting based on the

framework and criteria established in Internal Control—Integrated Framework (2013), issued by the Committee

of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has

concluded that our internal control over financial reporting was effective as of December 31, 2020.

Our independent auditor, KPMG LLP, a registered public accounting firm, has issued an attestation report

on the effectiveness of our internal control over financial reporting. This attestation report appears below.

/s/ Thomas J. McInerney

Thomas J. McInerney

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Daniel J. Sheehan IV

Daniel J. Sheehan IV

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

February 26, 2021

To the Stockholders and Board of Directors
Genworth Financial, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Genworth Financial, Inc.’s (the Company) internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019,
the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each
of the years in the three-year period ended December 31, 2020, and the related notes and financial statement
schedules I to III (collectively, the consolidated financial statements), and our report dated February 26, 2021
expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report On Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

328

329

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ KPMG LLP

Richmond, Virginia
February 26, 2021

Changes in Internal Control Over Financial Reporting During the Quarter Ended December 31, 2020

There were no changes in our internal control over financial reporting that occurred during the quarter ended

December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table sets forth certain information concerning our executive officers:

Name

Positions

Thomas J. McInerney . . . . . . . . . . . .

Daniel J. Sheehan IV . . . . . . . . . . . .

President and Chief Executive Officer, Director

Executive Vice President—Chief Financial Officer and Chief

Ward E. Bobitz . . . . . . . . . . . . . . . . .

Rohit Gupta . . . . . . . . . . . . . . . . . . . .

Pamela M. Harrison . . . . . . . . . . . . .

Brian K. Haendiges . . . . . . . . . . . . . .

Executive Vice President and General Counsel

Executive Vice President—U.S. Mortgage Insurance

Executive Vice President—Human Resources

Executive Vice President—U.S. Life Insurance & Chief Risk

Investment Officer

Age

64

55

56

46

56

60

Officer

Risk Committees

Committees

Committees

G. Kent Conrad . . . . . . . . . . . . . . . . .

72 Director, member of Nominating and Corporate Governance and

Karen E. Dyson . . . . . . . . . . . . . . . . .

61 Director, member of Risk Committee

Melina E. Higgins . . . . . . . . . . . . . . .

53 Director, member of Management Development and

Compensation and Nominating and Corporate Governance

David M. Moffett

. . . . . . . . . . . . . . .

69 Director, member of Management Development and

Compensation and Nominating and Corporate Governance

Thomas E. Moloney . . . . . . . . . . . . .

77 Director, member of Audit and Risk Committees

Debra J. Perry . . . . . . . . . . . . . . . . . .

69 Director, member of Audit and Risk Committees

Robert P. Restrepo Jr. . . . . . . . . . . . .

70 Director, member of Audit and Management Development and

James S. Riepe . . . . . . . . . . . . . . . . .

77 Non-Executive Chairman of the Board, member of Audit and

Management Development and Compensation Committees

Compensation Committees

Executive Officers and Directors

listed above.

The following sets forth certain biographical information with respect to our executive officers and directors

Thomas J. McInerney has been our President and Chief Executive Officer and a director since January

2013. Before joining our company, Mr. McInerney had served as a Senior Advisor to the Boston Consulting

Group from June 2011 to December 2012, providing consulting and advisory services to leading insurance and

financial services companies in the United States and Canada. From October 2009 to December 2010,

Mr. McInerney was a member of ING Groep’s Management Board for Insurance, where he was the Chief

Operating Officer of ING’s insurance and investment management business worldwide. Prior to that, he served in

a variety of senior roles with ING Groep NV after serving in many leadership positions with Aetna, where he

began his career as an insurance underwriter in June 1978. Mr. McInerney is also on the boards of the Richmond

Performing Arts Alliance and VA Ready. Mr. McInerney is a member of the American Council of Life Insurers

and serves, and has served, on its CEO Steering Committees and Board. Mr. McInerney received a B.A. in

Economics from Colgate University and an M.B.A. from the Tuck School of Business at Dartmouth College and

serves on Tuck’s Board of Advisors.

Daniel J. Sheehan IV is our Executive Vice President, Chief Financial Officer and Chief Investment

Officer. In August 2020, he was appointed as our Executive Vice President and Chief Financial Officer while

maintaining his title as Chief Investment Officer, a role he has held since April 2012. From January 2009 to April

2012, he served as our Vice President with responsibilities that included oversight of the Company’s insurance

investment portfolios. Prior to that, he served as our Senior Vice President—Chief Investment Officer since April

330

331

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

/s/ KPMG LLP

Richmond, Virginia

February 26, 2021

control over financial reporting.

Item 9B. Other Information

None.

Changes in Internal Control Over Financial Reporting During the Quarter Ended December 31, 2020

There were no changes in our internal control over financial reporting that occurred during the quarter ended

December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table sets forth certain information concerning our executive officers:

Name

Thomas J. McInerney . . . . . . . . . . . .
Daniel J. Sheehan IV . . . . . . . . . . . .

Ward E. Bobitz . . . . . . . . . . . . . . . . .
Rohit Gupta . . . . . . . . . . . . . . . . . . . .
Pamela M. Harrison . . . . . . . . . . . . .
Brian K. Haendiges . . . . . . . . . . . . . .

Age

64
55

56
46
56
60

Positions

President and Chief Executive Officer, Director
Executive Vice President—Chief Financial Officer and Chief
Investment Officer
Executive Vice President and General Counsel
Executive Vice President—U.S. Mortgage Insurance
Executive Vice President—Human Resources
Executive Vice President—U.S. Life Insurance & Chief Risk
Officer

G. Kent Conrad . . . . . . . . . . . . . . . . .

72 Director, member of Nominating and Corporate Governance and

Karen E. Dyson . . . . . . . . . . . . . . . . .
Melina E. Higgins . . . . . . . . . . . . . . .

61 Director, member of Risk Committee
53 Director, member of Management Development and

Risk Committees

David M. Moffett

. . . . . . . . . . . . . . .

69 Director, member of Management Development and

Compensation and Nominating and Corporate Governance
Committees

Compensation and Nominating and Corporate Governance
Committees

Thomas E. Moloney . . . . . . . . . . . . .
Debra J. Perry . . . . . . . . . . . . . . . . . .
Robert P. Restrepo Jr. . . . . . . . . . . . .

77 Director, member of Audit and Risk Committees
69 Director, member of Audit and Risk Committees
70 Director, member of Audit and Management Development and

James S. Riepe . . . . . . . . . . . . . . . . .

77 Non-Executive Chairman of the Board, member of Audit and

Management Development and Compensation Committees

Compensation Committees

Executive Officers and Directors

The following sets forth certain biographical information with respect to our executive officers and directors

listed above.

Thomas J. McInerney has been our President and Chief Executive Officer and a director since January
2013. Before joining our company, Mr. McInerney had served as a Senior Advisor to the Boston Consulting
Group from June 2011 to December 2012, providing consulting and advisory services to leading insurance and
financial services companies in the United States and Canada. From October 2009 to December 2010,
Mr. McInerney was a member of ING Groep’s Management Board for Insurance, where he was the Chief
Operating Officer of ING’s insurance and investment management business worldwide. Prior to that, he served in
a variety of senior roles with ING Groep NV after serving in many leadership positions with Aetna, where he
began his career as an insurance underwriter in June 1978. Mr. McInerney is also on the boards of the Richmond
Performing Arts Alliance and VA Ready. Mr. McInerney is a member of the American Council of Life Insurers
and serves, and has served, on its CEO Steering Committees and Board. Mr. McInerney received a B.A. in
Economics from Colgate University and an M.B.A. from the Tuck School of Business at Dartmouth College and
serves on Tuck’s Board of Advisors.

Daniel J. Sheehan IV is our Executive Vice President, Chief Financial Officer and Chief Investment
Officer. In August 2020, he was appointed as our Executive Vice President and Chief Financial Officer while
maintaining his title as Chief Investment Officer, a role he has held since April 2012. From January 2009 to April
2012, he served as our Vice President with responsibilities that included oversight of the Company’s insurance
investment portfolios. Prior to that, he served as our Senior Vice President—Chief Investment Officer since April

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2012. From January 2008 through December 2008, Mr. Sheehan had management responsibilities of the
Company’s portfolio management team, including fixed-income trading. From December 1997 through
December 2007, Mr. Sheehan served in various capacities with the Company and/or its predecessor including
roles with oversight responsibilities for the investments real estate team, as risk manager of the insurance
portfolios and as risk manager of the portfolio management team. Prior to joining our Company, Mr. Sheehan
had been with Sun Life of Canada from 1993 to 1997 as a Property Investment Officer in the Real Estate
Investments group. Prior thereto, he was with Massachusetts Laborers Benefit Fund from 1987 to 1993, as an
auditor and auditing supervisor. Mr. Sheehan graduated from Harvard University with a B.A. in Economics and
later received an MBA in Finance from Babson College.

Ward E. Bobitz has been our Executive Vice President and General Counsel since January 2015. Prior to

that, he served as a Vice President and Assistant Secretary, responsible for corporate transactions and regulatory
matters, since the completion of our IPO in May 2004. Prior to the IPO, he served as a Vice President and
Assistant Secretary of GE Financial Assurance Holdings, Inc. (“GEFAHI”) since October 1997. From September
1993 to October 1997, Mr. Bobitz was with the law firm of LeBoeuf, Lamb, Greene, and MacRae. Mr. Bobitz
received a B.A. in Economics from Columbia University and a J.D. from the University of Michigan Law
School. He is a member of the New York Bar and the Virginia Bar.

Rohit Gupta has been our Executive Vice President—U.S. Mortgage Insurance since February 2021,
having previously served as a Vice President since April 1, 2013. Mr. Gupta has been the President and Chief
Executive Officer for our U.S. Mortgage Insurance segment since May 2012. Prior to that role, he has held
positions of Chief Commercial Officer from September 2009 to May 2012 and Senior Vice President, Products,
Intelligence and Strategy from October 2007 to September 2009 in the Company’s U.S. Mortgage Insurance
segment. He also held various management positions with GE Mortgage Insurance beginning in 2003 and was a
product manager for GE Capital. Mr. Gupta graduated from the Indian Institute of Technology with a degree in
Computer Science and Technology and received an MBA in Finance from University of Illinois at Urbana
Champaign.

Pamela M. Harrison has been our Executive Vice President—Human Resources since January 2018. Prior
thereto, she was the Human Resources Leader responsible for organization and talent development at Latham &
Watkins, LLP from March 2012 to December 2017. From June 2003 to October 2011, Ms. Harrison was with
Marsh & McLennan Companies where she gained significant experience in the insurance industry and
international markets serving in the role of Managing Director International Human Resources with
responsibilities in Europe, Latin America, the Middle East, Africa, and the Asia Pacific Region and Senior Vice
President Human Resources with responsibilities over global specialty risk and national risk practices. She also
served in human resource positions with Protiviti (formerly a division of Arthur Andersen LLP), Frito-Lay, Inc.,
MasterCard and Liz Claiborne, Inc. Ms. Harrison received a B.A. in Psychology from the University of
Delaware.

Brian K. Haendiges has been our Executive Vice President—U.S. Life Insurance & Chief Risk Officer

since February 2021. Prior to becoming responsible for our U.S. Life Insurance segment, he had been our
Executive Vice President and Chief Risk Officer since September 2020. Before joining our Company,
Mr. Haendiges was the President and Owner of HAE Consulting, a firm established to expand the institutional
investment products business and advise on retirement blocks. From 2010 to 2019, he served in various roles at
MassMutual, including Senior Vice President and Head, U.S. Pricing and Product Management (2016 – 2019),
Senior Vice President and Head, Retirement Services Investments (2014 – 2016) and Head of Strategic Market
Development, Investments (2010 – 2014). Prior to that, he served in a variety of senior roles at ING Groep NV
from 2000 to 2009 after managing governmental and stable value business lines at Aetna. Mr. Haendiges is a
Fellow of the Society of Actuaries and a member of the American Academy of Actuaries. Mr. Haendiges
graduated from Worcester Polytechnic Institute with a B.S. in Actuarial Science.

G. Kent Conrad has served as a member of our board of directors since March 2013. Sen. Conrad served as

a U.S. Senator representing the State of North Dakota from January 1987 to January 2013. He served as chairman

or Ranking Member of the Senate Budget Committee for 12 years. Prior to serving in the U.S. Senate, Sen.

Conrad served as the Tax Commissioner for the State of North Dakota from 1981 to 1986 and as Assistant Tax

Commissioner from 1974 to 1980. Sen. Conrad received an A.B. in Political Science from Stanford University

and an M.B.A. from George Washington University.

Karen E. Dyson has served as a member of our board of directors since December 2020. Lt. Gen. Dyson was

the first female finance officer to achieve three-star general officer rank in August 2014. She retired as Military

Deputy to the Assistant Secretary of the Army for Financial Management and Comptroller in August 2017.

Preceding this top military financial manager position she held several command and senior staff positions,

including as the Deputy Assistant Secretary of the Army for Budget from December 2012 to August 2014, Deputy

for Business Transformation to Assistant Secretary of the Army from 2011 to 2012, and Brigade Commander with

service in Iraq and Europe from 2004 to 2007. Lt. Gen. Dyson is an experienced strategic leader with board

experience in corporate governance, finance and audit committees, and risk oversight. She currently serves on the

boards of USAA Federal Savings Bank since October 2017 (serving as nominations and governance committee

chair); CALIBRE Systems, Inc. since October 2018 (serving as audit committee chair); and Army Emergency

Relief Organization since 2020. She previously served as a director on the boards of Army & Air Force Exchange

Service, a global retail operation, from 2012 to 2017 (serving as finance committee chair); and Defense

Commissary Agency, a global grocery operation, from 2012 to 2014. Lt. Gen. Dyson received a B.S. in Business

Management from Missouri State University, an M.B.A. from Austin Peay State University and an M.S. in National

Resource Strategy from the Eisenhower School of National Security and Resources Strategy. Certifications include

National Association of Corporate Directors (“NACD”) Directorship Certification.

Melina E. Higgins has served as a member of our board of directors since September 2013. Ms. Higgins

retired in 2010 from a nearly 20-year career at The Goldman Sachs Group Inc., where she served as a Managing

Director from 2001 and a Partner from 2002. During her tenure at Goldman Sachs, Ms. Higgins served as Head

of the Americas for Private Debt and Co-Chairperson of the Investment Advisory Committee for the GS

Mezzanine Partners funds, which managed over $30 billion of assets. She also served as a member of the

Investment Committee for the Principal Investment Area, which oversaw and approved global private equity and

private debt investments. Goldman’s Principal Investment Area was one of the largest alternative asset managers

in the world. Ms. Higgins has served as a director of Viatris Inc since November 2020. She also previously

served on the board of Mylan N.V. from February 2013 to November 2020. Ms. Higgins has also served as

non-executive chairman of the board of Antares Midco, Inc. since January 2016 and is a member of the Women’s

Leadership Board of Harvard University’s John F. Kennedy School of Government. Ms. Higgins received a B.A.

in Economics and Spanish from Colgate University and an M.B.A. from Harvard Business School.

David M. Moffett has served as a member of our board of directors since December 2012. Mr. Moffett was

the Chief Executive Officer and a director of the Federal Home Loan Mortgage Corporation from September

2008 until his retirement in March 2009. Prior to this position, Mr. Moffett served as a Senior Advisor with the

Carlyle Group LLC from May 2007 to September 2008. Mr. Moffett also served as the Vice Chairman and Chief

Financial Officer of U.S. Bancorp from 2001 to 2007, after its merger with Firstar Corporation, having

previously served as Vice Chairman and Chief Financial Officer of Firstar Corporation from 1998 to 2001 and as

Chief Financial Officer of StarBanc Corporation, a predecessor to Firstar Corporation, from 1993 to 1998.

Mr. Moffett has served as a director of CSX Corporation since May 2015, and PayPal Holdings, Inc. since July

2015. He also previously served on the boards of directors of CIT Group Inc. from July 2010 to May 2016, eBay

Inc. from July 2007 to July 2015, MBIA Inc. from May 2007 to September 2008, The E.W. Scripps Company

from May 2007 to September 2008 and Building Materials Holding Corporation from May 2006 to November

2008. Mr. Moffett also serves as a trustee on the boards of Columbia Fund Series Trust I and Columbia Funds

Variable Insurance Trust, overseeing approximately 52 funds within the Columbia Funds mutual fund complex.

He also serves as a trustee for the University of Oklahoma Foundation. Mr. Moffett holds a B.A. degree in

Economics from the University of Oklahoma and an M.B.A. degree from Southern Methodist University.

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2012. From January 2008 through December 2008, Mr. Sheehan had management responsibilities of the

Company’s portfolio management team, including fixed-income trading. From December 1997 through

December 2007, Mr. Sheehan served in various capacities with the Company and/or its predecessor including

roles with oversight responsibilities for the investments real estate team, as risk manager of the insurance

portfolios and as risk manager of the portfolio management team. Prior to joining our Company, Mr. Sheehan

had been with Sun Life of Canada from 1993 to 1997 as a Property Investment Officer in the Real Estate

Investments group. Prior thereto, he was with Massachusetts Laborers Benefit Fund from 1987 to 1993, as an

auditor and auditing supervisor. Mr. Sheehan graduated from Harvard University with a B.A. in Economics and

later received an MBA in Finance from Babson College.

Ward E. Bobitz has been our Executive Vice President and General Counsel since January 2015. Prior to

that, he served as a Vice President and Assistant Secretary, responsible for corporate transactions and regulatory

matters, since the completion of our IPO in May 2004. Prior to the IPO, he served as a Vice President and

Assistant Secretary of GE Financial Assurance Holdings, Inc. (“GEFAHI”) since October 1997. From September

1993 to October 1997, Mr. Bobitz was with the law firm of LeBoeuf, Lamb, Greene, and MacRae. Mr. Bobitz

received a B.A. in Economics from Columbia University and a J.D. from the University of Michigan Law

School. He is a member of the New York Bar and the Virginia Bar.

Rohit Gupta has been our Executive Vice President—U.S. Mortgage Insurance since February 2021,

having previously served as a Vice President since April 1, 2013. Mr. Gupta has been the President and Chief

Executive Officer for our U.S. Mortgage Insurance segment since May 2012. Prior to that role, he has held

positions of Chief Commercial Officer from September 2009 to May 2012 and Senior Vice President, Products,

Intelligence and Strategy from October 2007 to September 2009 in the Company’s U.S. Mortgage Insurance

segment. He also held various management positions with GE Mortgage Insurance beginning in 2003 and was a

product manager for GE Capital. Mr. Gupta graduated from the Indian Institute of Technology with a degree in

Computer Science and Technology and received an MBA in Finance from University of Illinois at Urbana

Champaign.

Pamela M. Harrison has been our Executive Vice President—Human Resources since January 2018. Prior

thereto, she was the Human Resources Leader responsible for organization and talent development at Latham &

Watkins, LLP from March 2012 to December 2017. From June 2003 to October 2011, Ms. Harrison was with

Marsh & McLennan Companies where she gained significant experience in the insurance industry and

international markets serving in the role of Managing Director International Human Resources with

responsibilities in Europe, Latin America, the Middle East, Africa, and the Asia Pacific Region and Senior Vice

President Human Resources with responsibilities over global specialty risk and national risk practices. She also

served in human resource positions with Protiviti (formerly a division of Arthur Andersen LLP), Frito-Lay, Inc.,

MasterCard and Liz Claiborne, Inc. Ms. Harrison received a B.A. in Psychology from the University of

Delaware.

Brian K. Haendiges has been our Executive Vice President—U.S. Life Insurance & Chief Risk Officer

since February 2021. Prior to becoming responsible for our U.S. Life Insurance segment, he had been our

Executive Vice President and Chief Risk Officer since September 2020. Before joining our Company,

Mr. Haendiges was the President and Owner of HAE Consulting, a firm established to expand the institutional

investment products business and advise on retirement blocks. From 2010 to 2019, he served in various roles at

MassMutual, including Senior Vice President and Head, U.S. Pricing and Product Management (2016 – 2019),

Senior Vice President and Head, Retirement Services Investments (2014 – 2016) and Head of Strategic Market

Development, Investments (2010 – 2014). Prior to that, he served in a variety of senior roles at ING Groep NV

from 2000 to 2009 after managing governmental and stable value business lines at Aetna. Mr. Haendiges is a

Fellow of the Society of Actuaries and a member of the American Academy of Actuaries. Mr. Haendiges

graduated from Worcester Polytechnic Institute with a B.S. in Actuarial Science.

G. Kent Conrad has served as a member of our board of directors since March 2013. Sen. Conrad served as
a U.S. Senator representing the State of North Dakota from January 1987 to January 2013. He served as chairman
or Ranking Member of the Senate Budget Committee for 12 years. Prior to serving in the U.S. Senate, Sen.
Conrad served as the Tax Commissioner for the State of North Dakota from 1981 to 1986 and as Assistant Tax
Commissioner from 1974 to 1980. Sen. Conrad received an A.B. in Political Science from Stanford University
and an M.B.A. from George Washington University.

Karen E. Dyson has served as a member of our board of directors since December 2020. Lt. Gen. Dyson was

the first female finance officer to achieve three-star general officer rank in August 2014. She retired as Military
Deputy to the Assistant Secretary of the Army for Financial Management and Comptroller in August 2017.
Preceding this top military financial manager position she held several command and senior staff positions,
including as the Deputy Assistant Secretary of the Army for Budget from December 2012 to August 2014, Deputy
for Business Transformation to Assistant Secretary of the Army from 2011 to 2012, and Brigade Commander with
service in Iraq and Europe from 2004 to 2007. Lt. Gen. Dyson is an experienced strategic leader with board
experience in corporate governance, finance and audit committees, and risk oversight. She currently serves on the
boards of USAA Federal Savings Bank since October 2017 (serving as nominations and governance committee
chair); CALIBRE Systems, Inc. since October 2018 (serving as audit committee chair); and Army Emergency
Relief Organization since 2020. She previously served as a director on the boards of Army & Air Force Exchange
Service, a global retail operation, from 2012 to 2017 (serving as finance committee chair); and Defense
Commissary Agency, a global grocery operation, from 2012 to 2014. Lt. Gen. Dyson received a B.S. in Business
Management from Missouri State University, an M.B.A. from Austin Peay State University and an M.S. in National
Resource Strategy from the Eisenhower School of National Security and Resources Strategy. Certifications include
National Association of Corporate Directors (“NACD”) Directorship Certification.

Melina E. Higgins has served as a member of our board of directors since September 2013. Ms. Higgins

retired in 2010 from a nearly 20-year career at The Goldman Sachs Group Inc., where she served as a Managing
Director from 2001 and a Partner from 2002. During her tenure at Goldman Sachs, Ms. Higgins served as Head
of the Americas for Private Debt and Co-Chairperson of the Investment Advisory Committee for the GS
Mezzanine Partners funds, which managed over $30 billion of assets. She also served as a member of the
Investment Committee for the Principal Investment Area, which oversaw and approved global private equity and
private debt investments. Goldman’s Principal Investment Area was one of the largest alternative asset managers
in the world. Ms. Higgins has served as a director of Viatris Inc since November 2020. She also previously
served on the board of Mylan N.V. from February 2013 to November 2020. Ms. Higgins has also served as
non-executive chairman of the board of Antares Midco, Inc. since January 2016 and is a member of the Women’s
Leadership Board of Harvard University’s John F. Kennedy School of Government. Ms. Higgins received a B.A.
in Economics and Spanish from Colgate University and an M.B.A. from Harvard Business School.

David M. Moffett has served as a member of our board of directors since December 2012. Mr. Moffett was

the Chief Executive Officer and a director of the Federal Home Loan Mortgage Corporation from September
2008 until his retirement in March 2009. Prior to this position, Mr. Moffett served as a Senior Advisor with the
Carlyle Group LLC from May 2007 to September 2008. Mr. Moffett also served as the Vice Chairman and Chief
Financial Officer of U.S. Bancorp from 2001 to 2007, after its merger with Firstar Corporation, having
previously served as Vice Chairman and Chief Financial Officer of Firstar Corporation from 1998 to 2001 and as
Chief Financial Officer of StarBanc Corporation, a predecessor to Firstar Corporation, from 1993 to 1998.
Mr. Moffett has served as a director of CSX Corporation since May 2015, and PayPal Holdings, Inc. since July
2015. He also previously served on the boards of directors of CIT Group Inc. from July 2010 to May 2016, eBay
Inc. from July 2007 to July 2015, MBIA Inc. from May 2007 to September 2008, The E.W. Scripps Company
from May 2007 to September 2008 and Building Materials Holding Corporation from May 2006 to November
2008. Mr. Moffett also serves as a trustee on the boards of Columbia Fund Series Trust I and Columbia Funds
Variable Insurance Trust, overseeing approximately 52 funds within the Columbia Funds mutual fund complex.
He also serves as a trustee for the University of Oklahoma Foundation. Mr. Moffett holds a B.A. degree in
Economics from the University of Oklahoma and an M.B.A. degree from Southern Methodist University.

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Thomas E. Moloney has served as a member of our board of directors since October 2009. Mr. Moloney
served as the interim Chief Financial Officer of MSC—Medical Services Company (“MSC”) from December
2007 to March 2008. He retired as the Senior Executive Vice President and Chief Financial Officer of John
Hancock Financial Services, Inc. in December 2004. He had served in this position since 1992. Mr. Moloney
served in various roles at John Hancock Financial Services, Inc. during his tenure from 1965 to 1992, including
Vice President, Controller, and Senior Accountant. Mr. Moloney has served as a director of SeaWorld
Entertainment, Inc. since January 2015. He also previously served as a director of MSC from 2005 to 2012 (MSC
was acquired in 2012 and ceased to be a public company in 2008). Mr. Moloney is on the boards of Nashoba
Learning Group and the Boston Children’s Museum (past Chairperson), both non-profit organizations.
Mr. Moloney received a B.A. in Accounting from Bentley University and holds a Silver Level Executive Masters
Professional Director Certification from the Corporate Directors Group.

Debra J. Perry has served as a member of our board of directors since December 2016. Ms. Perry worked

at Moody’s Corporation from 1992 to 2004. From 2001 to 2004, Ms. Perry was a senior managing director in the
Global Ratings and Research Unit of Moody’s Investors Service, Inc. where she oversaw the Americas Corporate
Finance and U.S. Public Finance Groups. From 1999 to 2001, Ms. Perry served as Chief Administrative Officer
and Chief Credit Officer, and from 1996 to 1999, she was a group managing director for the Finance, Securities
and Insurance Rating Groups of Moody’s Corporation. Ms. Perry has served as a director of Assurant, Inc., a
provider of risk management solutions, since August 2017 and as risk committee chair since May 2019; and as a
director of Korn/Ferry International, a talent management and executive search firm, since 2008, and as chair of
the audit committee since 2010. She has also served as a director of The Bernstein Funds (which currently
oversees the Sanford C. Bernstein Fund, the Bernstein Fund and the Alliance Multi-Manager Alternative Fund)
since July 2011 and has served as chair since July 2018. She was a member of the board of PartnerRe, a
Bermuda-based reinsurance company, from June 2013 to March 2016. She was also a trustee of the Bank of
America Funds from June 2011 until April 2016. Ms. Perry served on the board of directors of CNO Financial
Group, Inc. from 2004 to 2011. In 2014, Ms. Perry was named to the National Association of Corporate
Directors’ Directorship 100, which recognizes the most influential people in the boardroom and corporate
governance community. From September 2012 to December 2014, Ms. Perry served as a member of the
Executive Committee of the Committee for Economic Development (“CED”) in Washington, D.C. a
non-partisan, business-led public policy organization, until its merger with the Conference Board, and she
continues as a member of CED. Ms. Perry received her B.A. in History from the University of Wisconsin and her
M.A. in European History from Yale University.

Robert P. Restrepo Jr. has served as a member of our board of directors since December 2016.

Mr. Restrepo retired from State Auto Financial Corporation in 2015, having served as its Chairman from 2006 to
December 2015 and as its President and Chief Executive Officer from 2006 to May 2015. Mr. Restrepo has over
40 years of insurance industry experience, having held executive roles at Main Street America Group, Hanover
Insurance Group Inc. (formerly Allmerica Financial Corp), Travelers and Aetna. Mr. Restrepo has served as a
director of RLI Corp., a property and casualty insurance company, since July 2016. He also previously served as
a director of Majesco, a provider of insurance software and consulting services, from August 2015 until
September 2020. Mr. Restrepo also currently serves on the board of directors of The Larry H. Miller Group of
Companies. Mr. Restrepo received a B.A. in English from Yale University.

James S. Riepe has served as a member of our board of directors since March 2006 and was appointed
Non-Executive Chairman of the Board in May 2012, having previously been appointed as Lead Director in
February 2009. Mr. Riepe is a retired Vice Chairman and a former Senior Advisor at T. Rowe Price Group, Inc.
Mr. Riepe served as the Vice Chairman of T. Rowe Price Group, Inc. from 1997 until his retirement in December
2005. Prior to joining T. Rowe Price Group, Inc. in 1981, Mr. Riepe was an Executive Vice President of The
Vanguard Group. Mr. Riepe previously served on the boards of directors of LPL Financial Holdings Inc. from
February 2008 until May 2020, The NASDAQ OMX Group, Inc. from May 2003 to May 2014, T. Rowe Price
Group, Inc. from 1981 to 2006 and 57 T. Rowe Price registered investment companies (mutual funds) until his

retirement in 2006. He is an Emeritus member of the University of Pennsylvania’s Board of Trustees and Trustee

of Penn Medicine. Mr. Riepe received a B.S. in Industrial Management, M.B.A. and Honorary Doctor of Laws

degree from the University of Pennsylvania.

From time to time, we or our subsidiaries are subject to court orders, judgments or decrees enjoining us or

the subsidiaries from engaging in certain business practices, and sometimes such orders, judgments or decrees

are also applicable to our affiliates, officers, employees and certain other related parties, including certain of our

executive officers.

Other Information

We will provide the remaining information that is responsive to this Item 10 in our definitive proxy

statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year

covered by this Annual Report, in either case under the captions “Election of Directors,” “Corporate

Governance,” “Board of Directors and Committees,” “Section 16(a) Beneficial Ownership Reporting

Compliance,” and possibly elsewhere therein. That information is incorporated into this Item 10 by reference.

Item 11. Executive Compensation

We will provide information that is responsive to this Item 11 in our definitive proxy statement or in an

amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual

Report, in either case under the captions “Board of Directors and Committees,” “Compensation Discussion and

Analysis,” “Report of the Management Development and Compensation Committee” (which report shall be

deemed furnished with this Form 10-K, and shall not be deemed “filed” for purposes of Section 18 of the

Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the

Securities Act of 1933 or the Securities Exchange Act of 1934), “Executive Compensation,” and possibly

elsewhere therein. That information is incorporated into this Item 11 by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

We will provide information that is responsive to this Item 12 in our definitive proxy statement or in an

amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual

Report, in either case under the caption “Information Relating to Directors, Director Nominees, Executive

Officers and Significant Stockholders,” “Equity Compensation Plans” and possibly elsewhere therein. That

information is incorporated into this Item 12 by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

We will provide information that is responsive to this Item 13 in our definitive proxy statement or in an

amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual

Report, in either case under the captions “Corporate Governance,” “Certain Relationships and Transactions,” and

possibly elsewhere therein. That information is incorporated into this Item 13 by reference.

Item 14. Principal Accountant Fees and Services

We will provide information that is responsive to this Item 14 in our definitive proxy statement or in an

amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual

Report, in either case under the caption “Independent Registered Public Accounting Firm,” and possibly

elsewhere therein. That information is incorporated into this Item 14 by reference.

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Thomas E. Moloney has served as a member of our board of directors since October 2009. Mr. Moloney

served as the interim Chief Financial Officer of MSC—Medical Services Company (“MSC”) from December

2007 to March 2008. He retired as the Senior Executive Vice President and Chief Financial Officer of John

Hancock Financial Services, Inc. in December 2004. He had served in this position since 1992. Mr. Moloney

served in various roles at John Hancock Financial Services, Inc. during his tenure from 1965 to 1992, including

Vice President, Controller, and Senior Accountant. Mr. Moloney has served as a director of SeaWorld

Entertainment, Inc. since January 2015. He also previously served as a director of MSC from 2005 to 2012 (MSC

was acquired in 2012 and ceased to be a public company in 2008). Mr. Moloney is on the boards of Nashoba

Learning Group and the Boston Children’s Museum (past Chairperson), both non-profit organizations.

Mr. Moloney received a B.A. in Accounting from Bentley University and holds a Silver Level Executive Masters

Professional Director Certification from the Corporate Directors Group.

Debra J. Perry has served as a member of our board of directors since December 2016. Ms. Perry worked

at Moody’s Corporation from 1992 to 2004. From 2001 to 2004, Ms. Perry was a senior managing director in the

Global Ratings and Research Unit of Moody’s Investors Service, Inc. where she oversaw the Americas Corporate

Finance and U.S. Public Finance Groups. From 1999 to 2001, Ms. Perry served as Chief Administrative Officer

and Chief Credit Officer, and from 1996 to 1999, she was a group managing director for the Finance, Securities

and Insurance Rating Groups of Moody’s Corporation. Ms. Perry has served as a director of Assurant, Inc., a

provider of risk management solutions, since August 2017 and as risk committee chair since May 2019; and as a

director of Korn/Ferry International, a talent management and executive search firm, since 2008, and as chair of

the audit committee since 2010. She has also served as a director of The Bernstein Funds (which currently

oversees the Sanford C. Bernstein Fund, the Bernstein Fund and the Alliance Multi-Manager Alternative Fund)

since July 2011 and has served as chair since July 2018. She was a member of the board of PartnerRe, a

Bermuda-based reinsurance company, from June 2013 to March 2016. She was also a trustee of the Bank of

America Funds from June 2011 until April 2016. Ms. Perry served on the board of directors of CNO Financial

Group, Inc. from 2004 to 2011. In 2014, Ms. Perry was named to the National Association of Corporate

Directors’ Directorship 100, which recognizes the most influential people in the boardroom and corporate

governance community. From September 2012 to December 2014, Ms. Perry served as a member of the

Executive Committee of the Committee for Economic Development (“CED”) in Washington, D.C. a

non-partisan, business-led public policy organization, until its merger with the Conference Board, and she

continues as a member of CED. Ms. Perry received her B.A. in History from the University of Wisconsin and her

M.A. in European History from Yale University.

Robert P. Restrepo Jr. has served as a member of our board of directors since December 2016.

Mr. Restrepo retired from State Auto Financial Corporation in 2015, having served as its Chairman from 2006 to

December 2015 and as its President and Chief Executive Officer from 2006 to May 2015. Mr. Restrepo has over

40 years of insurance industry experience, having held executive roles at Main Street America Group, Hanover

Insurance Group Inc. (formerly Allmerica Financial Corp), Travelers and Aetna. Mr. Restrepo has served as a

director of RLI Corp., a property and casualty insurance company, since July 2016. He also previously served as

a director of Majesco, a provider of insurance software and consulting services, from August 2015 until

September 2020. Mr. Restrepo also currently serves on the board of directors of The Larry H. Miller Group of

Companies. Mr. Restrepo received a B.A. in English from Yale University.

James S. Riepe has served as a member of our board of directors since March 2006 and was appointed

Non-Executive Chairman of the Board in May 2012, having previously been appointed as Lead Director in

February 2009. Mr. Riepe is a retired Vice Chairman and a former Senior Advisor at T. Rowe Price Group, Inc.

Mr. Riepe served as the Vice Chairman of T. Rowe Price Group, Inc. from 1997 until his retirement in December

2005. Prior to joining T. Rowe Price Group, Inc. in 1981, Mr. Riepe was an Executive Vice President of The

Vanguard Group. Mr. Riepe previously served on the boards of directors of LPL Financial Holdings Inc. from

February 2008 until May 2020, The NASDAQ OMX Group, Inc. from May 2003 to May 2014, T. Rowe Price

Group, Inc. from 1981 to 2006 and 57 T. Rowe Price registered investment companies (mutual funds) until his

retirement in 2006. He is an Emeritus member of the University of Pennsylvania’s Board of Trustees and Trustee
of Penn Medicine. Mr. Riepe received a B.S. in Industrial Management, M.B.A. and Honorary Doctor of Laws
degree from the University of Pennsylvania.

From time to time, we or our subsidiaries are subject to court orders, judgments or decrees enjoining us or
the subsidiaries from engaging in certain business practices, and sometimes such orders, judgments or decrees
are also applicable to our affiliates, officers, employees and certain other related parties, including certain of our
executive officers.

Other Information

We will provide the remaining information that is responsive to this Item 10 in our definitive proxy

statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year
covered by this Annual Report, in either case under the captions “Election of Directors,” “Corporate
Governance,” “Board of Directors and Committees,” “Section 16(a) Beneficial Ownership Reporting
Compliance,” and possibly elsewhere therein. That information is incorporated into this Item 10 by reference.

Item 11. Executive Compensation

We will provide information that is responsive to this Item 11 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual
Report, in either case under the captions “Board of Directors and Committees,” “Compensation Discussion and
Analysis,” “Report of the Management Development and Compensation Committee” (which report shall be
deemed furnished with this Form 10-K, and shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934), “Executive Compensation,” and possibly
elsewhere therein. That information is incorporated into this Item 11 by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

We will provide information that is responsive to this Item 12 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual
Report, in either case under the caption “Information Relating to Directors, Director Nominees, Executive
Officers and Significant Stockholders,” “Equity Compensation Plans” and possibly elsewhere therein. That
information is incorporated into this Item 12 by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

We will provide information that is responsive to this Item 13 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual
Report, in either case under the captions “Corporate Governance,” “Certain Relationships and Transactions,” and
possibly elsewhere therein. That information is incorporated into this Item 13 by reference.

Item 14. Principal Accountant Fees and Services

We will provide information that is responsive to this Item 14 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual
Report, in either case under the caption “Independent Registered Public Accounting Firm,” and possibly
elsewhere therein. That information is incorporated into this Item 14 by reference.

334

335

Item 15. Exhibits and Financial Statement Schedules

PART IV

3. Exhibits

Number

Description

a.

1.

Documents filed as part of this report.

Financial Statements (see Item 8. Financial Statements and Supplementary Data)

Report of KPMG LLP, Independent Registered Public Accounting Firm

2.2

Offer Management Agreement, dated as of April 23, 2014, among Genworth Mortgage Insurance

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019
and 2018

Consolidated Statements of Changes in Equity for the years ended December 31, 2020, 2019 and
2018

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

2.

Financial Statement Schedules

Schedule I—Summary of Investments—Other Than Investments in Related Parties

Schedule II—Financial Statements of Genworth Financial, Inc. (Parent Only)

2015)

Schedule III—Supplemental Insurance Information

2.1

Agreement and Plan of Merger, dated as of April 1, 2013, among Genworth Financial, Inc. (renamed

Genworth Holdings, Inc.), Sub XLVI, Inc. (renamed Genworth Financial, Inc.) and Sub XLII, Inc.

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on April 1, 2013)

2.3

2.4

Australia Limited, Genworth Financial, Inc., Genworth Financial Mortgage Insurance Pty Limited,

Genworth Financial Mortgage Indemnity Limited and the joint lead managers named therein

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on May 21, 2014)

Irrevocable Offer Deed, dated as of July 22, 2015, by AXA S.A. (incorporated by reference to

Exhibit 2.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 2015)

Letter Agreement, dated as of July 22, 2015, by and among Genworth Financial, Inc., Brookfield

Life and Annuity Insurance Company Limited, European Group Financing Company Limited,

Genworth Financial International Holdings, Inc. and AXA S.A. (incorporated by reference to Exhibit

2.2 to the Quarterly report on Form 10-Q for the period ended September 30, 2015)

2.5

Sale and Purchase Agreement, dated as of September 17, 2015, by and among Genworth Financial,

Inc., Brookfield Life and Annuity Insurance Company Limited, European Group Financing

Company Limited, Genworth Financial International Holdings, Inc. and AXA S.A. (incorporated by

reference to Exhibit 2 to the Quarterly Report on Form 10-Q for the period ended September 30,

2.6

Agreement and Plan of Merger, dated October 21, 2016, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd. and Asia Pacific Global Capital USA Corporation (incorporated

by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on October 24, 2016)

2.6.1

Waiver and Agreement, dated as of August 21, 2017, by and among Genworth Financial, Inc., Asia

Pacific Global Capital Co., Ltd. and Asia Pacific Global Capital USA Corporation (incorporated by

reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 21, 2017)

2.6.2

Second Waiver and Agreement, dated as of November 29, 2017, by and among Genworth Financial,

Inc., Asia Pacific Global Capital Co., Ltd. and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 29,

2.6.3

Third Waiver and Agreement, dated as of February 23, 2018, by and among Genworth Financial,

Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on February 26,

2.6.4

Fourth Waiver and Agreement, dated as of March 27, 2018, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on March 27,

2.6.5

Fifth Waiver and Agreement, dated as of June 28, 2018, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on June 28, 2018)

2.6.6

Sixth Waiver and Agreement, dated as of August 14, 2018, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 14,

2017

2018)

2018)

2018)

336

337

Item 15. Exhibits and Financial Statement Schedules

PART IV

3. Exhibits

Number

Description

Documents filed as part of this report.

a.

1.

Financial Statements (see Item 8. Financial Statements and Supplementary Data)

Report of KPMG LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019

and 2018

2018

Consolidated Statements of Changes in Equity for the years ended December 31, 2020, 2019 and

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

2.

Financial Statement Schedules

Schedule I—Summary of Investments—Other Than Investments in Related Parties

Schedule II—Financial Statements of Genworth Financial, Inc. (Parent Only)

Schedule III—Supplemental Insurance Information

2.1

2.2

2.3

2.4

2.5

2.6

2.6.1

2.6.2

2.6.3

2.6.4

2.6.5

2.6.6

Agreement and Plan of Merger, dated as of April 1, 2013, among Genworth Financial, Inc. (renamed
Genworth Holdings, Inc.), Sub XLVI, Inc. (renamed Genworth Financial, Inc.) and Sub XLII, Inc.
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on April 1, 2013)

Offer Management Agreement, dated as of April 23, 2014, among Genworth Mortgage Insurance
Australia Limited, Genworth Financial, Inc., Genworth Financial Mortgage Insurance Pty Limited,
Genworth Financial Mortgage Indemnity Limited and the joint lead managers named therein
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on May 21, 2014)

Irrevocable Offer Deed, dated as of July 22, 2015, by AXA S.A. (incorporated by reference to
Exhibit 2.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 2015)

Letter Agreement, dated as of July 22, 2015, by and among Genworth Financial, Inc., Brookfield
Life and Annuity Insurance Company Limited, European Group Financing Company Limited,
Genworth Financial International Holdings, Inc. and AXA S.A. (incorporated by reference to Exhibit
2.2 to the Quarterly report on Form 10-Q for the period ended September 30, 2015)

Sale and Purchase Agreement, dated as of September 17, 2015, by and among Genworth Financial,
Inc., Brookfield Life and Annuity Insurance Company Limited, European Group Financing
Company Limited, Genworth Financial International Holdings, Inc. and AXA S.A. (incorporated by
reference to Exhibit 2 to the Quarterly Report on Form 10-Q for the period ended September 30,
2015)

Agreement and Plan of Merger, dated October 21, 2016, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd. and Asia Pacific Global Capital USA Corporation (incorporated
by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on October 24, 2016)

Waiver and Agreement, dated as of August 21, 2017, by and among Genworth Financial, Inc., Asia
Pacific Global Capital Co., Ltd. and Asia Pacific Global Capital USA Corporation (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 21, 2017)

Second Waiver and Agreement, dated as of November 29, 2017, by and among Genworth Financial,
Inc., Asia Pacific Global Capital Co., Ltd. and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 29,
2017

Third Waiver and Agreement, dated as of February 23, 2018, by and among Genworth Financial,
Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on February 26,
2018)

Fourth Waiver and Agreement, dated as of March 27, 2018, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on March 27,
2018)

Fifth Waiver and Agreement, dated as of June 28, 2018, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on June 28, 2018)

Sixth Waiver and Agreement, dated as of August 14, 2018, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 14,
2018)

336

337

Number

2.6.7

2.6.8

2.6.9

2.6.10

2.6.11

2.6.12

2.6.13

2.6.14

2.6.15

2.6.16

2.6.17

2.7

Description

Number

Description

Seventh Waiver and Agreement, dated as of November 30, 2018, by and among Genworth Financial,
Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 30,
2018)

Eighth Waiver and Agreement, dated as of January 30, 2019, by and among Genworth Financial,
Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on January 30,
2019)

Ninth Waiver and Agreement, dated as of March 14, 2019, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on March 14,
2019)

Tenth Waiver and Agreement, dated as of April 29, 2019, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on April 29, 2019)

Eleventh Waiver and Agreement, dated as of June 30, 2019, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on July 1, 2019)

Twelfth Waiver and Agreement, dated as of August 12, 2019, by and among Genworth Financial,
Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 13,
2019)

Thirteenth Waiver and Agreement, dated as of December 22, 2019, by and among Genworth
Financial, Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA
Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on
December 23, 2019)

Fourteenth Waiver and Agreement, dated as of March 31, 2020, by and among Genworth Financial,
Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on March 31,
2020)

Fifteenth Waiver and Agreement, dated as of June 30, 2020, by and among Genworth Financial, Inc.,
Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on June 30, 2020)

Sixteenth Waiver and Agreement, dated as of September 30, 2020, by and among Genworth
Financial, Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA
Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on
October 1, 2020)

Seventeenth Waiver and Agreement, dated as of November 30, 2020, by and among Genworth
Financial, Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA
Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on
November 30, 2020)

Share Purchase Agreement by and among Genworth Financial, Inc., Genworth Financial
International Holdings, LLC, Genworth Mortgage Insurance Corporation, Brookfield BBP Canada
Holdings Inc. and Brookfield Business Partners L.P., dated August 12, 2019 (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 13, 2019)

3.1

Amended and Restated Certificate of Incorporation of Genworth Financial, Inc., dated as of April 1,

2013 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on

3.2

Amended and Restated Bylaws of Genworth Financial, Inc., dated as of October 5, 2015

(incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on October 5,

April 1, 2013)

2015)

4.1

4.2

Specimen Class A Common Stock certificate (incorporated by reference to Exhibit 4.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2012)

Indenture, dated as of November 14, 2006, between Genworth Financial, Inc. (renamed Genworth

Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated

by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on November 14, 2006)

4.3

First Supplemental Indenture, dated as of November 14, 2006, between Genworth Financial, Inc.

(renamed Genworth Holdings, Inc.) and The Bank of New York Trust Company, N.A., as Trustee

(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on

November 14, 2006)

4.4

Second Supplemental Indenture, dated as of April 1, 2013, among Genworth Holdings, Inc.,

Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee

(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on April 1, 2013)

4.5

Third Supplemental Indenture, dated as of March 18, 2016, among Genworth Holdings, Inc.,

Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee,

amending the Indenture, dated as of November 14, 2006, between Genworth Financial, Inc. (renamed

Genworth Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee

(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 22,

2016)

4.6

Indenture, dated as of June 15, 2004, between Genworth Financial, Inc. (renamed Genworth

Holdings, Inc.) and The Bank of New York (successor to JPMorgan Chase Bank), as Trustee

(incorporated by reference to Exhibit 4.10 to the Annual Report on Form 10-K for the fiscal year

ended December 31, 2004)

4.7

Supplemental Indenture No. 1, dated as of June 15, 2004, between Genworth Financial, Inc.

(renamed Genworth Holdings, Inc.) and The Bank of New York (successor to JPMorgan Chase

Bank), as Trustee (incorporated by reference to Exhibit 4.11 to the Annual Report on Form 10-K for

the fiscal year ended December 31, 2004)

4.8

Supplemental Indenture No. 7, dated as of November 22, 2010, between Genworth Financial, Inc.

(renamed Genworth Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as

Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on

4.9

Supplemental Indenture No. 8, dated as of March 25, 2011, between Genworth Financial, Inc.

(renamed Genworth Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as

Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on

November 22, 2010)

March 25, 2011)

4.10

Supplemental Indenture No. 9, dated as of April 1, 2013, among Genworth Holdings, Inc., Genworth

Financial, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as Trustee

(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 1, 2013)

338

339

Number

Description

Number

Description

2018)

2019)

2019)

2019)

2020)

2.6.7

Seventh Waiver and Agreement, dated as of November 30, 2018, by and among Genworth Financial,

Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 30,

2.6.8

Eighth Waiver and Agreement, dated as of January 30, 2019, by and among Genworth Financial,

Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on January 30,

2.6.9

Ninth Waiver and Agreement, dated as of March 14, 2019, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on March 14,

2.6.10

Tenth Waiver and Agreement, dated as of April 29, 2019, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on April 29, 2019)

2.6.11

Eleventh Waiver and Agreement, dated as of June 30, 2019, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on July 1, 2019)

2.6.12

Twelfth Waiver and Agreement, dated as of August 12, 2019, by and among Genworth Financial,

Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 13,

2.6.13

Thirteenth Waiver and Agreement, dated as of December 22, 2019, by and among Genworth

Financial, Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA

Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on

December 23, 2019)

2.6.14

Fourteenth Waiver and Agreement, dated as of March 31, 2020, by and among Genworth Financial,

Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on March 31,

2.6.15

Fifteenth Waiver and Agreement, dated as of June 30, 2020, by and among Genworth Financial, Inc.,

Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA Corporation

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on June 30, 2020)

2.6.16

Sixteenth Waiver and Agreement, dated as of September 30, 2020, by and among Genworth

Financial, Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA

Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on

2.6.17

Seventeenth Waiver and Agreement, dated as of November 30, 2020, by and among Genworth

Financial, Inc., Asia Pacific Global Capital Co., Ltd., and Asia Pacific Global Capital USA

Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on

October 1, 2020)

November 30, 2020)

2.7

Share Purchase Agreement by and among Genworth Financial, Inc., Genworth Financial

International Holdings, LLC, Genworth Mortgage Insurance Corporation, Brookfield BBP Canada

Holdings Inc. and Brookfield Business Partners L.P., dated August 12, 2019 (incorporated by

reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 13, 2019)

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

Amended and Restated Certificate of Incorporation of Genworth Financial, Inc., dated as of April 1,
2013 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on
April 1, 2013)

Amended and Restated Bylaws of Genworth Financial, Inc., dated as of October 5, 2015
(incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on October 5,
2015)

Specimen Class A Common Stock certificate (incorporated by reference to Exhibit 4.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2012)

Indenture, dated as of November 14, 2006, between Genworth Financial, Inc. (renamed Genworth
Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated
by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on November 14, 2006)

First Supplemental Indenture, dated as of November 14, 2006, between Genworth Financial, Inc.
(renamed Genworth Holdings, Inc.) and The Bank of New York Trust Company, N.A., as Trustee
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on
November 14, 2006)

Second Supplemental Indenture, dated as of April 1, 2013, among Genworth Holdings, Inc.,
Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on April 1, 2013)

Third Supplemental Indenture, dated as of March 18, 2016, among Genworth Holdings, Inc.,
Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee,
amending the Indenture, dated as of November 14, 2006, between Genworth Financial, Inc. (renamed
Genworth Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Trustee
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on March 22,
2016)

Indenture, dated as of June 15, 2004, between Genworth Financial, Inc. (renamed Genworth
Holdings, Inc.) and The Bank of New York (successor to JPMorgan Chase Bank), as Trustee
(incorporated by reference to Exhibit 4.10 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2004)

Supplemental Indenture No. 1, dated as of June 15, 2004, between Genworth Financial, Inc.
(renamed Genworth Holdings, Inc.) and The Bank of New York (successor to JPMorgan Chase
Bank), as Trustee (incorporated by reference to Exhibit 4.11 to the Annual Report on Form 10-K for
the fiscal year ended December 31, 2004)

Supplemental Indenture No. 7, dated as of November 22, 2010, between Genworth Financial, Inc.
(renamed Genworth Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as
Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on
November 22, 2010)

Supplemental Indenture No. 8, dated as of March 25, 2011, between Genworth Financial, Inc.
(renamed Genworth Holdings, Inc.) and The Bank of New York Mellon Trust Company, N.A., as
Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on
March 25, 2011)

4.10

Supplemental Indenture No. 9, dated as of April 1, 2013, among Genworth Holdings, Inc., Genworth
Financial, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as Trustee
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 1, 2013)

338

339

Number

4.11

4.12

4.13

4.14

4.15

10.1

10.2

10.2.1

10.2.2

10.3

10.3.1

Description

Number

Description

Supplemental Indenture No. 10, dated as of August 8, 2013, among Genworth Holdings, Inc.,
Genworth Financial, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as
Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on
August 8, 2013)

Supplemental Indenture No. 11, dated as of December 10, 2013, among Genworth Holdings, Inc.,
Genworth Financial, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as
Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on
December 10, 2013)

Supplemental Indenture No. 12, dated as of March 18, 2016, among Genworth Holdings, Inc.,
Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee,
amending the Indenture, dated as of June 15, 2004, between Genworth Financial, Inc. (renamed
Genworth Holdings, Inc.) and JPMorgan Chase Bank, N.A. (succeeded by The Bank of New York
Mellon Trust Company, N.A.), as Trustee (incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K filed on March 22, 2016)

Supplemental Indenture No. 13, dated as of October 3, 2018, among Genworth Holdings, Inc.,
Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee,
amending the Indenture, dated as of June 15, 2004, between Genworth Financial, Inc. (renamed
Genworth Holdings, Inc.) and JPMorgan Chase Bank, N.A. (succeeded by The Bank of New York
Mellon Trust Company, N.A.), as Trustee (incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K filed on October 4, 2018)

Description of Registrant’s Capital Stock (incorporated by reference to Exhibit 4.15 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2019)

Master Agreement, dated April 23, 2014, between Genworth Financial, Inc. and Genworth Mortgage
Insurance Company Australia Limited (incorporated by reference to Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the period ended June 30, 2014)

Shareholder Agreement, dated May 21, 2014, among Genworth Mortgage Insurance Australia
Limited, Brookfield Life Assurance Company Limited, Genworth Financial International Holdings,
Inc. and Genworth Financial, Inc. (incorporated by reference to Exhibit 10.2 to the Quarterly Report
on Form 10-Q for the period ended June 30, 2014)

Accession and Retirement Deed, dated September 15, 2015, among Genworth Financial International
Holdings, Inc., Genworth Holdings, Inc., Brookfield Life Assurance Company Limited, Genworth
Financial, Inc. and Genworth Mortgage Insurance Australia Limited (incorporated by reference to
Exhibit 10.3 to the Quarterly Report on Form 10-Q for the period ended September 30, 2015)

Accession and Retirement Deed, dated October 1, 2015, among Genworth Financial International
Holdings, LLC, Genworth Holdings, Inc., Brookfield Life Assurance Company Limited, Genworth
Financial, Inc. and Genworth Mortgage Insurance Australia Limited (incorporated by reference to
Exhibit 10.4 to the Quarterly Report on Form 10-Q for the period ended September 30, 2015)

Restated Tax Matters Agreement, dated as of February 1, 2006, by and among General Electric
Company, General Electric Capital Corporation, GE Financial Assurance Holdings, Inc., GEI, Inc.
and Genworth Financial, Inc. (renamed Genworth Holdings, Inc.) (incorporated by reference to
Exhibit 10.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2006)

Consent and Agreement to Become a Party to Restated Tax Matters Agreement, dated April 1, 2013,
among Genworth Financial, Inc., Genworth Holdings, Inc., General Electric Company, General
Electric Capital Corporation, GE Financial Assurance Holdings, Inc. and GEI, Inc. (incorporated by
reference to Exhibit 10.4 to the Current Report on Form 8-K filed on April 1, 2013)

10.4

Coinsurance Agreement, dated as of April 15, 2004, by and between GE Life and Annuity Assurance

Company (now known as Genworth Life and Annuity Insurance Company) and Union Fidelity Life

Insurance Company (incorporated by reference to Exhibit 10.11 to the Registration Statement on

Form S-1 (No. 333-112009) (the “Registration Statement”))

10.4.1

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.6.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.5

Coinsurance Agreement, dated as of April 15, 2004, by and between Federal Home Life Insurance

Company (merged with and into Genworth Life and Annuity Insurance Company effective

January 1, 2007) and Union Fidelity Life Insurance Company (incorporated by reference to

Exhibit 10.12 to the Registration Statement)

10.5.1

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.7.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.6

Coinsurance Agreement, dated as of April 15, 2004, by and between General Electric Capital

Assurance Company (now known as Genworth Life Insurance Company) and Union Fidelity Life

Insurance Company (incorporated by reference to Exhibit 10.13 to the Registration Statement)

10.6.1

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.8.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.7

Coinsurance Agreement, dated as of April 15, 2004, by and between GE Capital Life Assurance

Company of New York (now known as Genworth Life Insurance Company of New York) and Union

Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.14 to the Registration

Statement)

10.7.1

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.9.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.7.2

Third Amendment to Coinsurance Agreement (incorporated by reference to Exhibit 10.11.2 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

10.8

Coinsurance Agreement, dated as of April 15, 2004, by and between American Mayflower Life

Insurance Company of New York (merged with and into Genworth Life Insurance Company of

New York effective January 1, 2007) and Union Fidelity Life Insurance Company (incorporated by

reference to Exhibit 10.15 to the Registration Statement)

10.8.1

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.10.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.8.2

Third Amendment to Coinsurance Agreement (incorporated by reference to Exhibit 10.12.2 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

10.9

Coinsurance Agreement, dated as of April 15, 2004, between First Colony Life Insurance Company

(merged with and into Genworth Life and Annuity Insurance Company, effective January 1, 2007)

and Union Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.54 to the

Registration Statement)

10.9.1

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.11.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.10

Retrocession Agreement, dated as of April 15, 2004, by and between General Electric Capital

Assurance Company (now known as Genworth Life Insurance Company) and Union Fidelity Life

Insurance Company (incorporated by reference to Exhibit 10.16 to the Registration Statement)

10.10.1

Amendments to Retrocession Agreement (incorporated by reference to Exhibit 10.12.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

340

341

Number

Description

4.11

Supplemental Indenture No. 10, dated as of August 8, 2013, among Genworth Holdings, Inc.,

Genworth Financial, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as

Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on

4.12

Supplemental Indenture No. 11, dated as of December 10, 2013, among Genworth Holdings, Inc.,

Genworth Financial, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as

Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on

August 8, 2013)

December 10, 2013)

4.13

Supplemental Indenture No. 12, dated as of March 18, 2016, among Genworth Holdings, Inc.,

Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee,

amending the Indenture, dated as of June 15, 2004, between Genworth Financial, Inc. (renamed

Genworth Holdings, Inc.) and JPMorgan Chase Bank, N.A. (succeeded by The Bank of New York

Mellon Trust Company, N.A.), as Trustee (incorporated by reference to Exhibit 4.1 to the Current

Report on Form 8-K filed on March 22, 2016)

4.14

Supplemental Indenture No. 13, dated as of October 3, 2018, among Genworth Holdings, Inc.,

Genworth Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee,

amending the Indenture, dated as of June 15, 2004, between Genworth Financial, Inc. (renamed

Genworth Holdings, Inc.) and JPMorgan Chase Bank, N.A. (succeeded by The Bank of New York

Mellon Trust Company, N.A.), as Trustee (incorporated by reference to Exhibit 4.1 to the Current

Report on Form 8-K filed on October 4, 2018)

4.15

Description of Registrant’s Capital Stock (incorporated by reference to Exhibit 4.15 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2019)

10.1

Master Agreement, dated April 23, 2014, between Genworth Financial, Inc. and Genworth Mortgage

Insurance Company Australia Limited (incorporated by reference to Exhibit 10.1 to the Quarterly

Report on Form 10-Q for the period ended June 30, 2014)

10.2

Shareholder Agreement, dated May 21, 2014, among Genworth Mortgage Insurance Australia

Limited, Brookfield Life Assurance Company Limited, Genworth Financial International Holdings,

Inc. and Genworth Financial, Inc. (incorporated by reference to Exhibit 10.2 to the Quarterly Report

on Form 10-Q for the period ended June 30, 2014)

10.2.1

Accession and Retirement Deed, dated September 15, 2015, among Genworth Financial International

Holdings, Inc., Genworth Holdings, Inc., Brookfield Life Assurance Company Limited, Genworth

Financial, Inc. and Genworth Mortgage Insurance Australia Limited (incorporated by reference to

Exhibit 10.3 to the Quarterly Report on Form 10-Q for the period ended September 30, 2015)

10.2.2

Accession and Retirement Deed, dated October 1, 2015, among Genworth Financial International

Holdings, LLC, Genworth Holdings, Inc., Brookfield Life Assurance Company Limited, Genworth

Financial, Inc. and Genworth Mortgage Insurance Australia Limited (incorporated by reference to

Exhibit 10.4 to the Quarterly Report on Form 10-Q for the period ended September 30, 2015)

10.3

Restated Tax Matters Agreement, dated as of February 1, 2006, by and among General Electric

Company, General Electric Capital Corporation, GE Financial Assurance Holdings, Inc., GEI, Inc.

and Genworth Financial, Inc. (renamed Genworth Holdings, Inc.) (incorporated by reference to

Exhibit 10.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2006)

10.3.1

Consent and Agreement to Become a Party to Restated Tax Matters Agreement, dated April 1, 2013,

among Genworth Financial, Inc., Genworth Holdings, Inc., General Electric Company, General

Electric Capital Corporation, GE Financial Assurance Holdings, Inc. and GEI, Inc. (incorporated by

reference to Exhibit 10.4 to the Current Report on Form 8-K filed on April 1, 2013)

Number

10.4

10.4.1

10.5

10.5.1

10.6

10.6.1

10.7

10.7.1

10.7.2

10.8

10.8.1

10.8.2

10.9

10.9.1

10.10

Description

Coinsurance Agreement, dated as of April 15, 2004, by and between GE Life and Annuity Assurance
Company (now known as Genworth Life and Annuity Insurance Company) and Union Fidelity Life
Insurance Company (incorporated by reference to Exhibit 10.11 to the Registration Statement on
Form S-1 (No. 333-112009) (the “Registration Statement”))

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.6.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Coinsurance Agreement, dated as of April 15, 2004, by and between Federal Home Life Insurance
Company (merged with and into Genworth Life and Annuity Insurance Company effective
January 1, 2007) and Union Fidelity Life Insurance Company (incorporated by reference to
Exhibit 10.12 to the Registration Statement)

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.7.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Coinsurance Agreement, dated as of April 15, 2004, by and between General Electric Capital
Assurance Company (now known as Genworth Life Insurance Company) and Union Fidelity Life
Insurance Company (incorporated by reference to Exhibit 10.13 to the Registration Statement)

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.8.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Coinsurance Agreement, dated as of April 15, 2004, by and between GE Capital Life Assurance
Company of New York (now known as Genworth Life Insurance Company of New York) and Union
Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.14 to the Registration
Statement)

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.9.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Third Amendment to Coinsurance Agreement (incorporated by reference to Exhibit 10.11.2 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

Coinsurance Agreement, dated as of April 15, 2004, by and between American Mayflower Life
Insurance Company of New York (merged with and into Genworth Life Insurance Company of
New York effective January 1, 2007) and Union Fidelity Life Insurance Company (incorporated by
reference to Exhibit 10.15 to the Registration Statement)

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.10.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Third Amendment to Coinsurance Agreement (incorporated by reference to Exhibit 10.12.2 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

Coinsurance Agreement, dated as of April 15, 2004, between First Colony Life Insurance Company
(merged with and into Genworth Life and Annuity Insurance Company, effective January 1, 2007)
and Union Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.54 to the
Registration Statement)

Amendments to Coinsurance Agreement (incorporated by reference to Exhibit 10.11.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Retrocession Agreement, dated as of April 15, 2004, by and between General Electric Capital
Assurance Company (now known as Genworth Life Insurance Company) and Union Fidelity Life
Insurance Company (incorporated by reference to Exhibit 10.16 to the Registration Statement)

10.10.1

Amendments to Retrocession Agreement (incorporated by reference to Exhibit 10.12.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

340

341

Number

10.11

10.11.1

10.11.2

10.12

10.12.1

10.12.2

10.13

10.13.1

10.13.2

10.13.3

10.14

10.15

10.16

10.17

10.18

Description

Number

Description

Retrocession Agreement, dated as of April 15, 2004, by and between GE Capital Life Assurance
Company of New York (now known as Genworth Life Insurance Company of New York) and Union
Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.17 to the Registration
Statement)

Amendments to Retrocession Agreement (incorporated by reference to Exhibit 10.13.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Third Amendment to Retrocession Agreement (incorporated by reference to Exhibit 10.15.2 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

Reinsurance Agreement, dated as of April 15, 2004, by and between GE Life and Annuity Assurance
Company (now known as Genworth Life and Annuity Insurance Company) and Union Fidelity Life
Insurance Company (incorporated by reference to Exhibit 10.18 to the Registration Statement)

First Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.14.1 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2008)

Second Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.15.2 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2012)

Reinsurance Agreement, dated as of April 15, 2004, by and between GE Capital Life Assurance
Company of New York (now known as Genworth Life Insurance Company of New York) and Union
Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.19 to the Registration
Statement)

First Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.15.1 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2008)

Second Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.17.2 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

Third Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.16.3 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2012)

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company,
General Electric Capital Assurance Company (now known as Genworth Life Insurance Company)
and The Bank of New York (incorporated by reference to Exhibit 10.48 to the Registration
Statement)

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company,
Federal Home Life Insurance Company (merged with and into Genworth Life and Annuity Insurance
Company, effective January 1, 2007) and The Bank of New York (incorporated by reference to
Exhibit 10.51 to the Registration Statement)

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company, First
Colony Life Insurance Company (merged with and into Genworth Life and Annuity Insurance
Company, effective January 1, 2007) and The Bank of New York (incorporated by reference to
Exhibit 10.53 to the Registration Statement)

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Insurance Company, American
Mayflower Life Insurance Company of New York (merged with and into Genworth Life Insurance
Company of New York, effective January 1, 2007) and The Bank of New York (incorporated by
reference to Exhibit 10.49 to the Registration Statement)

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company, GE
Life and Annuity Assurance Company (now known as Genworth Life and Annuity Insurance
Company) and The Bank of New York (incorporated by reference to Exhibit 10.50 to the
Registration Statement)

10.19

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company, GE

Capital Life Assurance Company of New York (now known as Genworth Life Insurance Company

of New York) and The Bank of New York (incorporated by reference to Exhibit 10.52 to the

Registration Statement)

10.20

Trust Agreement, dated as of December 1, 2009, among Union Fidelity Life Insurance Company,

Genworth Life Insurance Company of New York and Deutsche Bank Trust Company Americas

(incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K for the fiscal year

ended December 31, 2009)

10.21

Capital Maintenance Agreement, dated as of January 1, 2004, by and between Union Fidelity Life

Insurance Company and General Electric Capital Corporation (incorporated by reference to

Exhibit 10.21 to the Registration Statement)

10.21.1

Amendment No. 1 to Capital Maintenance Agreement, dated as of December 1, 2013, by and

between General Electric Capital Corporation and Union Fidelity Life Insurance Company (received

by Genworth Financial, Inc. with all required signatures for effectiveness from General Electric

Capital Corporation and Union Fidelity Life Insurance Company in February 2015) (incorporated by

reference to Exhibit 10.27.1 to the Annual Report on Form 10-K for the fiscal year ended

December 31, 2014

10.22

Replacement Capital Covenant, dated November 14, 2006 (incorporated by reference to Exhibit 10.1

to the Current Report on Form 8-K filed on November 14, 2006)

10.23

Assignment and Assumption Agreement, dated as of April 1, 2013, between Genworth Holdings,

Inc. and Genworth Financial, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on

10.24§

2004 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.56

Form 8-K filed on April 1, 2013)

to the Registration Statement)

10.24.1§

First Amendment to the Genworth Financial, Inc. 2004 Omnibus Incentive Plan (incorporated by

reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended

September 30, 2007)

10.24.2§

Second Amendment to the Genworth Financial, Inc. 2004 Omnibus Incentive Plan (incorporated by

reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 18, 2009)

10.25§

Amended & Restated Sub-Plan under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan:

Genworth Financial Canada Stock Savings Plan (incorporated by reference to Exhibit 10.31 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

10.26§

Sub-Plan under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan: Genworth Financial, Inc.

U.K. Share Incentive Plan (incorporated by reference to Exhibit 10.52.7 to the Quarterly Report on

Form 10-Q for the period ended September 30, 2006)

10.27§

Sub-Plan under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan: Genworth Financial

U.K. Share Option Plan (incorporated by reference to Exhibit 10.29 to the Annual Report on

Form 10-K for the fiscal year ended December 31, 2007)

10.28§

Form of Deferred Stock Unit Award Agreement under the 2004 Genworth Financial, Inc. Omnibus

Incentive Plan (incorporated by reference to Exhibit 10.56.1 to the Current Report on Form 8-K filed

on December 30, 2004)

10.28.1§

Form of Deferred Stock Unit Award Agreement under the 2004 Genworth Financial, Inc. Omnibus

Incentive Plan (for grants after January 1, 2010) (incorporated by reference to Exhibit 10.34.2 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

342

343

Number

Description

10.11

Retrocession Agreement, dated as of April 15, 2004, by and between GE Capital Life Assurance

Company of New York (now known as Genworth Life Insurance Company of New York) and Union

Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.17 to the Registration

Statement)

10.11.1

Amendments to Retrocession Agreement (incorporated by reference to Exhibit 10.13.1 to the Annual

Report on Form 10-K for the fiscal year ended December 31, 2008)

10.11.2

Third Amendment to Retrocession Agreement (incorporated by reference to Exhibit 10.15.2 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

10.12

Reinsurance Agreement, dated as of April 15, 2004, by and between GE Life and Annuity Assurance

Company (now known as Genworth Life and Annuity Insurance Company) and Union Fidelity Life

Insurance Company (incorporated by reference to Exhibit 10.18 to the Registration Statement)

10.12.1

First Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.14.1 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2008)

10.12.2

Second Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.15.2 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2012)

10.13

Reinsurance Agreement, dated as of April 15, 2004, by and between GE Capital Life Assurance

Company of New York (now known as Genworth Life Insurance Company of New York) and Union

Fidelity Life Insurance Company (incorporated by reference to Exhibit 10.19 to the Registration

Statement)

10.13.1

First Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.15.1 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2008)

10.13.2

Second Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.17.2 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

10.13.3

Third Amendment to Reinsurance Agreement (incorporated by reference to Exhibit 10.16.3 to the

Annual Report on Form 10-K for the fiscal year ended December 31, 2012)

10.14

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company,

General Electric Capital Assurance Company (now known as Genworth Life Insurance Company)

and The Bank of New York (incorporated by reference to Exhibit 10.48 to the Registration

Statement)

10.15

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company,

Federal Home Life Insurance Company (merged with and into Genworth Life and Annuity Insurance

Company, effective January 1, 2007) and The Bank of New York (incorporated by reference to

Exhibit 10.51 to the Registration Statement)

10.16

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company, First

Colony Life Insurance Company (merged with and into Genworth Life and Annuity Insurance

Company, effective January 1, 2007) and The Bank of New York (incorporated by reference to

Exhibit 10.53 to the Registration Statement)

10.17

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Insurance Company, American

Mayflower Life Insurance Company of New York (merged with and into Genworth Life Insurance

Company of New York, effective January 1, 2007) and The Bank of New York (incorporated by

reference to Exhibit 10.49 to the Registration Statement)

10.18

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company, GE

Life and Annuity Assurance Company (now known as Genworth Life and Annuity Insurance

Company) and The Bank of New York (incorporated by reference to Exhibit 10.50 to the

Registration Statement)

Number

10.19

10.20

10.21

10.21.1

10.22

10.23

Description

Trust Agreement, dated as of April 15, 2004, among Union Fidelity Life Insurance Company, GE
Capital Life Assurance Company of New York (now known as Genworth Life Insurance Company
of New York) and The Bank of New York (incorporated by reference to Exhibit 10.52 to the
Registration Statement)

Trust Agreement, dated as of December 1, 2009, among Union Fidelity Life Insurance Company,
Genworth Life Insurance Company of New York and Deutsche Bank Trust Company Americas
(incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2009)

Capital Maintenance Agreement, dated as of January 1, 2004, by and between Union Fidelity Life
Insurance Company and General Electric Capital Corporation (incorporated by reference to
Exhibit 10.21 to the Registration Statement)

Amendment No. 1 to Capital Maintenance Agreement, dated as of December 1, 2013, by and
between General Electric Capital Corporation and Union Fidelity Life Insurance Company (received
by Genworth Financial, Inc. with all required signatures for effectiveness from General Electric
Capital Corporation and Union Fidelity Life Insurance Company in February 2015) (incorporated by
reference to Exhibit 10.27.1 to the Annual Report on Form 10-K for the fiscal year ended
December 31, 2014

Replacement Capital Covenant, dated November 14, 2006 (incorporated by reference to Exhibit 10.1
to the Current Report on Form 8-K filed on November 14, 2006)

Assignment and Assumption Agreement, dated as of April 1, 2013, between Genworth Holdings,
Inc. and Genworth Financial, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed on April 1, 2013)

10.24§

2004 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.56
to the Registration Statement)

10.24.1§

First Amendment to the Genworth Financial, Inc. 2004 Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended
September 30, 2007)

10.24.2§

Second Amendment to the Genworth Financial, Inc. 2004 Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 18, 2009)

10.25§

10.26§

10.27§

10.28§

Amended & Restated Sub-Plan under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan:
Genworth Financial Canada Stock Savings Plan (incorporated by reference to Exhibit 10.31 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

Sub-Plan under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan: Genworth Financial, Inc.
U.K. Share Incentive Plan (incorporated by reference to Exhibit 10.52.7 to the Quarterly Report on
Form 10-Q for the period ended September 30, 2006)

Sub-Plan under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan: Genworth Financial
U.K. Share Option Plan (incorporated by reference to Exhibit 10.29 to the Annual Report on
Form 10-K for the fiscal year ended December 31, 2007)

Form of Deferred Stock Unit Award Agreement under the 2004 Genworth Financial, Inc. Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.56.1 to the Current Report on Form 8-K filed
on December 30, 2004)

10.28.1§

Form of Deferred Stock Unit Award Agreement under the 2004 Genworth Financial, Inc. Omnibus
Incentive Plan (for grants after January 1, 2010) (incorporated by reference to Exhibit 10.34.2 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)

342

343

Number

10.28.2§

Description

Number

Description

Form of Stock Appreciation Rights with a Maximum Share Value Award Agreement under the 2004
Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q for the period ended March 31, 2011)

10.37§

Form of Restricted Stock Unit Award Agreement under the 2012 Genworth Financial, Inc. Omnibus

Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for

the period ended March 31, 2016)

10.29§

2012 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed on May 21, 2012)

10.38§

Form of 2018-2020 Performance Stock Unit Award Agreement under the 2012 Genworth Financial,

Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on

10.29.1§

10.29.2§

10.29.3§

10.29.4§

10.29.5§

10.30§

10.31§

10.32§

First Amendment to the 2012 Genworth Financial, Inc. Omnibus Incentive Plan, dated as of
December 12, 2017 (incorporated by reference to Exhibit 10.34.1 to the Annual Report on Form
10-K for the fiscal year ended December 31, 2017)

Form of Deferred Stock Unit Award Agreement under the 2012 Genworth Financial, Inc. Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q for
the period ended June 30, 2012)

Form of Stock Appreciation Rights with a Maximum Share Value—Executive Officer Retention
Agreement under the 2012 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.3 to the Current Report on Form 8-K filed on November 1, 2012)

Stock Appreciation Rights with a Maximum Share Value—CEO New Hire Grant under the 2012
Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.32.5 to
the Annual Report on Form 10-K for the fiscal year ended December 31, 2012)

Form of Stock Appreciation Rights with a Maximum Share Value Award Agreement under the 2012
Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q for the period ended June 30, 2015)

Amendment to Stock Options and Stock Appreciation Rights under the 2004 Genworth Financial,
Inc. Omnibus Incentive Plan and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q for the period ended
June 30, 2013)

Policy Regarding Personal Use of Non-Commercial Aircraft by Executive Officers (incorporated by
reference to Exhibit 10 to the Current Report on Form 8-K filed on July 21, 2006)

Genworth Financial, Inc. Executive Life Program (incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K filed on September 6, 2005)

10.32.1§ Amendment to the Genworth Financial, Inc. Executive Life Program (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q for the period ended March 31, 2007)

10.32.2§ Amendment to the Genworth Financial, Inc. Executive Life Program (incorporated by reference to
Exhibit 10.38.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2008)

10.33§

10.34§

10.35§

10.36§

Amendment to Stock Options and Stock Appreciation Rights under the 2004 Genworth Financial,
Inc. Omnibus Incentive Plan and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended
June 30, 2015)

Amended and Restated Genworth Financial, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.47 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2015)

Amended and Restated Genworth Financial, Inc. Retirement and Savings Restoration Plan
(incorporated by reference to Exhibit 10.48 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2015)

Amended and Restated Genworth Financial, Inc. Deferred Compensation Plan (incorporated by
reference to Exhibit 10.49 to the Annual Report on Form 10-K for the fiscal year ended
December 31, 2015)

Form 10-Q for the period ended June 30, 2018)

10.39§

Form of 2018-2020 Performance Cash Award Agreement under the 2012 Genworth Financial, Inc.

Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form

10-Q for the period ended June 30, 2018)

10.40§

Form of Cash Retention Award Agreement under the 2012 Genworth Financial, Inc. Omnibus

Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for

the period ended June 30, 2018)

10.41§

Form of 2017-2019 Performance Stock Unit Award Agreement under the 2012 Genworth Financial,

Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on

Form 10-Q for the period ended March 31, 2017)

10.42§

2018 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to

the Quarterly report filed on Form 10-Q for the period ended June 30, 2019)

10.43§

Form of 2019-2021 Performance Stock Unit Award Agreement under the 2018 Genworth Financial,

Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly report filed

on Form 10-Q for the period ended June 30, 2019)

10.44§

Form of Restricted Stock Award Agreement under the 2018 Genworth Financial, Inc. Omnibus

Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly report filed on Form 10-Q

for the period ended June 30, 2019)

10.45§

Form of Cash-Based Award Agreement under the 2018 Genworth Financial, Inc. Omnibus Incentive

Plan (incorporated by reference to Exhibit 10.4 to the Quarterly report filed on Form 10-Q for the

period ended June 30, 2019)

10.46§

Amended and Restated Genworth Financial, Inc. 2014 Change of Control Plan (incorporated by

reference to Exhibit 10.5 to the Quarterly report filed on Form 10-Q for the period ended June 30,

10.47§

Amended and Restated Genworth Financial, Inc. 2015 Key Employee Severance Plan (incorporated

by reference to Exhibit 10.6 to the Quarterly report filed on Form 10-Q for the period ended June 30,

2019)

2019)

10.48§

10.49§

Amended and Restated Genworth Financial, Inc. Leadership Life Insurance Plan (filed herewith)

Form of 2020-2022 Performance Stock Unit Award Agreement under the 2018 Genworth Financial,

Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on

Form 10-Q for the period ended June 30, 2020)

10.50§

Form of 2020-2022 Restricted Stock Award Agreement under the 2018 Genworth Financial, Inc.

Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form

10-Q for the period ended June 30, 2020)

10.51§

Form of 2020-2022 Cash Based Award Agreement under the 2018 Genworth Financial, Inc.

Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form

10-Q for the period ended June 30, 2020)

10.52

Secured Promissory Note, dated as of July 20, 2020, issued by Genworth Financial, Inc. and

Genworth Financial International Holdings, LLC to AXA S.A. (incorporated by reference to Exhibit

10.1 to the Current Report on Form 8-K filed on July 20, 2020)

344

345

Number

Description

10.28.2§

Form of Stock Appreciation Rights with a Maximum Share Value Award Agreement under the 2004

Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10 to the

Quarterly Report on Form 10-Q for the period ended March 31, 2011)

10.29§

2012 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to

the Current Report on Form 8-K filed on May 21, 2012)

10.29.1§

First Amendment to the 2012 Genworth Financial, Inc. Omnibus Incentive Plan, dated as of

December 12, 2017 (incorporated by reference to Exhibit 10.34.1 to the Annual Report on Form

10-K for the fiscal year ended December 31, 2017)

10.29.2§

Form of Deferred Stock Unit Award Agreement under the 2012 Genworth Financial, Inc. Omnibus

Incentive Plan (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q for

the period ended June 30, 2012)

10.29.3§

Form of Stock Appreciation Rights with a Maximum Share Value—Executive Officer Retention

Agreement under the 2012 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by

reference to Exhibit 10.3 to the Current Report on Form 8-K filed on November 1, 2012)

10.29.4§

Stock Appreciation Rights with a Maximum Share Value—CEO New Hire Grant under the 2012

Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.32.5 to

the Annual Report on Form 10-K for the fiscal year ended December 31, 2012)

10.29.5§

Form of Stock Appreciation Rights with a Maximum Share Value Award Agreement under the 2012

Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the

Quarterly Report on Form 10-Q for the period ended June 30, 2015)

10.30§

Amendment to Stock Options and Stock Appreciation Rights under the 2004 Genworth Financial,

Inc. Omnibus Incentive Plan and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan

(incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q for the period ended

June 30, 2013)

10.31§

Policy Regarding Personal Use of Non-Commercial Aircraft by Executive Officers (incorporated by

reference to Exhibit 10 to the Current Report on Form 8-K filed on July 21, 2006)

10.32§

Genworth Financial, Inc. Executive Life Program (incorporated by reference to Exhibit 10.2 to the

Current Report on Form 8-K filed on September 6, 2005)

10.32.1§ Amendment to the Genworth Financial, Inc. Executive Life Program (incorporated by reference to

Exhibit 10.2 to the Quarterly Report on Form 10-Q for the period ended March 31, 2007)

10.32.2§ Amendment to the Genworth Financial, Inc. Executive Life Program (incorporated by reference to

Exhibit 10.38.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2008)

10.33§

Amendment to Stock Options and Stock Appreciation Rights under the 2004 Genworth Financial,

Inc. Omnibus Incentive Plan and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan

(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended

10.34§

Amended and Restated Genworth Financial, Inc. Supplemental Executive Retirement Plan

(incorporated by reference to Exhibit 10.47 to the Annual Report on Form 10-K for the fiscal year

10.35§

Amended and Restated Genworth Financial, Inc. Retirement and Savings Restoration Plan

(incorporated by reference to Exhibit 10.48 to the Annual Report on Form 10-K for the fiscal year

10.36§

Amended and Restated Genworth Financial, Inc. Deferred Compensation Plan (incorporated by

reference to Exhibit 10.49 to the Annual Report on Form 10-K for the fiscal year ended

June 30, 2015)

ended December 31, 2015)

ended December 31, 2015)

December 31, 2015)

Number

10.37§

10.38§

10.39§

10.40§

10.41§

10.42§

10.43§

10.44§

10.45§

10.46§

10.47§

10.48§

10.49§

10.50§

10.51§

10.52

Description

Form of Restricted Stock Unit Award Agreement under the 2012 Genworth Financial, Inc. Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for
the period ended March 31, 2016)

Form of 2018-2020 Performance Stock Unit Award Agreement under the 2012 Genworth Financial,
Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the period ended June 30, 2018)

Form of 2018-2020 Performance Cash Award Agreement under the 2012 Genworth Financial, Inc.
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the period ended June 30, 2018)

Form of Cash Retention Award Agreement under the 2012 Genworth Financial, Inc. Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for
the period ended June 30, 2018)

Form of 2017-2019 Performance Stock Unit Award Agreement under the 2012 Genworth Financial,
Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the period ended March 31, 2017)

2018 Genworth Financial, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to
the Quarterly report filed on Form 10-Q for the period ended June 30, 2019)

Form of 2019-2021 Performance Stock Unit Award Agreement under the 2018 Genworth Financial,
Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly report filed
on Form 10-Q for the period ended June 30, 2019)

Form of Restricted Stock Award Agreement under the 2018 Genworth Financial, Inc. Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly report filed on Form 10-Q
for the period ended June 30, 2019)

Form of Cash-Based Award Agreement under the 2018 Genworth Financial, Inc. Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.4 to the Quarterly report filed on Form 10-Q for the
period ended June 30, 2019)

Amended and Restated Genworth Financial, Inc. 2014 Change of Control Plan (incorporated by
reference to Exhibit 10.5 to the Quarterly report filed on Form 10-Q for the period ended June 30,
2019)

Amended and Restated Genworth Financial, Inc. 2015 Key Employee Severance Plan (incorporated
by reference to Exhibit 10.6 to the Quarterly report filed on Form 10-Q for the period ended June 30,
2019)

Amended and Restated Genworth Financial, Inc. Leadership Life Insurance Plan (filed herewith)

Form of 2020-2022 Performance Stock Unit Award Agreement under the 2018 Genworth Financial,
Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the period ended June 30, 2020)

Form of 2020-2022 Restricted Stock Award Agreement under the 2018 Genworth Financial, Inc.
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the period ended June 30, 2020)

Form of 2020-2022 Cash Based Award Agreement under the 2018 Genworth Financial, Inc.
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form
10-Q for the period ended June 30, 2020)

Secured Promissory Note, dated as of July 20, 2020, issued by Genworth Financial, Inc. and
Genworth Financial International Holdings, LLC to AXA S.A. (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed on July 20, 2020)

344

345

Number

10.53§

21

23

24

31.1

31.2

32.1

32.2

Separation Agreement and Release, dated October 5, 2020, between Genworth Financial, Inc. and
Kelly Groh (filed herewith)

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Description

SIGNATURES

Subsidiaries of the registrant (filed herewith)

Consent of KPMG LLP (filed herewith)

Powers of Attorney (filed herewith)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Thomas J. McInerney
(filed herewith)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Daniel J. Sheehan IV
(filed herewith)

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Thomas
J. McInerney (filed herewith)

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Daniel J.
Sheehan IV (filed herewith)

101.INS

Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

104

The cover page for the Company’s Annual Report on Form 10-K for the year ended December 31,
2020, has been formatted in Inline XBRL

§ Management contract or compensatory plan or arrangement.

Neither Genworth Financial, Inc., nor any of its consolidated subsidiaries, has outstanding any instrument
with respect to its long-term debt, other than those filed as an exhibit to this Annual Report, under which the total
amount of securities authorized exceeds 10% of the total assets of Genworth Financial, Inc. and its subsidiaries
on a consolidated basis. Genworth Financial, Inc. hereby agrees to furnish to the U.S. Securities and Exchange
Commission, upon request, a copy of each instrument that defines the rights of holders of such long-term debt
that is not filed or incorporated by reference as an exhibit to this Annual Report.

Genworth Financial, Inc. will furnish any exhibit upon the payment of a reasonable fee, which fee shall be

limited to Genworth Financial, Inc.’s reasonable expenses in furnishing such exhibit.

Dated: February 26, 2021

GENWORTH FINANCIAL, INC.

By:

Name:

Title:

/s/ Thomas J. McInerney

Thomas J. McInerney

President and Chief Executive Officer; Director

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the date indicated.

Dated: February 26, 2021

President and Chief Executive Officer; Director

(Principal Executive Officer)

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Vice President and Controller (Principal Accounting

/s/ Thomas J. McInerney

Thomas J. McInerney

/s/ Daniel J. Sheehan IV

Daniel J. Sheehan IV

/s/ Matthew D. Farney

Matthew D. Farney

G. Kent Conrad

Karen E. Dyson

Melina E. Higgins

David M. Moffett

Thomas E. Moloney

Debra J. Perry

Robert P. Restrepo Jr.

*

*

*

*

*

*

*

*

**By

James S. Riepe

/s/ Thomas J. McInerney

Thomas J. McInerney

Attorney-in-Fact

Officer)

Director

Director

Director

Director

Director

Director

Director

Director

346

347

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Thomas J. McInerney

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Daniel J. Sheehan IV

Kelly Groh (filed herewith)

21

23

24

Subsidiaries of the registrant (filed herewith)

Consent of KPMG LLP (filed herewith)

Powers of Attorney (filed herewith)

(filed herewith)

(filed herewith)

J. McInerney (filed herewith)

Sheehan IV (filed herewith)

101.INS

Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

104

The cover page for the Company’s Annual Report on Form 10-K for the year ended December 31,

2020, has been formatted in Inline XBRL

§ Management contract or compensatory plan or arrangement.

Neither Genworth Financial, Inc., nor any of its consolidated subsidiaries, has outstanding any instrument

with respect to its long-term debt, other than those filed as an exhibit to this Annual Report, under which the total

amount of securities authorized exceeds 10% of the total assets of Genworth Financial, Inc. and its subsidiaries

on a consolidated basis. Genworth Financial, Inc. hereby agrees to furnish to the U.S. Securities and Exchange

Commission, upon request, a copy of each instrument that defines the rights of holders of such long-term debt

that is not filed or incorporated by reference as an exhibit to this Annual Report.

Genworth Financial, Inc. will furnish any exhibit upon the payment of a reasonable fee, which fee shall be

limited to Genworth Financial, Inc.’s reasonable expenses in furnishing such exhibit.

Number

Description

10.53§

Separation Agreement and Release, dated October 5, 2020, between Genworth Financial, Inc. and

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Dated: February 26, 2021

GENWORTH FINANCIAL, INC.

By:
Name:
Title:

/s/ Thomas J. McInerney
Thomas J. McInerney
President and Chief Executive Officer; Director
(Principal Executive Officer)

32.1

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Thomas

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the date indicated.

32.2

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Daniel J.

Dated: February 26, 2021

/s/ Thomas J. McInerney
Thomas J. McInerney

/s/ Daniel J. Sheehan IV
Daniel J. Sheehan IV

/s/ Matthew D. Farney
Matthew D. Farney

*
G. Kent Conrad

*
Karen E. Dyson

*
Melina E. Higgins

*
David M. Moffett

*
Thomas E. Moloney

*
Debra J. Perry

*
Robert P. Restrepo Jr.

*
James S. Riepe

/s/ Thomas J. McInerney

Thomas J. McInerney
Attorney-in-Fact

**By

President and Chief Executive Officer; Director
(Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Vice President and Controller (Principal Accounting
Officer)

Director

Director

Director

Director

Director

Director

Director

Director

346

347

This page intentionally left blank.

Stockholder Information

Corporate Headquarters
Genworth Financial, Inc. 6620 West 
Broad Street Richmond, VA 23230 
e-mail: contactus@genworth.com 804 
484.3821 
Toll free in the U.S.: 
888 GENWORTH 
888 436.9678

Stock Exchange Listing
Genworth Class A Common Stock 
is listed on the New York Stock 
Exchange (Ticker symbol: GNW)

Stock Purchase and Sale Plan
The Computershare CIP plan provides 
shareholders of record and new 
investors with a convenient way to 
make cash purchases of Genworth’s 
common stock and to automatically 
reinvest dividends, when paid. 
Inquiries should be made directly to 
Computershare.

To obtain plan enrollment materials, 
please call 866 229.8413 or visit 
www.computershare.com/investor

Transfer Agent
Computershare  
Tel: 866 229.8413  
Tel: 800 231.5469 (hearing impaired) 
Tel: 201 680.6578 (outside the U.S. 
and Canada)  
Tel: 201 680.6610 (hearing impaired 
outside the U.S. and Canada)

Independent Registered Public 
Accounting Firm
KPMG LLP  
Suite 2000  
1021 East Cary Street  
Richmond, VA 23219-4023  
Tel: 804 782.4200  
Fax: 804 782.4300

Address Genworth Stockholder 
Inquiries to:  
Computershare  
P.O. Box 505000 Louisville, 
KY 40233-5000  
www.computershare.com/investor

Contacts

Board of Directors  
For reporting complaints about 
Genworth’s accounting, internal 
accounting controls or auditing 
matters or any other concerns to 
the Board of Directors or the Audit 
Committee, you may write to or call:

Board of Directors  
Genworth Financial, Inc. c/o 
Corporate Secretary 6620 West Broad 
Street Richmond, VA 23230 866 
717.3594  
e-mail: directors@genworth.com

Corporate Ombudsperson  
To report concerns related to 
compliance with the law, Genworth 
policies or government contracting 
requirements, contact:

Genworth Ombudsperson  
6620 West Broad Street Richmond, 
VA 23230  
888 251.4332  
e-mail: ombudsoffice.genworth@ 
genworth.com

Investor Relations  
804 922.5765  
e-mail: investorinfo@genworth.com 
genworth.com/investor

Product/Service Information
For information about products 
offered by Genworth Financial 
companies, visit genworth.com. This 
Annual Report is also available online 
at genworth.com.

Genworth Financial, Inc. 
6620 West Broad Street 
Richmond, Virginia 23230 
genworth.com

©2021 Genworth Financial, Inc. All rights reserved.