GENWORTH FINANCIAL INC (GNW) FY 2023 MD&A

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, 2023 and 2022. In addition, with the exception of our Enact segment, this Form
10-K
also includes discussions of information related to 2021 and

year-to-year

comparisons between 2022 and 2021, which have been
re-presented
to reflect the adoption of LDTI and the change in our operating segments. Detailed comparative discussions between 2022 and 2021 for our Enact segment, which was not impacted by the new accounting guidance or change in operating segments, can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Enact segment” in our Annual Report on Form
10-K
for the year ended December 31, 2022.

Overview

Our business

Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s U.S. life insurance subsidiaries offer long-term care insurance and also manage
in-force
blocks of life insurance and annuity products which are no longer sold. We report our business results through three operating business segments: Enact; Long-Term Care Insurance; and Life and Annuities. In addition to our three operating segments, we report certain of our results of operations in Corporate and Other.

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:

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Our expenses consist primarily of the following:

The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers.

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Consolidated Results of Operations

The following table sets forth the consolidated results of operations for the periods indicated:

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Unless otherwise stated, all references to net income (loss), net income (loss) per share, adjusted operating income (loss) and adjusted operating income (loss) per share found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read as net income (loss) available to Genworth Financial, Inc.’s common stockholders, net income (loss) available to Genworth Financial, Inc.’s common stockholders per share, 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, respectively.

Use of
non-GAAP
measures

Reconciliation of net income (loss) to adjusted operating income (loss)

Management uses
non-GAAP
financial measures entitled “adjusted operating income (loss)” and “adjusted operating income (loss) per share” to evaluate performance and allocate resources. Adjusted operating income (loss) per share is derived from adjusted operating income (loss). We define adjusted operating income (loss) 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), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual
non-operating
items. 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. We exclude net investment gains (losses), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual
non-operating
items from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating performance.

While some of these items may be significant components of net income (loss) in accordance with U.S. GAAP, we believe that adjusted operating income (loss), and measures that are derived from or incorporate adjusted operating income (loss), including adjusted operating income (loss) 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), among other key performance indicators, 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) have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) and adjusted operating income (loss) per share on a basic and diluted basis are not substitutes for net income (loss) or net income (loss) per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) may differ from the definitions used by other companies.

Adjustments to reconcile net income (loss) to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Changes in fair value of market risk benefits and associated hedges are adjusted to exclude changes in reserves, attributed fees and benefit payments.

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The following table presents a reconciliation of net income to adjusted operating income for the years ended December 31:

Other than pension plan termination costs incurred in 2022 related to one of our defined benefit pension plans, there were no infrequent or unusual items excluded from adjusted operating income during the periods presented.

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Earnings per share

The following table provides basic and diluted earnings per common share for the periods indicated:

Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including performance stock units, restricted stock units and other equity-based awards.

The following table presents a summary of adjusted operating income (loss) for our segments and Corporate and Other for the periods indicated:

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Executive Summary of Consolidated Financial Results

Below is an executive summary of our consolidated financial results for the periods indicated. Amounts included within this “Executive Summary of Consolidated Financial Results” are net of taxes, unless otherwise indicated.
After-tax
amounts assume a tax rate of 21%.

For a discussion of selected financial information and detailed descriptions of operating performance measures, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”

2023 compared to 2022

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2022 compared to 2021

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Significant Developments and Strategic Highlights

Enact segment

Long-Term Care Insurance segment

Life and Annuities segment

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Capital of U.S. life insurance subsidiaries

Genworth Financial share repurchase program

Results of Operations and Selected Financial and Operating Performance Measures by Segment

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 included in our Enact segment. We consider new insurance written to be a measure of our Enact segment’s operating performance because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of revenues or profitability during that period. Management also regularly monitors and reports insurance
in-force
and risk
in-force
for our Enact segment. Insurance
in-force
is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans insured by our U.S. mortgage insurance subsidiaries. Risk
in-force
is based on the coverage percentage applied to the estimated current outstanding loan balance. We consider insurance
in-force
and risk
in-force
to be measures of our Enact segment’s operating performance because they represent measures of the size of its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period. These metrics are presented on a direct basis and exclude reinsurance.

Management also regularly monitors and reports a loss ratio for our Enact segment. The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums, and we consider it to be a measure of underwriting performance and helps to enhance the understanding of the operating performance of our Enact segment.

Management regularly monitors and reports on
in-force
rate actions, including state filing approvals; impacted
in-force
premiums; weighted-average percentage rate increases approved; and gross incremental premiums approved in our Long-Term Care Insurance segment. We also estimate the cumulative economic benefit of approved rate actions in our long-term care insurance multi-year
in-force
rate action plan on a net present value basis, discounted at our investment portfolio yield. This is defined as the net present value of historical and future expected premium increases and benefit reductions as a result of rate increases approved on individual and group long-term care insurance policies and reserve reductions related to legal settlements less

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cash payments made to policyholders who elect certain reduced benefit options in connection with the legal settlements, referred to as settlement payments. We monitor these selected operating performance measures for
in-force
rate actions to track our progress on ensuring the continued self-sustainability of our long-term care insurance business over time. We consider these
in-force
rate actions metrics to be measures of financial performance and help to enhance the understanding of the operating performance of our Long-Term Care Insurance segment.

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.

Enact segment

Trends and conditions

Results of our Enact segment 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 size of the overall private mortgage insurance market and the effect of regulatory actions thereon; 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. References to “Enact” included herein “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Enact segment” are, unless the context otherwise requires, to our Enact segment.

Macroeconomic environment

Mortgage origination activity remained slow throughout 2023 in response to elevated mortgage rates and sustained low housing supply. Housing affordability continued to deteriorate due to high interest rates and elevated home prices, only marginally offset by rising median family income, according to the National Association of Realtors Housing Affordability Index. National home prices rose modestly throughout 2023, according to the FHFA Monthly Purchase-Only House Price Index.

The unemployment rate increased to 3.7% in December 2023, compared to 3.5% in December 2022. As of December 31, 2023, the number of unemployed Americans was approximately 6.3 million, and the number of long term unemployed over 26 weeks was approximately 1.2 million. Both metrics remain relatively in line with
pre-pandemic
levels in February 2020.

Forbearance and loss mitigation programs

For mortgages insured by the federal government (including those purchased by Fannie Mae and Freddie Mac),
COVID-19
forbearance allowed borrowers impacted by
COVID-19
to temporarily suspend mortgage payments up to 18 months subject to certain limits. However, the Biden Administration ended the national emergency for
COVID-19
in April 2023, and as a result, the deadline for requesting a
COVID-19
related forbearance under the CARES Act ended in August 2023. The GSEs retired their
COVID-19
servicing-related policies including with respect to forbearance effective November 1, 2023 and reverted to standard forbearance policies as a loss mitigation option for borrowers that meet general hardship and program guidelines.

In March 2023, the GSEs announced new loss mitigation programs that allow
six-month
payment deferrals for borrowers facing financial hardship and encouraged servicers to start evaluating borrowers for these programs as early as July 1, 2023 but no later than October 1, 2023. Even though most foreclosure moratoriums expired at the end of 2021, federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend foreclosure timelines, which could negatively impact the severity of loss on loans that go to claim.

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Although it is difficult to predict the future level of reported forbearance and how many of the loans in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported forbearances have generally declined. As of December 31, 2023, approximately 1.2% or 11,536 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 31% were reported as delinquent.

The full impact of
COVID-19
and its associated economic effects on Enact’s future business results are difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan still may not be known for several quarters or longer. Enact continues to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated and delinquencies related to
COVID-19
have declined, it is possible that ancillary economic effects of
COVID-19
could have an adverse impact on Enact’s future results of operations and financial condition.

Regulatory developments

Private mortgage insurance market penetration and overall 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.

On October 24, 2022, the FHFA announced targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain first-time home buyers with income at or below area median income and for certain GSE affordable mortgage products, while implementing targeted increases to the upfront fees for most
cash-out
refinance loans. The fee reductions went into effect in the fourth quarter of 2022 while the new fees on
cash-out
refinance loans began February 1, 2023. Enact has seen a limited impact from these price changes on the private mortgage insurance market.

The FHFA also announced in October 2022 its validation and approval of certain credit score models for use by the GSEs and changed the required number of credit reports provided by lenders from all three nationwide consumer reporting agencies to only two. The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs. The FHFA has announced preliminary implementation expectations, but this is expected to be a multiple year process that will require system and process updates.

In January 2023, the FHFA announced additional updates to its upfront fee structure and pricing matrix. The changes marked the third iteration of the FHFA’s ongoing pricing review since early 2022 and impact purchase and rate-term refinance loans. Pricing grids are now broken out by loan purpose and are recalibrated to new credit score and

loan-to-value

ratio categories, along with associated loan attributes. The new pricing matrix initially included new upfront fees for loans with

debt-to-income

ratios greater than 40% but those fees were rescinded prior to implementation. The remaining changes became effective May 1, 2023.

In February 2023, the Department of Housing and Urban Development announced a 30 basis point reduction of the annual insurance premium charged to borrowers with
FHA-insured
mortgages in order to reduce the cost of borrowing for eligible lower and middle class homebuyers. This price reduction, which went into effect on March 20, 2023, is expected to have a negative impact on the U.S. private mortgage insurance market but will be partially offset by the effects of the recent FHFA pricing changes referenced above. Enact does not believe this net impact has been or will be material.

Competitive environment

The U.S. private mortgage insurance industry is highly competitive. Enact Holdings’ market share is influenced by the execution of its go to market strategy, including but not limited to, pricing competitiveness relative to its peers and its selective participation in forward commitment transactions. Enact continues to

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manage the quality of new business through pricing and its underwriting guidelines, which are modified from time to time when circumstances warrant. The market and underwriting conditions, including the mortgage insurance pricing environment, are within Enact’s risk adjusted return appetite enabling it to write new business at returns it views as attractive.

Mortgage insurance portfolio

New insurance written of $53.1 billion in 2023 decreased 20% compared to 2022 mostly from a smaller estimated private mortgage insurance market as originations were impacted by elevated interest rates. Enact’s primary persistency rate was 85% for the year ended December 31, 2023 compared to 80% for the year ended December 31, 2022. The increase in persistency was primarily driven by a decline in the percentage of
in-force
policies with mortgage rates above current mortgage rates and offset the decline in new insurance written in 2023, contributing to an increase in insurance
in-force
of $14.7 billion during 2023.

Net earned premiums increased in 2023 compared to 2022 primarily driven by insurance
in-force
growth, partially offset by the lapse of older, higher priced policies and lower single premium policy cancellations in 2023. The total number of delinquent loans has declined from the
COVID-19
peak in the second quarter of 2020 as borrowers continued to exit forbearance plans and new forbearances declined. During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default, and Enact refunds the post-delinquent premiums to the insured party if the delinquent loan goes to claim. Enact records a liability and a reduction to net earned premiums for the post-delinquent premiums it expects to refund. The post-delinquent premium liability recorded since the beginning of
COVID-19
in the second quarter of 2020 through December 31, 2023 was not significant to the change in earned premiums for those periods.

Loss experience

Enact’s loss ratio was 3% for the year ended December 31, 2023, compared to (10)% for the year ended December 31, 2022. Enact recorded favorable reserve adjustments of $241 million in 2023 primarily related to favorable cure performance on delinquencies from 2022 and earlier, including those related to
COVID-19.
During the peak of
COVID-19,
Enact experienced elevated new delinquencies subject to forbearance plans, and those delinquencies have continued to cure at levels above Enact’s reserve expectations. In addition, cure performance on delinquencies from 2022 has not been negatively impacted by uncertainty in the economic environment to the extent initially expected. During 2022, Enact recorded net favorable reserve adjustments of $268 million primarily related to favorable cure performance on
COVID-19
delinquencies from 2020 and 2021, partially offset by reserve strengthening on certain 2022 delinquencies.

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 continue to take advantage of available loss mitigation options, including forbearance programs, payment deferral options and other modifications. Loss reserves recorded on these delinquencies require a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments, as well as the timing and severity of those payments. The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated in part by embedded home price appreciation. For loans insured on or after October 1, 2014, Enact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

New primary delinquencies in 2023 increased compared to 2022 primarily due to the aging of large, new books of business. New primary delinquencies of 41,617 contributed $265 million of loss expense in 2023, while Enact incurred $171 million of losses from 35,996 new primary delinquencies in 2022. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and

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prospective economic conditions. Approximately 13% of Enact’s primary new delinquencies in 2023 were subject to a forbearance plan compared to 21% in 2022. Due to the declining number of new delinquencies in forbearance, Enact no longer differentiates the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance.

Capital requirements

As of December 31, 2023, EMICO’s

risk-to-capital

ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 11.6:1, compared with a

risk-to-capital

ratio of 12.9:1 as of December 31, 2022. EMICO’s

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. EMICO’s ongoing

risk-to-capital

ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Under PMIERs, Enact is 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. In addition, in September 2020, subsequent to the issuance of Enact Holdings’ senior notes due in 2025, the GSEs imposed certain restrictions on Enact with respect to capital. In May 2021, in connection with their conditional approval of the then potential partial sale of Enact Holdings, the GSEs confirmed the GSE Restrictions would remain in effect until certain conditions were met. These conditions were met as of December 31, 2022, and Enact is no longer subject to the GSE Restrictions and the GSE Conditions.

As of December 31, 2023, Enact had estimated available assets of $5,006 million against $3,119 million net required assets under PMIERs compared to available assets of $5,206 million against $3,156 million net required assets as of December 31, 2022. The sufficiency ratio as of December 31, 2023 was 161% or $1,887 million above the PMIERs requirements, compared to 165% or $2,050 million above the published PMIERS requirements as of December 31, 2022. Enact’s PMIERs required assets as of December 31, 2023 and 2022 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 $73 million and $132 million of benefit to Enact’s PMIERs required assets as of December 31, 2023 and 2022, respectively. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.

During 2023, Enact executed excess of loss reinsurance transactions that provide up to $428 million of reinsurance coverage on a portion of its new insurance written for the 2022 and 2023 book years. Enact also executed a quota share reinsurance agreement under which it cedes 16.125% of a portion of new insurance written in the 2023 book year. Enact’s third-party reinsurance transactions provided an aggregate of approximately $1,714 million and $1,578 million of PMIERs capital credit as of December 31, 2023 and 2022, respectively.

On January 3, 2024, Enact entered into a quota share reinsurance agreement under which it will cede approximately 21% of a portion of its new insurance written in the 2024 book year. On January 30, 2024, Enact executed an excess of loss reinsurance transaction which provides up to $255 million of reinsurance coverage on a portion of current and expected new insurance written for the 2024 book year, effective January 1, 2024. See note 9 in our consolidated financial statements under “Part II—Item 8—Financial Statements and Supplementary Data” for additional details on Enact’s reinsurance transactions.

Enact 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.

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Capital returns and other transactions

In April 2023 and November 2023, EMICO completed distributions to Enact Holdings that support its ability to pay a quarterly dividend. Enact Holdings intends to use these proceeds and future EMICO distributions to fund the quarterly dividend as well as to bolster its financial flexibility and potentially return additional capital to shareholders. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial. In addition to Enact’s quarterly dividend program, in November 2022, Enact Holdings announced approval by its board of directors of a share repurchase program under which it could repurchase up to $75 million of its outstanding common stock, and on August 1, 2023, announced the authorization of an additional $100 million of common stock repurchases under a new share repurchase program. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level. As the majority shareholder, Genworth Holdings received $245 million of capital returns from Enact Holdings during 2023 comprised of $82 million of quarterly dividends, a special dividend of $92 million and $71 million of share repurchases.

In May 2023, EMICO contributed $250 million to Enact Re, which enabled Enact Re to participate in the assumption of excess of loss reinsurance relating to GSE credit risk transfer and to reinsure EMICO’s new and existing insurance in-force under quota share reinsurance agreements. EMICO contributed an additional $250 million to Enact Re in November 2023, which will support an increase to the ceding percentage of affiliate quota share agreements, along with assumed new insurance written and new business opportunities, including the continued execution of GSE credit risk transfer.

Returning capital to shareholders, balanced with growth and risk management priorities, remains a key commitment for Enact Holdings, as it looks to enhance shareholder value through time. Future return of capital will be shaped by Enact Holdings’ capital prioritization framework, including: supporting its existing policyholders; growing its mortgage insurance business; funding attractive new business opportunities; and returning capital to shareholders. Enact Holdings’ total return of capital will also be based on its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

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Segment results of operations

The following table sets forth the results of operations relating to our Enact segment for the periods indicated:

2023 compared to 2022

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income decreased primarily attributable to higher losses on new delinquencies and lower favorable reserve adjustments, partially offset by higher net investment income, higher premiums and lower operating costs in 2023.

Revenues

Premiums increased mostly from higher insurance
in-force,
partially offset by the lapse of older, higher priced policies, lower single premium policy cancellations and higher ceded premiums in 2023.

Net investment income increased primarily from higher investment yields and higher average invested assets in 2023.

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For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”

Benefits and expenses

Benefits and other changes in policy reserves increased largely from higher losses on new delinquencies and lower favorable reserve adjustments in 2023. Enact released $241 million of reserves in 2023 primarily related to favorable cure performance on delinquencies from 2022 and earlier, including those related to
COVID-19,
compared to net favorable reserve adjustments of $268 million in 2022.

Acquisition and operating expenses, net of deferrals, decreased primarily attributable to lower operating costs in 2023.

Provision for income taxes.

The effective tax rate was 21.8% and 21.6% for the years ended December 31, 2023 and 2022, respectively, consistent with the U.S. corporate federal income tax rate.

Enact selected operating performance measures

The following table sets forth selected operating performance measures regarding Enact as of and for the dates indicated:

2023 compared to 2022

Primary insurance
in-force
and risk
in-force

Primary insurance
in-force
increased largely from new insurance written. In addition, lower lapses and cancellations drove higher primary persistency, largely as a result of suppressed refinancing activity due to a decline in the percentage of
in-force
policies with mortgage rates above current mortgage rates. Total risk
in-force
increased largely from higher primary insurance
in-force.

New insurance written

New insurance written decreased primarily due to a smaller estimated private mortgage insurance market in 2023 as both refinancing and purchase originations were impacted by elevated mortgage rates.

Loss and expense ratios

The following table sets forth the loss and expense ratios for Enact for the dates indicated:

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The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio is the ratio of general expenses to net earned premiums. Enact’s general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

2023 compared to 2022

The loss ratio increased largely from higher losses on new delinquencies and lower favorable reserve adjustments in 2023, as discussed above.

The expense ratio decreased primarily attributable to lower operating costs in 2023.

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Mortgage insurance loan portfolio

The following table sets forth selected financial information regarding Enact’s loan portfolio as of December 31:

The FICO credit score is one indicator of a borrower’s credit quality. Enact continues to underwrite predominantly prime loan new business. Based upon FICO at loan closing, the weighted average FICO score of Enact’s primary insurance
in-force
was 744 as of December 31, 2023.

Delinquent loans and claims

Enact’s delinquency management process begins with notification by the loan servicer of a delinquency on an insured loan. “Delinquency” is defined in Enact’s 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 Enact of a delinquency if the borrower fails to make two consecutive monthly mortgage payments prior to the due date of the next mortgage payment. Enact generally considers a loan to be delinquent and establishes required reserves after the insured gives notification that the borrower has failed to make two scheduled 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 Enact’s policy. The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for Enact’s loan portfolio as of December 31:

The delinquency rate as of December 31, 2023 increased compared to December 31, 2022 primarily from an increase in total delinquencies mostly driven by new delinquencies outpacing cures and paid claims. The delinquency rate as of December 31, 2023 decreased compared to December 31, 2021 primarily from a decline in total delinquencies as cures outpaced new delinquencies.

The following tables set forth primary delinquencies, direct primary case reserves and risk
in-force
by aged missed payment status in Enact’s loan portfolio as of December 31:

Reserves as a percentage of risk
in-force
as of December 31, 2023 decreased compared to December 31, 2022 as long-term delinquencies with higher reserves have continued to cure. The number of loans that are delinquent for 12 months or more has decreased since December 31, 2022 and is more in line with

pre-COVID-19

levels. Due to continued forbearance options, foreclosure moratoriums and the uncertainty

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around the lack of progression through the foreclosure process, there is still uncertainty around the likelihood and timing of delinquencies going to claim.

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 primary delinquency rates for the 10 largest states and the 10 largest Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by Enact’s primary 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.

The number 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 payments, and 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, as well as the borrower’s financial ability to continue making payments. When Enact receives notice of a delinquency, it uses its proprietary model to determine whether a delinquent loan is a candidate for a modification. When the model identifies such a candidate, Enact’s loan workout

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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 Enact’s claim exposure and ultimate payouts.

The following table sets forth the dispersion of Enact’s direct primary case reserves, 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, 2023:

Loss reserves in policy years 2008 and prior 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 Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. Loss reserves have shifted to newer book years, largely 2020 and later given their significant representation of risk
in-force.
As of December 31, 2023, Enact’s 2016 and newer policy years represented approximately 97% of its primary risk
in-force
and 78% of its total direct primary case reserves.

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. Enact’s average primary mortgage insurance claim severity was 97%, 94% and 103% for the years ended December 31, 2023, 2022 and 2021, respectively. The average claim severity for the years ended December 31, 2023 and 2022 was impacted by low claim volumes and lifetime home price appreciation. The average claim severities do not include the effects of agreements on
non-performing
loans.

Long-Term Care Insurance segment

Trends and conditions

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
in-force
rate actions,

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morbidity, mortality and persistency. Estimates for
in-force
rate actions reflect certain simplifying assumptions that may vary materially from actual results, including but not limited to consistent policyholder behavior over time in addition to a uniform rate of coinsurance and premium taxes. Actual policyholder behavior may differ significantly from these assumptions. Results of our long-term care insurance business are also influenced by our ability to improve investment yields and manage expenses and reinsurance, among other factors. Changes in laws 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.

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 as our actual claims experience will emerge over many years, or decades. For example, average claim reserves for new claims have trended 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. Although new claim counts on our oldest 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 fully expect continued overall growth in new claims as policyholders reach their peak claim years. Additionally, in our long-term care insurance business, we have observed an increase in the cost of care principally attributable to elevated inflation. Increases in cost of care have resulted in higher claim payments in our long-term care insurance business, which could have a material adverse impact on our liquidity, results of operations and financial condition if it persists. We will continue to monitor our experience and make changes to our assumptions and methodologies, as appropriate, for our long-term care insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions could have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition.

Under LDTI, the impacts of assumption updates and actual versus expected experience will continue to drive volatility in our long-term care insurance results, particularly for our unprofitable capped cohorts. It is important to note that quarterly variations resulting from assumption updates and actual versus expected experience are typically expected to be relatively small compared to the overall size of our liability for future policy benefits of $42.2 billion, at the
locked-in
discount rate, for our long-term care insurance business as of December 31, 2023.

For a discussion of potential impacts of assumption updates and actual versus expected experience on our results of operations, see “Item 1A—Risk Factors—We may be required to increase our reserves as a result of deviations from our estimates and actuarial assumptions or other reasons, which could have a material adverse effect on our business, results of operations and financial condition.”

The financial condition of our long-term care insurance business is also impacted by interest rates. We remeasure our liability for future policy benefits and related reinsurance recoverables at the
single-A
bond rate each quarter. As a result, our reported insurance liabilities are sensitive to movements in interest rates, which will likely result in continued volatility to our reserve balances and equity. For a discussion of the potential impacts and risks associated with changes in interest rates, see “Item 1A—Risk Factors—Interest rates and changes in rates, including changes in monetary policy to combat inflation, could materially adversely affect our business and profitability.”

In-force
rate actions and legal settlements

Given the ongoing challenges in our long-term care insurance business, we continue to pursue initiatives to improve the risk and profitability profile of our business, including premium rate increases and associated benefit reductions on our
in-force
policies. 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 the selected operating performance measures below.

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In addition, we have reached certain legal settlements regarding alleged disclosure deficiencies in premium increases for long-term care insurance policies. The first legal settlement related to certain of our long-term care insurance policies, which represents approximately 20% of our block, was implemented beginning in 2021 and its implementation was materially completed in the second quarter of 2022. A second legal settlement on certain of our long-term care insurance policies, which represents 15% of our block, was implemented beginning in August 2022 and its implementation was materially completed in the fourth quarter of 2023. On March 27, 2023, a third similar settlement on certain of our long-term care insurance policies, which represents 35% of our block, became final. We began implementation of this settlement during the second quarter of 2023.

While the legal settlements are similar, their ultimate impact will depend on the policyholder election rates and the types of reduced benefits elected. Given our experience with the first and second settlements, we expect the third legal settlement to result in an overall net favorable economic impact to our long-term care insurance business as it reduces tail risk on these long-duration liabilities. While we expect renewal premiums to decline over time, the settlements could accelerate that decline if policyholders continue to elect
non-forfeiture
and reduced benefit options, which have predominantly been the most prevalent policyholder elections for these legal settlements and which entitle the policyholder to reduced benefits in exchange for premiums already paid or a lower level of future premiums.

Fourth quarter assumption review

In the fourth quarter of 2023, our long-term care insurance products had an unfavorable
pre-tax
impact of $61 million from cash flow assumption updates, including updates to our healthy life assumptions to better reflect near-term experience for cost of care, mortality, incidence and lapse. For our 2023 assumption updates, we generally did not include data after 2019 in setting any long-term assumptions, as we do not have sufficient information around longer-term effects of the pandemic, which is consistent with the approach for our 2022 assumptions. However, we made a favorable update to our disabled life mortality assumptions to reflect an expectation that mortality will continue at elevated levels in the near term
post-COVID-19.
We also evaluated our assumptions regarding expectations of future premium rate increase approvals and benefit reductions and did not make significant changes to our multi-year
in-force
rate action plan. However, we did increase our assumption for future approvals and benefit reductions given our current plans for rate increase filings and our historical experience regarding approvals and regulatory support, as well as benefit reductions and legal settlement results. We also updated our assumptions for the third legal settlement in the fourth quarter of 2023; however, the changes had a muted favorable income statement impact as this settlement impacts profitable uncapped cohorts.

In the fourth quarter of 2022, our long-term care insurance business had favorable assumption updates of $303 million, which reflected an expected reserve reduction, net of estimated settlement payments, attributable to the inclusion of the second legal settlement. This settlement primarily impacts older, unprofitable capped cohorts; therefore, it had an immediate impact to the fourth quarter of 2022 earnings.

Under statutory accounting, only changes to our claim reserve assumptions are reflected in statutory income. Assumption changes impacting active life reserves are included in cash flow testing margin, which only impacts statutory income if the margin falls below zero. We completed statutory cash flow testing for our life insurance subsidiaries in the fourth quarter of 2023 and concluded that the margin in GLIC was positive and within the $0.5 billion to $1.0 billion range. However, GLICNY had a negative margin and recorded additional statutory reserves of $87 million in 2023.

COVID-19
impacts

In our long-term care insurance products, we experienced a favorable impact on reserves and our operating results related to elevated mortality during
COVID-19.
Although it is not our practice to track cause of death for long-term care insurance policyholders and claimants, we believe the favorable mortality in our long-term care

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insurance business in early 2022 was likely impacted by
COVID-19.
We expected the impacts to be temporary, with disabled life mortality remaining elevated over the near term. We saw mortality levels trending back to
pre-pandemic
levels in the latter half of 2022. In the first quarter of 2023, we experienced typical seasonally favorable mortality, but mortality was unfavorable for the remainder of 2023, consistent with seasonal trends.

We also experienced lower than expected new claims incidence in our long-term care insurance business during
COVID-19.
However, we are seeing new claims incidence trending back to
pre-pandemic
levels. In addition, during the pandemic, a larger share of our claimants sought home care instead of facility-based care, and as the impacts of the pandemic subside, we have seen that trend reverse. We will continue to monitor long-term care insurance benefit utilization so that we can evaluate any long-term impact emerging from the pandemic.

While the longer-term impacts of
COVID-19
are very difficult to predict, the related outcomes and impact on our long-term care insurance business currently depend on the after-effects indirectly caused by the pandemic, including elevated inflation, the associated impacts to the cost of care and changes in policyholder behavior. We will continue to monitor
COVID-19
associated impacts and evaluate all of our assumptions that may need updating as a result of longer-term trends related to the pandemic.

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Segment results of operations

The following table sets forth the results of operations relating to our Long-Term Care Insurance segment for the periods indicated:

2023 compared to 2022

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

The change to an adjusted operating loss in 2023 from adjusted operating income in 2022 was largely driven by unfavorable cash flow assumption updates in 2023 compared to favorable updates in 2022. The change was also driven by adverse actual versus expected experience in 2023 primarily related to higher claims and unfavorable timing impacts related to the second legal settlement. We also experienced higher operating costs and lower premiums in 2023.

Revenues

Premiums decreased primarily driven by lower renewal premiums from policy terminations and policies entering
paid-up
status, partially offset by $70 million of higher premiums from newly implemented
in-force
rate actions in 2023.

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Net investment income increased largely due to higher investment yields and higher income from limited partnerships and bank loans, partially offset by lower income from U.S. Government Treasury Inflation Protected Securities (“TIPS”). The increase was also partially offset by lower income from bond calls and commercial mortgage loan prepayments in 2023.

For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”

Benefits and expenses

Benefits and other changes in policy reserves increased primarily due to aging of the
in-force
block, including higher interest accretion, as well as higher loss adjustment expenses, partially offset by policy terminations in 2023.

The liability remeasurement loss in 2023 was largely driven by adverse actual versus expected experience primarily related to higher claims and unfavorable timing impacts from the second legal settlement. In addition, cash flow assumption updates were unfavorable in 2023 primarily driven by unfavorable updates to our healthy life assumptions to better reflect near-term experience related to cost of care, mortality, incidence and lapse. This was partially offset by a favorable update to our disabled life mortality assumptions to reflect an expectation that mortality will continue at elevated levels in the near term
post-COVID-19.
The liability remeasurement gain in 2022 resulted primarily from favorable cash flow assumption updates reflecting an expected reserve reduction, net of estimated settlement payments, attributable to the inclusion of the second legal settlement.

Acquisition and operating expenses, net of deferrals, increased principally from higher operating costs, partially offset by a lower accrual for legal settlement costs in 2023.

Provision (benefit) for income taxes.

The effective tax rate was 2.2% and 27.2% for the years ended December 31, 2023 and 2022, respectively. The decrease in the effective tax rate was primarily attributable to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income in relation to a
pre-tax
loss in 2023.

2022 compared to 2021

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income increased largely driven by favorable cash flow assumption updates reflecting an expected reserve reduction, net of estimated settlement payments, attributable to the inclusion of the second legal settlement, partially offset by lower net investment income in 2022.

Revenues

Premiums decreased primarily driven by lower renewal premiums from policy terminations and policies entering
paid-up
status, partially offset by $93 million of higher premiums from newly implemented
in-force
rate actions in 2022.

Net investment income decreased largely from lower income of $169 million in 2022 mostly attributable to limited partnerships, as well as bond calls and commercial mortgage loan prepayments. The decrease was partially offset by higher income of $18 million from TIPS and higher average invested assets in 2022.

For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”

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Benefits and expenses

Benefits and other changes in policy reserves decreased primarily due to policy terminations, partially offset by aging of the
in-force
block, including higher interest accretion, as well as higher loss adjustment expenses in 2022.

The liability remeasurement gain in 2022 was largely related to favorable cash flow assumption updates reflecting an expected reserve reduction, net of estimated settlement payments, attributable to the inclusion of the second legal settlement. The liability remeasurement loss in 2021 was primarily driven by unfavorable cash flow assumption updates largely related to an update to the benefit utilization trend to reflect expected future increases in cost of care, which drove significant updates to the
in-force
rate action plan and related assumptions. The unfavorable assumption updates in 2021 were partially offset by favorable actual to expected experience related to claim terminations and
in-force
rate actions.

Acquisition and operating expenses, net of deferrals, decreased principally from lower operating costs in 2022 and restructuring costs of $12 million in 2021 that did not recur, partially offset by a $20 million accrual for legal settlement costs in 2022.

Provision (benefit) for income taxes.

The effective tax rate was 27.2% and 27.9% for the years ended December 31, 2022 and 2021, respectively.

Long-Term Care Insurance selected operating performance measures

Under LDTI, we now include expectations for benefit reductions related to
in-force
rate actions and legal settlements as well as settlement payments in our assumptions for the liability for future policy benefits, which have impacted and will continue to impact our reported U.S. GAAP financial results. There was no change in how we recognize premiums related to
in-force
rate actions due to the adoption of LDTI.

We have experienced and may continue to experience quarterly fluctuations in earnings related to the legal settlements to the extent actual experience deviates from our assumptions. However, we expect the legal settlements to result in an overall net favorable economic impact to our long-term care insurance business as they reduce tail risk on these long-duration liabilities.

Under LDTI, we elected to update the net premium ratio quarterly for actual versus expected experience; therefore, forecasted cash flow assumptions will be replaced with actual cash flows each quarter with any difference recorded in net income (loss). As a result, variances between actual experience and our expectations for benefit reductions and settlement payments will be reflected in liability remeasurement (gains) losses in our operating results on a quarterly basis.

Remeasurement (gains) losses

The following table sets forth the
pre-tax
components of the liability remeasurement (gains) losses for the periods indicated:

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For additional discussion of the change in liability remeasurement (gains) losses, see the comparison for this line item above in “—Segment results of operations.”

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 ensure the continued self-sustainability of our long-term care insurance business over time and reduce the strain on its earnings and capital.

The following table sets forth filing approvals as part of our multi-year
in-force
rate action plan for the years ended December 31:

We estimate that the cumulative economic benefit of approved rate actions in our long-term care insurance multi-year
in-force
rate action plan from 2012 through December 31, 2023 was approximately $28.0 billion, on a net present value basis, which includes our current updated assumptions regarding future premiums and benefit reductions from approved rate actions and legal settlements. The $28.0 billion net present value of progress achieved has grown significantly since December 31, 2022, including $2.0 billion of value from rate action approvals and settlement implementations in 2023 and an increase of $2.5 billion of the value of benefit reductions connected with our previously achieved rate actions and settlements, including the impact of our assumption updates.

During the year ended December 31, 2023, we also submitted 144 new filings on approximately $989 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.

We continue to work closely with the NAIC and state regulators to demonstrate the broad-based need for actuarially justified rate increases in order to pay future claims. Because obtaining actuarially justified rate increases and associated benefit reductions is important to our ability to pay future claims, we will consider litigation against states that decline to approve those actuarially justified rate increases. In January 2022, we began litigation with two states that have refused to approve actuarially justified rate increases.

Life and Annuities segment

Trends and conditions

Many factors can affect the results of our life insurance and annuity products, as further discussed below. 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 methodologies, as appropriate, for our life insurance and annuity products. Even small changes in assumptions or small deviations of actual experience from assumptions could have, and in the

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past have had, material impacts on our reserve levels, results of operations and financial condition. Results of our life insurance and annuity products depend significantly upon the extent to which our actual future experience is consistent with assumptions and methodologies we have used in calculating our reserves.

Results of our life insurance and annuity products are also impacted by interest rates. For a discussion of the potential impacts and risks associated with changes in interest rates, see “Item 1A—Risk Factors—Interest rates and changes in rates, including changes in monetary policy to combat inflation, could materially adversely affect our business and profitability.”

Life insurance

Results of our life insurance products are impacted primarily by mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements, among other factors.

Mortality levels may deviate each period from historical trends. Overall mortality experience was less unfavorable during 2023 as compared to 2022. In our life insurance products,
COVID-19
deaths significantly declined during 2023 from the levels in 2022. We have experienced unfavorable mortality compared to our then-current and
priced-for
assumptions in recent years for our universal life insurance block. We have also been experiencing higher mortality related charges resulting in an increase in rates charged by our reinsurance partners reflecting natural block aging and unfavorable mortality compared to expectations.

In the fourth quarter of 2023, our life insurance products had an unfavorable impact from cash flow assumption updates of $226 million reflecting updates to our persistency and mortality assumptions. We made an unfavorable update to our persistency assumptions particularly in certain universal life insurance products with secondary guarantees to better reflect emerging experience, consistent with others in the industry. However, given the relatively small size and characteristics of our closed block, we believe we experienced a smaller impact from our assumption updates relative to others in the industry with larger blocks. We also made unfavorable updates to our mortality assumption in our term universal, universal and term life insurance products to better reflect emerging experience related to more modest mortality improvement and to include an expectation that mortality will continue at elevated levels in the near term
post-COVID-19.
Our 2023 assumption review considered trends during the pandemic years, but updates to our long-term assumptions generally excluded experience data after 2019, as we do not have sufficient information around the long-term effects of
COVID-19.
However, similar to our long-term care insurance products, we assessed near-term mortality trends as we continue to evaluate the long-term implications of
COVID-19.

In 2022, we made favorable cash flow assumption updates of $37 million in our universal and term universal life insurance products primarily related to higher interest rates.

Certain of our universal life insurance products with secondary guarantees are subject to additional reserves on a statutory basis using a regulatory prescribed reinvestment rate. Given the increase in rates, we experienced a favorable benefit from the reinvestment rate in 2023, which more than offset negative assumption updates from a statutory income perspective.

Fixed annuities

Results of our fixed annuity products 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 monitor and change crediting rates on fixed deferred annuities on a regular basis to maintain spreads and targeted returns, if applicable. However, we have seen and could continue to see declines in our fixed annuity spreads and margins as interest rates change, depending on the severity of the change.

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As part of our fourth quarter of 2023 review of our cash flow assumptions, we focused on mortality and lapse assumptions in our fixed annuity products and made modest updates based on recent experience.

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.

Variable annuities

Results of our variable annuity products are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results of our variable annuity products 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 have used reinsurance to help mitigate volatility in our variable annuity results.

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.

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Segment results of operations

The following table sets forth the results of operations relating to our Life and Annuities segment for the periods indicated:

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The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the products included in our Life and Annuities segment for the periods indicated:

2023 compared to 2022

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

Revenues

Premiums

. The decrease was driven by our life insurance products largely due to the continued runoff of our
in-force
blocks in 2023.

Net investment income

.

The decrease was primarily attributable to lower average invested assets driven mostly by block runoff in our fixed annuity products, partially offset by higher investment yields in 2023.

Net investment gains (losses)

. For a 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.

The decrease was principally from lower fee income due mostly to a decline in average account value in our variable annuity products and from lower product charges in our life insurance products due to the runoff of our
in-force
blocks in 2023.

Benefits and expenses

Benefits and other changes in policy reserves

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Liability remeasurement (gains) losses

. The increase in the liability remeasurement loss was largely attributable to a $244 million increase in our life insurance products principally driven by unfavorable updates to our persistency assumptions for certain universal life insurance products with secondary guarantees and unfavorable mortality updates, including more modest mortality improvement, in our term universal, universal and term life insurance products. The unfavorable assumption updates were partially offset by net favorable impacts related to a ceded reinsurance transaction in the fourth quarter of 2023.

Changes in fair value of market risk benefits and associated hedges

Acquisition and operating expenses, net of deferrals

Amortization of deferred acquisition costs and intangibles.

The decrease was primarily related to our life insurance products largely due to higher lapses in 2022 as our
20-year
level premium period business written in 2002 entered its post-level premium period.

Provision for income taxes.

The effective tax rate was 22.1% and 18.2% for the years ended December 31, 2023 and 2022, respectively. The increase in the effective tax rate was primarily attributable to tax benefits from tax favored items in relation to a
pre-tax
loss in 2023.

2022 compared to 2021

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

Revenues

Premiums

. The increase was driven by our life insurance products largely due to lower ceded premiums, partially offset by the continued runoff of our
in-force
blocks in 2022. In 2021, we ceded $360 million of certain term life insurance premiums in connection with a reinsurance transaction.

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Net investment income

.

The decrease was primarily attributable to lower average invested assets driven mostly by block runoff in our fixed annuity products, as well as lower bond calls and commercial mortgage loan prepayments in 2022.

Net investment gains (losses)

. For a 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.

The decrease was principally from lower product charges in our life insurance products driven mostly by the runoff of our
in-force
blocks and lower fee income in our variable annuity products driven mostly by a decline in average account value in 2022.

Benefits and expenses

Benefits and other changes in policy reserves

Liability remeasurement (gains) losses