GENWORTH FINANCIAL INC (GNW) FY 2024 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.”

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Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2024 and 2023. Discussions of information related to 2022 and year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K. Comparative discussions between 2023 and 2022 can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

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 segments: Enact; Long-Term Care Insurance; and Life and Annuities. In addition to our three 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:

Our expenses consist primarily of the following:

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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:

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)

Our chief operating decision maker (“CODM”) evaluates performance and allocates resources based on a non-GAAP financial measure entitled “adjusted operating income (loss).” Our CODM evaluates adjusted

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operating income (loss) as a key measure to assess performance and support new business initiatives because the measure more accurately reflects overall operating performance, as it minimizes the impact of macroeconomic volatility. Our legacy U.S. life insurance subsidiaries, which comprise our Long-Term Care Insurance and Life and Annuities segments, are managed on a standalone basis; therefore, we do not allocate capital to our Long-Term Care Insurance and Life and Annuities segments.

We define adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) attributable to noncontrolling interests, net investment gains (losses), changes in fair value of market risk benefits attributable to interest rates, equity markets 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 attributable to interest rates, equity markets 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) determined 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), are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Adjusted operating income (loss) is not a substitute for net income (loss) 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.”

2024 compared to 2023

Significant Developments and Strategic Highlights

Enact segment

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Long-Term Care Insurance segment

Life and Annuities segment

Capital of U.S. life insurance subsidiaries

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Capital and liquidity

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

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 in “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

During 2024, the U.S. economy continued to show positive signs but faced lingering uncertainty due to inflationary pressure, the geopolitical environment and other macroeconomic concerns. Mortgage origination activity increased modestly in 2024 but remained relatively slow due to elevated mortgage rates and sustained low housing supply. Over the past few years, housing affordability has deteriorated as elevated mortgage rates and home price appreciation outpaced median family income, according to the National Association of Realtors Housing Affordability Index. National home prices continued to rise in 2024, according to the FHFA Monthly Purchase-Only House Price Index.

The unemployment rate increased to 4.1% in December 2024, compared to 3.7% in December 2023. As of December 31, 2024, the number of unemployed Americans was approximately 6.9 million, and the number of long-term unemployed over 26 weeks was approximately 1.6 million.

Forbearance and loss mitigation programs

Borrowers’ ability to utilize extended forbearance timelines permitted through the Coronavirus Aid, Relief, and Economic Security Act and the GSEs’ COVID-19 servicing-related policies ended in 2023. Borrowers that

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meet general hardship and program guidelines continue to have access to standard forbearance policies as a loss mitigation option. In addition, in March 2023, the GSEs announced new loss mitigation programs that allow six-month payment deferrals for borrowers facing financial hardship.

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, 2024, approximately 1.1% or 10,943 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 34% were reported as delinquent. Approximately 9% of Enact’s primary new delinquencies in 2024 were subject to a forbearance plan compared to 13% in 2023.

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 its validation and approval of certain credit score models for anticipated use by the GSEs and proposed changing 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 is currently expected to require lenders to deliver both credit scores for each loan sold to the GSEs. Implementation, which has been delayed beyond 2025, will require system and process updates.

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 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 $51.0 billion in 2024 decreased 4% compared to 2023. Changes in new insurance written are primarily impacted by the size of the mortgage insurance market and Enact’s market share. Enact’s primary persistency rate was 83% for the year ended December 31, 2024 compared to 85% for the year ended December 31, 2023. Persistency remained elevated in 2024 but decreased compared to 2023 due to rate volatility. Elevated persistency continued to offset lower new insurance written, contributing to an increase in primary insurance in-force of $5.9 billion during 2024.

Net earned premiums increased in 2024 compared to 2023 primarily driven by insurance in-force growth and higher assumed premiums, mostly consisting of Enact Re’s GSE credit risk transfer participation and multifamily reinsurance, partially offset by higher ceded premiums.

Loss experience

Enact’s loss ratio was 4% for the year ended December 31, 2024, compared to 3% for the year ended December 31, 2023. Enact released reserves of $252 million during 2024 primarily driven by favorable cure

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performance on delinquencies from prior years and loss mitigation activities. As part of the reserve adjustments in 2024, Enact decreased its claim rate assumptions largely as a result of sustained favorable cure performance and lessening uncertainty in the economic environment, impacting both current and prior year delinquencies. Enact released reserves of $241 million in 2023 primarily related to favorable cure performance on delinquencies from 2022 and earlier, including those related to COVID-19.

The severity of loss on loans that go to claim may be negatively impacted by extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of 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 for the year ended December 31, 2024 increased compared to the year ended December 31, 2023, primarily due to the aging of large, newer books of business. New primary delinquencies of 48,537 contributed $287 million of loss expense in 2024, while Enact incurred $265 million of losses from 41,617 new primary delinquencies in 2023. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions.

Capital requirements

As of December 31, 2024, EMICO’s risk-to-capital ratio under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 10.5:1, compared with a risk-to-capital ratio of 11.6:1 as of December 31, 2023. 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. As of December 31, 2024, Enact had estimated available assets of $5,095 million against $3,043 million net required assets under PMIERs compared to available assets of $5,006 million against $3,119 million net required assets as of December 31, 2023. The sufficiency ratio as of December 31, 2024 was 167% or $2,052 million above the PMIERs requirements, compared to 161% or $1,887 million above the PMIERs requirements as of December 31, 2023.

Enact’s PMIERs required assets as of December 31, 2024 and 2023 benefited from the application of a 0.30 multiplier applied to the risk based required asset amount factor for certain non-performing loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $28 million and $73 million, respectively, of benefit to Enact’s December 31, 2024 and 2023 PMIERs required assets. Enact’s third-party reinsurance transactions provided an aggregate of approximately $1,885 million and $1,714 million of PMIERs capital credit as of December 31, 2024 and 2023, respectively. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier. Per guidance released by the GSEs in the third quarter of 2024, use of the multiplier will be discontinued effective March 31, 2025.

On August 21, 2024, the GSEs and the FHFA released updated PMIERs requirements phasing in a revision to the available assets standards between March 31, 2025 and September 30, 2026. Enact expects to hold capital sufficiency well in excess of these requirements and does not expect the impact of these updates to be material to its sufficiency. For additional details, see “Item 1—Regulation—Enact—Mortgage Insurance Regulation—Other U.S. Regulation and Agency Qualification Requirements.”

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Recent transactions

During 2024, Enact executed excess of loss reinsurance transactions that provide up to $270 million of reinsurance coverage on a portion of its new insurance written in 2024 and $90 million of reinsurance coverage on a portion of its existing new insurance written between July 2023 and December 2023. Enact also executed quota share reinsurance agreements under which it ceded approximately 21% of a portion of new insurance written for its 2024 book year and will cede, subject to certain conditions, approximately 27% of a portion of expected new insurance written for each of its 2025 and 2026 book years.

On January 27, 2025, Enact executed two excess of loss reinsurance transactions that provide approximately $225 million and $260 million, respectively, of reinsurance coverage on a portion of expected new insurance written for the 2025 and 2026 book years. See note 7 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.

Capital returns

In November 2024, EMICO completed a distribution to Enact Holdings that supports its ability to pay a quarterly dividend. 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, Enact Holdings announced approval by its board of directors on May 1, 2024 of a share repurchase program which allows for the repurchase of up to $250 million of its common stock. Genworth Holdings has agreed to participate in share repurchases in order to maintain its overall ownership at approximately its current level. As the majority shareholder, Genworth Holdings received $289 million of capital returns from Enact Holdings during 2024, comprised of $91 million of quarterly dividends and $198 million of share repurchases.

Returning capital to shareholders, balanced with growth and risk management priorities, remains a priority 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, which sets the following priorities: 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:

2024 compared to 2023

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

Adjusted operating income increased primarily attributable to higher net investment income and premiums, partially offset by higher new delinquencies in 2024.

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Revenues

Premiums increased mainly driven by insurance in-force growth and higher assumed premiums, mostly consisting of Enact Re’s GSE credit risk transfer participation and multifamily reinsurance, partially offset by higher ceded premiums in 2024.

Net investment income increased primarily from higher investment yields and higher average invested assets in 2024.

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 driven by higher new delinquencies, partially offset by higher favorable reserve adjustments in 2024. Enact released reserves of $252 million in 2024 primarily related to favorable cure performance on delinquencies from prior years and loss mitigation activities. During 2023, Enact released $241 million of reserves primarily related to favorable cure performance on prior year delinquencies, including those related to COVID-19.

Acquisition and operating expenses, net of deferrals, increased primarily due to an $11 million loss on the early redemption of Enact Holdings’ 2025 Notes in 2024.

Provision for income taxes. The effective tax rate was 21.6% and 21.8% for the years ended December 31, 2024 and 2023, respectively, consistent with the U.S. corporate federal income tax rate.

Enact selected operating performance measures

Management’s discussion and analysis of our Enact segment contains selected operating performance measures including “new insurance written,” “insurance in-force” and “risk in-force,” which are commonly used in the insurance industry as measures of operating performance.

Management regularly monitors and reports new insurance written for our Enact segment as a measure of volume of new business generated in a period. 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 mortgage 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. These metrics are presented on a direct basis and exclude reinsurance. 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.

Management also regularly monitors and reports a loss ratio and an expense ratio for our Enact segment. We consider the loss ratio, which is the ratio of benefits and other changes in policy reserves to net earned premiums, to be a measure of underwriting performance. 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. We believe these ratios help to enhance the understanding of the operating performance of our Enact segment.

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

2024 compared to 2023

Primary insurance in-force and risk in-force

Primary insurance in-force increased mainly from new insurance written and elevated persistency, partially offset by lapses and cancellations. The primary persistency rate was 83% and 85% for the years ended December 31, 2024 and 2023, respectively. Total risk in-force increased primarily as a result of higher primary insurance in-force.

New insurance written

Changes in new insurance written are primarily impacted by the size of the mortgage insurance market and Enact’s market share.

Loss and expense ratios

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

The loss ratio increased largely from higher new delinquencies, partially offset by higher favorable reserve adjustments in 2024, as discussed above.

The expense ratio increased primarily due to an $11 million loss on the early redemption of Enact Holdings’ 2025 Notes, which increased the expense ratio by one percentage point in 2024.

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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 745 as of December 31, 2024.

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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 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, 2024 increased compared to December 31, 2023 primarily from an increase in total delinquencies mostly driven by new delinquencies outpacing cures and paid claims.

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, 2024 decreased compared to December 31, 2023 as Enact has experienced cures among long-term delinquencies with higher reserves and has reduced the expected claim rate on new delinquencies.

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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 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.

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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, as well as weighted average mortgage interest rate and delinquency rate as of December 31, 2024:

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. The concentration of loss reserves has shifted to newer book years in line with changes in risk in-force. As of December 31, 2024, Enact’s 2017 and newer policy years represented approximately 96% of its primary risk in-force and 84% 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 99%, 97% and 94% for the years ended December 31, 2024, 2023 and 2022, respectively, and 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 results of our long-term care insurance business depend upon how our actual experience compares with our valuation assumptions, including but not limited to in-force rate actions, 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, also impact our long-term care insurance business either positively or negatively.

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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 certain of our oldest long-term care insurance blocks of business have reached their peak claim years and will decrease as the blocks run off, we expect overall claims costs to continue to increase as the approximately 609,000 insured individuals in our two largest blocks, Choice I and Choice II, with average attained ages of 77 and 74, respectively, reach their peak claim years, which are over age 85.

Additionally, we have observed an increase in the cost of care in our long-term care insurance business, due in part to elevated inflation. Increases in cost of care have resulted in higher claim payments, which could have a material adverse impact on our liquidity, results of operations and financial condition if the increases persist. 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.

The impacts of assumption updates and actual variances from expected experience will continue to drive volatility in our long-term care insurance results, particularly for our unprofitable capped cohorts. Our profitable uncapped cohorts have to date had a more modest earnings impact related to assumption updates and actual variances from expected experience, as a portion of the impact is reflected in current period results with the remaining majority of the impact recognized over the life of the cohort. However, as we move further from the January 2021 transition date of the accounting guidance for long-duration insurance contracts adopted on January 1, 2023, we may see increased volatility from the uncapped cohorts, with more of the impact related to assumption updates and actual variances from expected experience recognized immediately in net income. It is important to note that quarterly variations resulting from assumption updates and actual variances from expected experience are typically expected to be relatively small compared to the overall size of our liability for future policy benefits of $43.0 billion, at the locked-in discount rate, for our long-term care insurance business as of December 31, 2024.

For a discussion of potential impacts of assumption updates and actual variances from 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 the 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 could materially adversely affect our business and profitability.”

Fourth quarter assumption review

In the fourth quarter of 2024, our long-term care insurance products had an unfavorable pre-tax impact of $20 million from cash flow assumption updates primarily related to updates to our healthy life and near-term benefit utilization assumptions to better align with recent experience, including cost of care inflation. Although we did not make significant changes to our multi-year in-force rate action plan, these unfavorable impacts were partially offset by favorable assumption updates for future in-force rate action approvals given our current plans for rate increase filings and our recent experience regarding approvals and regulatory support. The unfavorable

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impacts were also partially offset by favorable updates to our short-term incidence assumptions for IBNR claims, reducing sufficiency held through a period of heightened uncertainty around incidence during and immediately following COVID-19. While our 2024 assumption review considered trends during the pandemic years, our updates to long-term assumptions generally exclude or adjust experience data after 2019, as we do not have sufficient information around the long-term effects of COVID-19.

Under statutory cash flow testing, changes impacting active life reserves are included in our margin review and only impact statutory income if the margin falls below zero. However, changes to our claim reserve assumptions are immediately reflected in statutory income. We completed statutory cash flow testing for our life insurance subsidiaries in the fourth quarter of 2024 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 $79 million in 2024.

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.

In addition, we have reached three legal settlements regarding alleged disclosure deficiencies in premium increases for long-term care insurance policies. These legal settlements cover approximately 70% of our long-term care insurance block and have had the effect of accelerating benefit reductions. We began implementing the third and final legal settlement during the second quarter of 2023, and its implementation was materially completed in the fourth quarter of 2024. These legal settlements resulted in an overall net favorable economic impact to our long-term care insurance business as they reduced tail risk on these long-duration liabilities.

While we expect renewal premiums to decline over time as the block runs off, benefit reductions elected by policyholders in connection with our in-force rate actions and legal settlements have accelerated that decline. However, we expect this decline to be partially offset by future approved rate actions.

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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:

2024 compared to 2023

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

The adjusted operating loss decreased primarily driven by lower liability remeasurement losses, net insurance recoveries and higher income from limited partnerships, partially offset by lower renewal premiums in 2024.

Revenues

Premiums decreased primarily driven by lower renewal premiums from benefit reduction elections made by policyholders in connection with our in-force rate actions and legal settlements and from policy terminations in 2024. The decrease was partially offset by $7 million of higher premiums in 2024 from newly implemented in-force rate actions.

Net investment income increased largely due to higher income from limited partnerships in 2024.

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 lower net premiums collected resulting from benefit reduction elections made by policyholders in connection with our in-force rate actions and legal settlements and from policy terminations. This was partially offset by aging of the in-force block, including higher interest accretion, and higher loss adjustment expenses in 2024.

The liability remeasurement loss in 2024 was largely due to adverse actual versus expected experience primarily driven by lower terminations and higher claims. This was partially offset by net favorable cash flow assumption updates primarily related to approval amounts and implementation timing of our in-force rate action plan and a favorable update to our short-term incidence assumption for IBNR claims. The liability remeasurement loss in 2023 was largely driven by adverse actual variances from 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. See “ —Critical Accounting Estimates—Liability for future policy benefits—Long-term care insurance” for a discussion of the fourth quarter annual review of assumptions.

Acquisition and operating expenses, net of deferrals, decreased principally from $28 million of net insurance recoveries in 2024 related to previously incurred legal settlement expenses, as well as a $13 million accrual for legal settlement costs in 2023 that did not recur. These decreases were partially offset by higher employee-related expenses in 2024.

Provision (benefit) for income taxes. The tax provision in 2024 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, partially offset by a tax benefit related to the pre-tax loss. The tax benefit in 2023 was primarily related to the pre-tax loss, partially offset by tax expense on certain forward starting swap gains.

Long-Term Care Insurance selected operating performance measures

Liability remeasurement (gains) losses

We include expectations for benefit reductions related to in-force rate actions and legal settlements as well as cash payments made to policyholders who elect certain reduced benefit options in connection with the legal settlements, referred to 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. We update the net premium ratio quarterly for actual variances from 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 will be reflected in liability remeasurement (gains) losses in our operating results on a quarterly basis.

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

For additional discussion of liability remeasurement (gains) losses, see the comparison for this line item above.

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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 in order to maintain the self-sustainability of our legacy U.S. life insurance subsidiaries and reduce the strain on earnings and capital.

Management regularly monitors and reports 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 based on current assumptions and 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. It also includes the net present value of reserve reductions related to legal settlements less settlement payments. We monitor these selected operating performance measures for in-force rate actions to track our progress on maintaining the self-sustainability of our legacy U.S. life insurance subsidiaries. We consider these in-force rate action metrics to be measures of financial performance and help to enhance the understanding of the operating performance of our Long-Term Care Insurance segment.

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 multi-year in-force rate action plan from 2012 through December 31, 2024 was approximately $31.2 billion, on a net present value basis, based on our current updated assumptions regarding future premiums and benefit reductions from approved rate actions. This represents a significant increase in estimated rate actions achieved since December 31, 2023, including $2.1 billion of value from rate action approvals and legal settlement implementations in 2024 and an increase of $1.1 billion in the value of benefit reductions connected with our previously achieved rate actions and legal settlements from the impact of our assumption updates.

During the year ended December 31, 2024, we also submitted 90 new filings on approximately $525 million in annualized in-force premiums. The total in-force premiums submitted in 2024 were lower than previous years due to past successes in achieving approvals. In some cases, we received large approvals that either materially completed the current multi-year rate action plan, which removed the need to re-file in the near-term, or resulted in multi-year implementations, which delayed the expected submission of a subsequent filing to beyond 2024.

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 and product. 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

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litigation against states that decline to approve those actuarially justified rate increases. As of December 31, 2024, we were in litigation with two states that have refused to approve actuarially justified rate increases for certain products.

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 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 could materially adversely affect our business and profitability.”

We no longer solicit sales of traditional life insurance and annuity products; however, we continue to service our existing retained and reinsured blocks of business.

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 during 2024 was largely consistent with 2023. We have experienced unfavorable mortality compared to our then-current and priced-for assumptions in recent years for our universal life insurance block. Reinsurance costs typically increase due to natural aging of the yearly renewable term reinsured blocks. We have also received some yearly renewable term reinsurance premium increases from some of our reinsurance partners that reflect unfavorable mortality.

In the fourth quarter of 2024, our universal life insurance products had an unfavorable pre-tax impact of $28 million from cash flow assumption updates reflecting unfavorable updates to mortality assumptions for contracts originating from term life insurance conversions and interest rate assumptions given the recent rate environment. Consistent with our long-term care insurance business, our 2024 assumption review considered trends during the pandemic years, but updates to our long-term assumptions generally exclude or adjust experience data after 2019, as we do not have sufficient information around the long-term effects of COVID-19.

Certain of our universal life insurance products with secondary guarantees are subject to additional reserves on a statutory basis using regulatory prescribed assumptions, including mortality improvement and the reinvestment rate, which is measured from July to June each year and increased from July 2023 to June 2024. The benefits from the reinvestment rate and mortality improvement more than offset negative assumption updates in these products from a statutory income perspective.

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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.

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.

In the fourth quarter of 2024, we had an unfavorable pre-tax impact of $16 million from assumption updates primarily related to our fixed indexed annuity lapse assumptions.

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 and liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate these 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 market and interest rate performance and volatility could result in additional gains or losses in these products, although associated hedging activities are expected to partially mitigate these impacts.

In the fourth quarter of 2024, our variable annuity products had an unfavorable pre-tax impact of $6 million from an update to our lapse assumptions.

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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:

2024 compared to 2023

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.

Net investment income

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.”

Benefits and expenses

Benefits and other changes in policy reserves

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Liability remeasurement (gains) losses. The favorable variance was mainly driven by a gain in 2024 compared to a loss in 2023 primarily driven by our life insurance products. The liability remeasurement gain in 2024 was primarily due to a $58 million model refinement related to certain universal life insurance products with secondary guarantees, partially offset by $28 million of unfavorable updates to our mortality assumptions for universal life insurance contracts and our interest rate assumptions. The liability remeasurement loss in our life insurance products in 2023 was principally driven by unfavorable updates of $256 million primarily related to our persistency assumptions for certain universal life insurance products with secondary guarantees and unfavorable mortality updates, including more modest mortality improvement. The unfavorable updates in 2023 were partially offset by net favorable impacts related to a ceded reinsurance transaction.

Changes in fair value of market risk benefits and associated hedges. The higher gain in 2024 was primarily attributable to favorable interest rate impacts, partially offset by unfavorable updates to our lapse assumptions of $13 million in our fixed indexed annuity products and $6 million in our variable annuity products compared to favorable assumption updates in 2023. Our variable annuity products also included higher derivative losses in 2024.

Interest credited

Acquisition and operating expenses, net of deferrals. The increase was primarily driven by higher operating costs in our life insurance and fixed annuity products and a $5 million legal settlement accrual in 2024.

Amortization of deferred acquisition costs and intangibles. The decrease was largely due to block runoff in our term life insurance products.

Provision (benefit) for income taxes. The effective tax rate was 27.4% and 22.1% for the years ended December 31, 2024 and 2023, respectively. The increase in the effective tax rate was primarily attributable to tax benefits from tax favored items in relation to a lower pre-tax loss in 2024.

Life and Annuities selected operating performance measures

Liability remeasurement (gains) losses

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

For additional discussion of liability remeasurement (gains) losses, see the comparison for this line item above.

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Life insurance

The following table sets forth insurance in-force for our life insurance products as of the dates indicated:

The decrease in insurance in-force in our life insurance products reflects the continued runoff of our in-force blocks.

Corporate and Other

Results of operations

The following table sets forth the results of operations relating to Corporate and Other for the periods indicated:

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2024 compared to 2023

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

The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives, partially offset by a higher benefit for income taxes in 2024.

Revenues

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

Acquisition and operating expenses, net of deferrals, increased primarily from higher expenses related to CareScout growth initiatives, as well as higher employee-related expenses. These increases were partially offset by $5 million of higher gains in 2024 related to the repurchase of Genworth Holdings’ debt.

Amortization of DAC and intangibles in 2024 primarily relates to amortization of capitalized software.

The increase in the benefit for income taxes was primarily related to a higher pre-tax loss, favorable provision to return adjustments and lower terminations of share-based awards in 2024.

Investments and Derivative Instruments

Trends and conditions

Investments

During the year ended December 31, 2024, our investment portfolio was impacted, and we believe will continue to be impacted, by the following macroeconomic trends:

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Derivatives

Investment results

The following table sets forth information about investment income, excluding net investment gains (losses), for each component of our investment portfolio for the years ended December 31: