Genworth Financial Inc

earnings conference call. My name is Cynthia, 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 toward the end of this 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 Sarah Cruz, Director of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to Genworth's first quarter 2024 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 the call up for a question and answer period. In addition to our speakers, Jamala Arland, President and CEO of our U.S. Life Insurance business, and Kelly Selbstgeber, 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 the SEC rules. Also, 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 very much, Sarah, and good morning, everyone, and thank you for joining our first quarter earnings call. Chen will continue to make strong progress in the first quarter against our strategic priorities to drive long-term growth and shareholder value. In the first quarter, Genworth reported net income of $139 million, or $0.31 per share, and adjusted operating income of $85 million, or $0.19 per share. Results were led again by an act which had a very strong quarter with adjusted operating income of $135 million to Genworth. An act also announced a $250 million expansion of its share repurchase program and an increase in its ordinary dividend to 18.5 cents per share, up from 16 cents per share. We are very pleased with Enact's continued strong operating performance, capital levels, and shareholder distributions. Since Enact's IPO, Genworth has received approximately 675 million in capital from Enact, including 61 million in the first quarter. We are very pleased with our approximately 81% ownership stake in Enact, as it continues to generate significant earnings and is a key source of cash flows, helping fuel our share repurchase program, opportunistic debt reduction, and our growth investments in CareScout. Our LTC segment reported adjusted operating income of $3 million in the quarter, driven by seasonally higher claim terminations. Meanwhile, our life and annuity segment reported an adjusted operating loss of $15 million, driven by losses in life insurance. Jerome will cover the performance of these segments in more detail later. On a statutory accounting basis, the U.S. life insurance companies had a very strong quarter, with pre-tax income estimated at $258 million, driven primarily by benefits from LTC and forced-rate actions, including the impact of legal settlements. Complete statutory results for our U.S. life insurance companies will be available when we file our first quarter statutory statements later this month. Turning to our three strategic priorities, We continue to further strengthen the financial and operating 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 break even on a go-forward basis and ensure the continued self-sustainability of the life insurance companies. We achieved a total of $41 million of gross incremental premium approved through March, with an average percentage premium increase of 25%. This brings our cumulative progress to approximately $28 billion in approvals on a net present value basis since 2012. Our second strategic priority is to develop innovative aging services and solutions through Care Scout. On this front, Care Scout Services is well positioned to drive future growth for Genworth as we continue to make significant progress on the first phase of our offering with a build-out of our CareScout Quality Network, a network of long-term care providers. The CareScout Quality Network is now available in over 30 states with more than 200 providers in the network. We continue to add providers to the network that meet our quality credentialing standards and agree to negotiated preferred rates. By the end of the year, we anticipate we will have CareScout Quality Network home care coverage for two-thirds or more of the age 65 plus census population in the U.S. The CareScout Services business model is predicated on earning revenues generated from discounts on LTC claim savings with an initial focus on reducing claim costs on Genworth LTC policyholders' claims. Historically, Genworth policyholders have chosen their care providers with little input from Genworth, and more than a third have chosen providers that charge hourly rates above the median cost of care in their respective zip codes. Two key benefits of the CareScout Quality Network are the higher quality of care and the lower hourly rates negotiated with the subset of providers that are admitted to the network. Providers are willing to accept lower hourly rates in exchange for potential access to generous 1 million LTC policyholders. Currently, 85 to 90% of the providers approved for our network have agreed to hourly rates below the median cost of care for their respective zip codes. While Genwood policyholders can choose a care provider outside of the CareScout quality network, we assume many will choose providers in the network because they will allow their policy benefits to potentially last longer while receiving care from high-quality, person-centered care providers. Genwood Life Insurance Company and CareScout Services have negotiated an arm's-length agreement that is triggered when a Genworth policyholder chooses a CareScout Quality Network provider. Genworth, of course, benefits from 100% of the applicable cost discount negotiated with the provider. The life insurance company retains 75% of the value of the discount through lower claim costs, which we continue to forecast between $1 billion to $1.5 billion in savings over time on an up-present-value basis. The remaining 25% of the value of the discount is paid as a fee to CareScout services for the use of their network. As the number of matches between individuals on claim and CareScout Quality Network providers grows, CareScout services revenues will increase. With a network in place across the country by the end of the year, we expect CareScout revenues to grow as matches increase in 2025. Over time, with national coverage in the CareScout Quality Network, We will expand our customer base beyond general policyholders to include other LTC insurance carriers, policyholders, and then eventually go directly to consumers. As we have said before, we believe a holistic approach to making aging more dignified, connected, and fulfilling includes offering insurance and other funding solutions to help pay for long-term care. We continue to build the foundation for these offerings in CareScout, and now expect to complete this foundational work by the end of the year with a goal of formally offering a first insurance product in early 2025. As we work through designing and pricing our new LTC insurance products and its related assumptions, we are leveraging our unparalleled experience and paying over 370,000 LTC claims. When I look at the LTC insurance products currently available in the market, I believe that the price points for many of these products reflect pricing assumptions that are aggressive. Moving to our third strategic priority, capital management, we continue to allocate excess cash from an act to drive general long-term shareholder value. In the first quarter, we made excellent progress continuing to execute our share repurchase program. In total, we have repurchased approximately $434 million of shares. at an average price of $542 per share since the program's inception in May 2022. Cash flows from the act have also enabled us to invest in long-term growth, and we continue to expect approximately $35 million of capital contributions to Care Scout services this year as we build out the Care Scout Quality Network. We will continue to prudently scale and diversify Care Scout services in a way that will leverage our intellectual property, successfully drive claim savings in our legacy LTC block, introduce new offerings to the market, and drive long-term growth. Before I wrap up, I wanted to take a moment to remind investors that the trial date and access case against Santander regarding the payment protection insurance mis-selling case is still set for March of next year. As we have said before, Genwith is not a party to the case, but we previously owned the payment protection insurance business before selling it to AXA in 2015. If AXA is successful in pursuing its claims, we will share in the recoveries AXA receives from Santander. We continue to monitor the proceedings closely and will update investors with any material developments. In closing, I'm very pleased with our continued progress against our strategic priorities year to date, along with Enact's strong performance. And with that, I'll turn the call over to Jerome.