(9) Borrowings and Other Financings

(a) Short-Term Borrowings

Revolving Credit Facilities

On May 20, 2016, Genworth MI Canada Inc. (“Genworth Canada”), our majority-owned subsidiary, entered into a CAD$100 million senior unsecured revolving credit facility, which matures on May 20, 2019. Any borrowings under Genworth Canada’s credit facility will bear interest at a rate per annum equal to, at the option of Genworth Canada, either a fixed rate or a variable rate pursuant to the terms of the credit agreement. Genworth Canada’s credit facility includes customary representations, warranties, covenants, terms and conditions. As of September 30, 2016, there was no amount outstanding under Genworth Canada’s credit facility.

In April 2016, Genworth Holdings terminated its $300 million multicurrency revolving credit facility, prior to its September 26, 2016 maturity date. There were no amounts outstanding under the credit facility at the time of termination.

(b) Long-Term Borrowings

The following table sets forth total long-term borrowings as of the dates indicated:


(Amounts in millions)	September 30, 2016			December 31, 2015
Genworth Holdings ⁽¹⁾
8.625% Senior Notes, due 2016	$	—		$	298
6.52% Senior Notes, due 2018		597			598
7.70% Senior Notes, due 2020		397			397
7.20% Senior Notes, due 2021		381			389
7.625% Senior Notes, due 2021		705			724
4.90% Senior Notes, due 2023		399			399
4.80% Senior Notes, due 2024		400			400
6.50% Senior Notes, due 2034		297			297
6.15% Fixed-to-Floating Rate Junior Subordinated Notes, due 2066		598			598

Subtotal		3,774			4,100
Bond consent fees		(40	)		—
Deferred borrowing charges		(20	)		(21	)

Total Genworth Holdings		3,714			4,079

Canada ⁽²⁾
5.68% Senior Notes, due 2020		210			199
4.24% Senior Notes, due 2024		122			116

Subtotal		332			315
Deferred borrowing charges		(2	)		(2	)

Total Canada		330			313

Australia ⁽³⁾
Floating Rate Junior Notes, due 2021		—			36
Floating Rate Junior Notes, due 2025		153			146

Subtotal		153			182
Deferred borrowing charges		(3	)		(4	)

Total Australia		150			178

Total	$	4,194		$	4,570

⁽¹⁾

We have the option to redeem all or a portion of the senior notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread.

⁽²⁾	Senior notes issued by Genworth Canada, our majority-owned subsidiary.

⁽³⁾	Subordinated floating rate notes issued by Genworth Financial Mortgage Insurance Pty Limited, our indirect wholly-owned subsidiary.

Genworth Holdings

In January 2016, Genworth Holdings redeemed $298 million of its 8.625% senior notes due 2016 issued in December 2009 (the “2016 Notes”) and paid a make-whole premium of approximately $20 million pre-tax in addition to accrued and unpaid interest.

During the three months ended March 31, 2016, we also repurchased $28 million principal amount of Genworth Holdings’ notes with various maturity dates for a pre-tax gain of $4 million and paid accrued and unpaid interest thereon.

On March 18, 2016, Genworth Holdings received the requisite consents, pursuant to a solicitation of consents (the “Consent Solicitation”), to amend the indenture dated as of June 15, 2004, by and between Genworth Holdings and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as successor to JP Morgan Chase Bank, N.A., as amended and supplemented from time to time (as so amended and supplemented, the “Senior Notes Indenture”) and the indenture dated as of November 14, 2006, by and between Genworth Holdings and the Trustee, as amended and supplemented from time to time (as so amended and supplemented, the “Subordinated Notes Indenture” and together with the Senior Notes Indenture, the “Indentures”).

On March 18, 2016, Genworth Holdings, Genworth Financial, as guarantor, and the Trustee entered into Supplemental Indenture No. 12 to the Senior Notes Indenture and the Third Supplemental Indenture to the Subordinated Notes Indenture (the “Supplemental Indentures”) that amended the Senior Notes Indenture and the Subordinated Notes Indenture, respectively, to (i) exclude Genworth Life Insurance Company and Genworth Life Insurance Company of New York, which operate our long-term care insurance business, from the event of default provisions of the Indentures (such amendment also previously excluded Brookfield Life and Annuity Insurance Company Limited until it merged into Genworth Life Insurance Company in October 2016) and (ii) clarify that one or more transactions disposing of any or all of the Genworth Holdings’ long-term care and other life insurance businesses and assets (a “Life Sale”) would not constitute a disposition of “all or substantially all” of Genworth Holdings’ assets under the Indentures, provided that in order to rely on that clarification, the assets of our U.S. Mortgage Insurance segment would be contributed to Genworth Holdings and 80% of any Net Cash Proceeds, as defined in the Supplemental Indentures, to us from any Life Sale would be used to reduce outstanding indebtedness.

The Supplemental Indentures became operative on March 22, 2016 upon the payment of the applicable consent fees payable under the terms of the Consent Solicitation. We paid total fees related to the Consent Solicitation of approximately $61 million, including bond consent fees of $43 million, which were deferred, as well as broker, advisor and investment banking fees of $18 million, which were expensed, in the first quarter of 2016.

Australia

In June 2016, Genworth Financial Mortgage Insurance Pty Limited, our indirect majority-owned subsidiary, redeemed all of its outstanding AUD$50 million of subordinated floating rate notes with an interest rate of three-month Bank Bill Swap reference rate plus a margin of 4.75% due 2021.

(c) Non-Recourse Funding Obligations

The following table sets forth the non-recourse funding obligations (surplus notes) of our wholly-owned, special purpose consolidated captive insurance subsidiaries as of the dates indicated:


(Amounts in millions)	September 30, 2016			December 31, 2015
Issuance	September 30, 2016			December 31, 2015
River Lake Insurance Company ^(a), due 2033	$	—		$	570
River Lake Insurance Company ^(b), due 2033		—			405
River Lake Insurance Company II ^(a), due 2035		—			192
River Lake Insurance Company II ^(b), due 2035		—			453
Rivermont Life Insurance Company I ^(a), due 2050		315			315

Subtotal		315			1,935
Deferred borrowing charges		(5	)		(15	)

Total	$	310		$	1,920

^(a)	Accrual of interest based on one-month London Interbank Offered Rate (“LIBOR”) that resets every 28 days plus a fixed margin.

^(b)	Accrual of interest based on one-month LIBOR that resets on a specified date each month plus a contractual margin.

During the three months ended March 31, 2016, in connection with a life block transaction, River Lake Insurance Company, our indirect wholly-owned subsidiary, redeemed $975 million of its total outstanding floating rate subordinated notes due in 2033 and River Lake Insurance Company II, our indirect wholly-owned subsidiary, redeemed $645 million of its total outstanding floating rate subordinated notes due in 2035 for a pre-tax loss of $9 million from the write-off of deferred borrowing costs.

(d) Repurchase agreements and securities lending activity

Repurchase agreements

We previously had a repurchase program in which we sold an investment security at a specified price and agreed to repurchase that security at another specified price at a later date. Repurchase agreements were treated as collateralized financing transactions and were carried at the amounts at which the securities were subsequently reacquired, including accrued interest, as specified in the respective agreement. The market value of securities to be repurchased were monitored and collateral levels adjusted where appropriate to protect the parties against credit exposure. Cash received was invested in fixed maturity securities. As of December 31, 2015, the fair value of securities pledged under the repurchase program was $231 million and the repurchase obligation of $229 million was included in other liabilities in the consolidated balance sheet. As of September 30, 2016, the fair value of securities pledged under the repurchase program and the repurchase obligation was zero as they matured during the three months ended June 30, 2016.

Securities lending activity

In the United States and Canada, we engage in certain securities lending transactions for the purpose of enhancing the yield on our investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently indemnified against counterparty credit risk by the intermediary.

Under the securities lending program in the United States, the borrower is required to provide collateral, which can consist of cash or government securities, on a daily basis in amounts equal to or exceeding 102% of the value of the loaned securities. Currently, we only accept cash collateral from borrowers under the program. Cash collateral received by us on securities lending transactions is reflected in other invested assets with an offsetting liability recognized in other liabilities for the obligation to return the collateral. Any cash collateral received is reinvested by our custodian based upon the investment guidelines provided within our agreement. In the United States, the reinvested cash collateral is primarily invested in a money market fund approved by the National Association of Insurance Commissioners, U.S. and foreign government securities, U.S. government agency securities, asset-backed securities and corporate debt securities. As of September 30, 2016 and December 31, 2015, the fair value of securities loaned under our securities lending program in the United States was $401 million and $334 million, respectively. As of September 30, 2016 and December 31, 2015, the fair value of collateral held under our securities lending program in the United States was $417 million and $347 million, respectively, and the offsetting obligation to return collateral of $417 million and $347 million, respectively, was included in other liabilities in the consolidated balance sheets. We did not have any non-cash collateral provided by the borrowers in our securities lending program in the United States as of September 30, 2016 and December 31, 2015.

Under our securities lending program in Canada, the borrower is required to provide collateral consisting of government securities on a daily basis in amounts equal to or exceeding 105% of the fair value of the applicable securities loaned. Securities received from counterparties as collateral are not recorded on our consolidated balance sheet given that the risk and rewards of ownership is not transferred from the counterparties to us in the course of such transactions. Additionally, there was no cash collateral because it is not permitted as an acceptable form of collateral under the program. In Canada, the lending institution must be included on the approved Securities Lending Borrowers List with the Canadian regulator and the intermediary must be rated at least “AA-” by Standard & Poor’s Financial Services LLC. As of September 30, 2016 and December 31, 2015, the fair value of securities loaned under our securities lending program in Canada was $364 million and $340 million, respectively.

Risks associated with repurchase agreements and securities lending programs

Our repurchase agreement and securities lending programs expose us to liquidity risk if we did not have enough cash or collateral readily available to return to the counterparty when required to do so under the agreements. We manage this risk by regularly monitoring our available sources of cash and collateral to ensure we can meet short-term liquidity demands under normal and stressed scenarios.

We are also exposed to credit risk in the event of default of our counterparties or changes in collateral values. This risk is significantly reduced because our programs require over collateralization and collateral exposures are trued up on a daily basis. We manage this risk by using multiple counterparties and ensuring that changes in required collateral are monitored and adjusted daily. We also monitor the creditworthiness, including credit ratings, of our counterparties on a regular basis.

Contractual maturity

The following tables present the remaining contractual maturity of the agreements as of the dates indicated:


	September 30, 2016
(Amounts in millions)	Overnight and continuous		Up to 30 days		31 - 90 days		Greater than 90 days		Total
Repurchase agreements:
U.S. government, agencies and government-sponsored enterprises	$	—	$	—	$	—	$	—	$	—
Securities lending:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises		78		—		—		—		78
Non-U.S. government		61		—		—		—		61
U.S. corporate		163		—		—		—		163
Non-U.S. corporate		110		—		—		—		110

Subtotal, fixed maturity securities		412		—		—		—		412

Equity securities		5		—		—		—		5

Total securities lending		417		—		—		—		417

Total repurchase agreements and securities lending	$	417	$	—	$	—	$	—	$	417


	December 31, 2015
(Amounts in millions)	Overnight and continuous		Up to 30 days		31 - 90 days		Greater than 90 days		Total
Repurchase agreements:
U.S. government, agencies and government-sponsored enterprises	$	—	$	58	$	25	$	146	$	229
Securities lending:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises		18		—		—		—		18
Non-U.S. government		39		—		—		—		39
U.S. corporate		95		—		—		—		95
Non-U.S. corporate		190		—		—		—		190

Subtotal, fixed maturity securities		342		—		—		—		342

Equity securities		5		—		—		—		5

Total securities lending		347		—		—		—		347

Total repurchase agreements and securities lending	$	347	$	58	$	25	$	146	$	576