Genworth Financial Inc

Good morning, ladies and gentlemen, and welcome to Genworth's financial third quarter 2023 earnings conference call. My name is Lisa, and I will be your coordinator today. At this time, all participants are in listen-only mode. We will facilitate a question and answer session towards the end of the conference call. As a reminder, the conference is being recorded for replay purposes. Also, we ask that you refrain from using cell phones, speaker phones, or headsets during the Q&A portion of today's call. I would now like to turn the presentation over to Brian Johnson, Senior Vice President of Financial Planning and Analysis. Please go ahead.

Thank you and good morning. Welcome to Genworth's third quarter 2023 earnings call. The slide presentation that accompanies this call is available on the investor relations section of the Genworth website, investor.genworth.com. Our earnings release and financial supplement can also be found there, and we encourage you to review these materials. Speaking today will be Tom McInerney, President and Chief Executive Officer, and Jerome Upton, Chief Financial Officer. Following our prepared remarks, we will open up the call for a question and answer period. In addition to our speakers, Brian Hendages, President of our U.S. Life Insurance business, and Kelly Saltscaper, Chief Investment Officer will also be available to take your questions. During the call this morning, we may make various forward-looking statements. Our actual results may differ materially from such statements. We advise you to read the cautionary notes regarding forward-looking statements in our earnings release and related presentation, as well as the risk factors of our most recent annual report, on Form 10-K as filed with the SEC. This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. In our investor materials, non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules. references to statutory results or estimates due to the timing of the filing of the statutory statement. And now, I'll turn the call over to our President and CEO, Tom McInerney.

Thank you, Brian. Good morning, everyone, and thank you for joining our third quarter earnings call. Genworth continue to make progress against our strategic priorities in the third quarter as we deliver long-term growth and drive shareholder value. In the third quarter, Genworth reported net income of $29 million, or $0.06 per diluted share, and adjusted operating income of $42 million, or $0.09 per diluted share. And ACT again had a very strong quarter, with adjusted operating income of $134 million to Genworth. We are very pleased with ACT's continued strong operating performance and capital levels. LTC had an adjusted operating loss of $71 million, driven by a liability remeasurement loss under LDTI. Investors can refer to slide 20 in our slide presentation and our commentary from last quarter for more details on how differences in our actual to expected experience drive quarterly volatility in this line item. On a statutory accounting basis, pre-tax income for the U.S. life insurance companies is estimated at $30 million, driven by $21 million of pre-tax earnings in LTC. Complete statutory results for U.S. life insurance companies will be available when we file our third quarter statutory statements later this month. As a reminder, we believe investors should evaluate LTC results under both U.S. GAAP and U.S. statutory accounting to have a more complete understanding of LTC results. Turning to our three strategic priorities, we continue to improve the financial condition of our legacy LTC business primarily through our Multi-Year Rate Action Plan, or MIRAP. the most effective tool we have to bring our legacy LTC insurance portfolio to break even on a go forward basis. We achieved a total of $83 million of gross incremental premium approved in the third quarter, resulting in a total of $227 million of premium approved year to date. This brings our cumulative progress to approximately $25 billion in approvals on a net present value basis since 2012. We are very pleased with our progress year to date. and now expect our total gross incremental premium approved for the full year to be at least $275 million. Turning to the next strategic priority, we continue to leverage GenWars LTC expertise to develop innovative aging care solutions. CareScout Services has made significant progress on the build-out of our quality care network of senior care providers with an initial launch in Texas. Texas is a large LTC insurance market And Genworth has approximately 43,000 policyholders there. We now have CareScout quality network coverage for approximately 50% of the age 65 plus Texas population with providers that have met our quality credentialing standards and agreed to negotiated discount rates. We are pleased to share that policyholders have begun to make their first matches with our network providers in Texas. With the discounted rates negotiated, Genworth policyholders will be able to extend their available benefits, and our preliminary projections indicate that Genworth will realize claim savings over time of between $1 to $1.5 billion, driving further risk mitigation for the legacy LTC block. CareScout Services offers an attractive value proposition for both policyholders and providers. For providers, joining the Quality Network offers preferred access to qualified care seekers, recognition for quality care, and opportunities to strengthen their person-centered care experience. We have strong momentum to expand the network beyond Texas with Ford providers so far across the country. We are building a regional sales organization and have hired three of six regional vice presidents in the southwest, southeast, and mid-Atlantic regions. The field sales organization will be responsible for building the CareScout quality network in the regions and will drive new sales of CareScout LTC insurance products when they are introduced later in 2024. We plan to expand CareScout's customer base beyond Genworth policyholders to include other LTC insurance carriers policyholders, and eventually we'll offer CareScout services and LTC insurance products to all Americans. As we have said before, we believe a successful transformation of the US LTC market will address both financing and services for our customers, and ultimately will help to reduce the likelihood of people needing care and lessen the care they need. To enhance the success of CareScout, we are engaging with our state regulators and working with a few highly rated reinsurers to partner with us as we bring new LTC products to the market. We will continue to provide quarterly updates to investors as we move forward in 2024. Moving to our third strategic priority, capital management, we continue to allocate excess cash from an act to drive generous long-term shareholder value. We returned significant capital to shareholders via share repurchases and have repurchased a total of approximately $334 million of shares at an average price of $5.24 per share since the program's inception in May 2022. Including the expansion to the program we announced July 31st, we have approximately $366 million of outstanding repurchase authority. Cash flows from an act have also enabled us to invest in long-term growth in CareScout, and we continue to expect approximately $30 million of capital contributions to CareScout this year. Genworth received $26 million in capital from an act in the third quarter. Since an act's IPO, Genworth has received approximately $493 million in capital from an act through October 2023. We expect our 81.6% ownership of an act to be the primary source of free cash flow moving forward. We recently increased the flexibility we have in our capital management program through a bondholder consent solicitation. The transaction, which Jerome will discuss in more detail, resulted in an amendment to a restrictive covenant that limited our ability to repurchase our 2066 subordinated notes. This amendment gives us more optionality to make opportunistic holding company debt repurchases while prioritizing growth investments, and share repurchases. As we have said before, it is important to remember our commitment to managing the U.S. life companies on a standalone basis. They operate as a closed system, leveraging existing reserves and capital, current premiums, as well as future new premiums under the LTC multi-year rate action plan to cover liabilities. We have no plans to put additional capital into the U.S. life insurance companies, and given the long-tailed of our long-term care insurance policies with peak claim years still over a decade away. We also do not expect capital returns from the U.S. life insurance companies. Looking ahead, Genworth's enterprise value and future potential are rooted in our 81.6% ownership stake in ENACT and our strategy to grow CareScout into a profitable, comprehensive provider of long-term care services, insurance, and other solutions, leveraging the intellectual property, data, expertise, and experience we have accumulated over five decades. In closing, I'm very pleased with ENAC's outstanding performance and our strong execution against our three strategic priorities year to date. We are working from a strong financial foundation with a significantly improved balance sheet, low annual debt service obligations, and increased flexibility in how we allocate cash flows from ENAC. With that, I'll turn the call over to Jerome.