Genworth Financial Inc

We will facilitate a question and answer session towards the end of this conference. 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 Analyst. Please go ahead, sir.

Thank you and good morning. Welcome to Genworth's fourth 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 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 the call up for a question and answer period. In addition to our speakers, Jamala Arlen, President and CEO of our U.S. Life Insurance business, and Kelly Saltscaper, Chief Investment Officer, will 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. Also, references to statutory results are estimates due to the timing of the filing of the statutory statements. And now, I'll turn the call over to our President and CEO, Tom McInerney.

Tom McInerney Thank you very much, Brian. Good morning, everyone, and thank you for joining our fourth quarter earnings call. Before I get to the quarter, I want to welcome Jamala Arlen to her first earnings call in her official capacity as the new president and CEO of our U.S. life insurance business. Jamala has been with Genworth for 18 years. She's one of the top actuaries in the LTC insurance industry, and she's been an integral leader in both the development and execution of our multi-year rate action plan. I'm very excited to work with her in her new and broader role. I also want to thank Brian Henegas for his tremendous contributions and accomplishments at Genworth. As you know, Brian recently retired. In 2023, Genworth made outstanding progress against our three strategic priorities, which enabled us to return significant value to our shareholders. Before I discuss these accomplishments, I'll quickly review our financial performance. For the full year, net income was 76 million, or 16 cents per diluted share, and adjusted operating income was $41 million, or $0.09 per diluted share. These results were led by an act which had an outstanding year, delivering adjusted operating income of $552 million for Genworth. An act continues to execute on its strategy, maintaining a strong balance sheet and high-quality books of insurance in force. An act also expanded its platform in 2023 with the launch of an act re to pursue opportunities in the mortgage insurance market. In the fourth quarter, Chen was reported a net loss of $212 million, or $0.40 per diluted share, and an adjusted operating loss of $230 million, or $0.51 per diluted share. These results were driven by losses in both life annuities and in LTC, primarily due to the impact of our annual assumption reviews, as well as quarterly actual expected experience on the new LDTI GAAP accounting standards, which Jerome will discuss in more details. On a statutory accounting basis, pre-tax income for the U.S. life insurance companies was $148 million for the fourth quarter and $433 million for the full year, driven by a net benefit in variable annuities from better equity markets and higher interest rates and a net favorable impact of assumption updates. $1.6 billion pre-tax earnings benefits in 2023 from LTC in-force rate actions and settlements were offset by higher claims as the blocks age. Complete statutory results for our U.S. life insurance companies will be available when we follow our fourth quarter statutory statements later this month. An act had a very strong fourth quarter with adjusted operating income of $129 million to Genworth. We're pleased with an act's continued strong operating performance and capital levels. Since an act's IPO, Genworth has received approximately $615 million in capital from an act, including $128 million in the fourth quarter. Cash flows from an act have fueled our share repurchase program and our growth in CareScout. Moving to our strategic progress, we continue to further strengthen the financial and operational capabilities of our legacy LTC insurance business. We're achieving this primarily through our multi-year rate action plan, or MIRAP, the most effective tool we have to bring our legacy LTC insurance portfolio to economic break-even on a go-forward basis and ensure the self-sustainability of the life companies. 2023 was a very successful year for our MIRAP on a few different fronts. First, we achieved a total of $354 million in premium rate increase approvals in 2023, well above our forecast of $275 million. In the fourth quarter, premium rate increases totaled $127 million from 13 states, with an average percentage increase of 75%, which is one of the strongest quarterly percentage increases we've ever achieved. We also saw significant approvals on our PCS2 policies as a result of the new National Association of Insurance Commissioners, or NAICs, process to develop a multi-state actuarial review to address state inequalities. Perhaps most importantly in 2023, the value of our minor progress achieved today increased by $4.5 billion, which reduces the remaining amount currently left to be achieved by $1.5 billion. In the past two years, we've reduced the remaining amount left to be achieved by almost $4 billion. While Jerome will discuss our 2023 efforts in more detail, I wanted to note our significant progress and continued momentum on this important strategic priority. As we've said before, we manage the U.S. life insurance 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 MIRAP plan to cover future claims and other obligations. We will not put capital into life insurance companies, and given the long-tail nature of our long-term care insurance policies, with peak claim years still well over a decade away, we also do not expect capital returns from this segment. Our second strategic priority is to leverage Genworth's LTC expertise to develop new, innovative aging services and solutions. On this front, CareScout achieves several key milestones in 2023. After our initial launch in Texas, the CareScout Quality Network is now available in 20 states. We continue to add providers to the network that meet our quality credentialing standards and that agree to negotiated discount rates. At the end of 2023, we add 125 providers in the network, and by the end of 2024, we anticipate we will have CareScout quality network home care coverage from approximately 600 providers that will cover two-thirds of the age 65-plus census population in the U.S., and also approximately two-thirds of our 1 million LTC policies. With the discounted rates negotiated, we will bend the future LTC claim curve and reduce future LTC claim costs. Genworth policies will also be able to extend their available benefits, particularly where they have limited benefits. We continue to forecast claim savings on Genworth LTC claim costs over time of between one to one and a half billion on a net present value basis, driving further risk mitigation for the legacy LTC block. In addition, we have been focused on building the foundation necessary to reenter the long-term care insurance business with new funding solutions in 2024 through our new subsidiary, CareScout Insurance. We are focused on product development and pricing, identification of a highly-rated reinsurance partner, regulatory engagement, and operational readiness as we prepare to launch new LTC insurance products later in 2024. Moving to our third strategic priority, We continue to allocate excess cash from an act to drive Genworth's long-term shareholder value. We returned significant capital to shareholders via share repurchases in 2023, and we remain committed to the execution of our buyback program. In July of last year, the Genworth Board authorized an additional $350 million in share repurchases, significantly expanding our original share repurchase authorization, which we first announced in May of 2022. This step was reflective of the transformative progress we've made as a company in recent years, our strong progress on buybacks, and the board's confidence in our strategy and in our future. Since the initial authorization in May 2022, we have repurchased a total of approximately $384 million worth of shares at an average price of $533 per share as of February 13th. and reduced outstanding shares by 13 percent from approximately 511 million shares to 443 million shares outstanding. We also invested approximately 30 million in Care Scout services in 2023 in line with our guidance. We plan to invest an additional approximately 35 million in 2024 as we build out the Care Scout Quality Network. We will continue to prudently scale and diversify Care Scout services in a way that we leverage our intellectual property, successfully drive claim savings for Genworth Life Insurance Company and Glickney, and introduce new insurance offerings to the market and drive long-term growth. Our 2023 achievements have improved Genworth's financial strength, evidenced by our ratings upgrades from both Moody's and S&P, and allowed us to enter 2024 with greater financial flexibility and continued confidence, in our long-term strategy to invest in growth, primarily through CareScout, and continue returning capital to our shareholders. And with that, I'll turn the call over to Jerome.