OneMain Holdings, Inc.

Would you please continue to stand by? Thank you. Welcome to the OneMain Financial fourth quarter and full year 2023 earnings conference call and webcast. Hosting the call today from OneMain is Peter Poyon, head of investor relations. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. We do ask that you limit yourself to one question and one follow-up, and please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the floor over to Peter Poyan. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to page two of the fourth quarter 2023 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the investor relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business prospects. And these forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward-looking statements. If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, February 7th, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Schulman, our Chairman and Chief Executive Officer, and Micah Conrad, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. I'd like to now turn the call over to Doug.

Thanks, Pete, and good morning, everyone. Thank you for joining us today. I'm going to provide a brief overview of 2023, and then I'll discuss our performance for the fourth quarter, and our progress against key strategic initiatives. As many of you heard at Investor Day in December, while we continue to navigate the current credit environment, we feel that one main has never been better positioned for medium and long-term outperformance. In 2023, capital generation was nearly $800 million and our receivables reached $22 billion. supplemented by growth in our new products. In the year, we also grew our customer base to 3 million customers. We maintained our underwriting discipline in 2023, tightening our credit box throughout the year and increasing pricing, and continue to feel very good about the loans we are originating today. In what was a difficult funding environment, the strength of our balance sheet and capital markets program was evident. We raised $4.6 billion, including issuing three times in the unsecured market. And we continued to strengthen our already industry-leading liquidity profile. We made significant progress in the development and growth of our new products. most notably credit cards and auto finance and also announced the acquisition of foresight to give us a platform to access franchise auto dealers the nearly 800 million of capital generated in 2023 is a testament to one main strong business model if you attended our investor day in december You heard that we have a line of sight to significant capital generation growth over the medium term as the economic environment stabilizes and our new products scale. In 2023, we remained cautious in our approach to growing the credit card business, but still grew our book to $330 million in receivables and 430,000 customers. we're really pleased with the progress made last year in terms of maturing the business and customer experience. Our auto finance business grew more than $350 million in 2023. And with the acquisition of Foresight, which we expect to close this quarter, we're well positioned to drive profitable growth in this business in the years ahead. Trim by one main, Our financial wellness platform, which helps customers save money on household bills and manage everyday expenses, continues to help our customers improve their financial well-being. Creditworthy by one main, our community program that teaches young people the importance of responsible management of credit has now provided free financial education programs to over 275,000 students in more than 3,400 high schools across the country. And one main was certified as a most loved workplace by the Best Practice Institute for the second year in a row, showcasing our deep commitment to our team members who serve our customers so well every day. Let me now turn to the results of the quarter. Capital generation, the key metric against which we measure financial performance and manage our business, was $191 million. Our competitive positioning, deep experience with the non-prime consumer, and broadened product offering allowed us to grow receivables and our customer base despite a markedly tightened credit box. Our originations in the quarter totaled $3 billion. Even though demand for our loan products remains very strong, we deliberately reduced the pace of originations as we have taken a conservative view on credit and continued to tighten our underwriting and increased pricing in certain segments. Loan net charge-offs in the quarter were 7.7%, up seasonally from the third quarter and in line with our expectations for the quarter. Full year net charge-offs were 7.4%, in line with our expectations at the beginning of the year. We feel good about the actions we have taken on credit over the past 18 months. Our front book continues to perform in line with expectations, and the majority of our elevated delinquency is coming from our back book, which is running off but still represented over half of our delinquent receivables in December. Our pace of originations has slowed down the front book transition, resulting in a greater mix of higher delinquency back book receivables in our overall portfolio. This has created a dynamic in delinquency and loss metrics, which Micah will discuss later. Importantly, we feel very good about the performance of newer vintages. We are confident that this is moving the credit performance of our entire portfolio in the right direction, and we expect losses to peak in 2024, as long as the current macro environment stays relatively stable. Operating expenses are a key lever we have control over in our business, and we are taking cost actions to ensure that we keep producing operating leverage. We are driving efficiency across the business by closely examining every expense, making cuts where appropriate, but also investing in our future, whether it be in technology and digital, new products, data science, or other key areas. I am very pleased with our expense management in 2023. and we expect to reduce our operating expense ratio again in 2024. Turning now to our strategic initiatives. During our investor day, we spent some time discussing our plans to expand one main's business across two complementary products with attractive returns, credit cards and auto finance, both of which are key components of our long-term strategy. Our customer base grew 15% in 2023. A sizable portion of that was driven by our staged rollout of these new products. We like the continued metrics we are seeing across our credit card portfolio. The utilization rate is excellent, and the card continues to be used regularly for groceries, gas, and household goods. Our customers also really like the product and digital engagement is high, driving customer satisfaction and operating efficiencies. Given the macroeconomic uncertainty, we have tilted our new originations towards our lower line cards with an annual fee and continue to book business that meets our return thresholds, even if the economic outlook changes. We're maintaining our disciplined approach to the rollout of cards as we enter 2024, but think we've built a great product and value proposition for customers, which we will be able to scale in future years. Our auto finance business, loan sourced at a growing network of independent dealerships across the United States, reached almost 750 million of receivables at year end. We expect that the business we've built combined with the platform and network of franchise dealerships that we acquired with foresight will drive profitable growth long into the future. I'll close by briefly touching on capital allocation. Our long stated strategy remains the same. Our top priority remains investing in the business to position us for ongoing success. We will continue to invest in high quality loans that meet our return hurdles while also investing in new products and channels like card and auto and in data science and digital capabilities that improve the customer experience and further advance our competitive positioning. We are committed to our strong regular dividend which is $1 per share on a quarterly basis and $4 per share annually. Our board will continue to consider raising the dividend, likely when the macro and credit environment is less uncertain. We purchased about 1.7 million shares of our stock for $65 million in 2023, and we expect to maintain a disciplined approach to repurchases in 2024. With that, let me turn the call over to Micah.