Borrowings and Other Financings

12 Months Ended

Dec. 31, 2019

(12) Borrowings and Other Financings

(a) Long-Term Borrowings

The following table sets forth total long-term borrowings as of December 31:


(Amounts in millions)	2019			2018
Genworth Holdings
Floating Rate Senior Secured Term Loan Facility, due 2023	$	—		$	445
7.70% Senior Notes, due 2020		397			397
7.20% Senior Notes, due 2021		382			381
7.625% Senior Notes, due 2021		701			703
4.90% Senior Notes, due 2023		399			399
4.80% Senior Notes, due 2024		400			400
6.50% Senior Notes, due 2034		297			297
Floating Rate Junior Subordinated Notes, due 2066		598			598

Subtotal		3,174			3,620
Bond consent fees		(25	)		(32	)
Deferred borrowing charges		(12	)		(21	)

Total Genworth Holdings		3,137			3,567

Australia
Floating Rate Junior Subordinated Notes, due 2025		140			141
Deferred borrowing charges		—			(1	)

Total Australia		140			140

Total	$	3,277		$	3,707

Genworth Holdings

Secured Term Loan Facility

On December 12, 2019, Genworth Holdings repaid its senior secured term loan facility (“Term Loan”), which was originally closed on March 7, 2018 and was scheduled to mature in March 2023. Prior to the repayment, Genworth Financial International Holdings, LLC (“GFIH”) provided a limited recourse guarantee to the lenders of Genworth Holdings’ outstanding Term Loan, which was secured by GFIH’s ownership interest in Genworth Canada’s outstanding common shares. Due to the sale of the underlying collateral, the Term Loan was required to be repaid upon the sale of Genworth Canada. A cash payment of $445 million was used to fully repay the outstanding principal and accrued interest of the Term Loan.

Long-Term Senior Notes

As of December 31, 2019, Genworth Holdings had outstanding six series of fixed rate senior notes with varying interest rates between 4.80% and 7.70% and maturity dates between 2020 and 2034. The senior notes are Genworth Holdings’ direct, unsecured obligations and rank equally in right of payment with all of its existing and future unsecured and unsubordinated obligations. Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior notes and the holders of the senior notes, on an

unsecured unsubordinated basis, of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes, and the full and punctual payment of all other amounts payable by Genworth Holdings under the senior notes indenture in respect of such senior notes. We have the option to redeem all or a portion of each series of senior notes at any time with notice to the noteholders at a price equal to the

greater

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.

On January 21, 2020, Genworth Holdings early redeemed $397 million of its 7.70% senior notes originally scheduled to mature in June 2020. The senior notes were fully redeemed with a cash payment of $409

million, comprised of the outstanding principal balance of $397 million, accrued interest of approximately $3 million and a make-whole premium of

approximately $9 million.

On October 3, 2018, 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”). Genworth Holdings, Genworth Financial, as guarantor, and the Trustee entered into Supplemental Indenture No. 13 to the Senior Notes Indenture that amended the Senior Notes Indenture to clarify that Genworth Life and Annuity Insurance Company (“GLAIC”) and the subsidiaries of Genworth Life Insurance Company (“GLIC”), GLAIC and Genworth Life Insurance Company of New York (“GLICNY”) are excluded from the class of subsidiaries for which a bankruptcy, insolvency or other similar proceeding

would

result in an event of default under the Senior Notes Indenture.

The amendments to the Senior Notes Indenture became operative on October 4, 2018 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 $11 million, including bond consent fees of $5 million, which were deferred, as well as broker, advisor and investment banking fees of $6 million, which were expensed in the fourth quarter of 2018.

On May 22, 2018, Genworth Holdings redeemed $597 million of its 6.52% senior notes that were issued in May 2008 and matured in May 2018 (the “May 2018 senior notes”). A cash payment of $616 million comprising net proceeds of $441 million from the Term Loan and $175 million of existing cash on hand was used to fully redeem the principal and accrued interest balance of the May 2018 senior notes.

Long-Term Junior Subordinated Notes

As of December 31, 2019, Genworth Holdings had outstanding floating rate junior notes having an aggregate principal amount of $598 million, with an annual interest rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus 2.0025% payable quarterly, until the notes mature in November 2066 (“2066 Notes”). Subject to certain conditions, Genworth Holdings has the right, on one or more occasions, to defer the payment of interest on the 2066 Notes during any period of up to 10 years without giving rise to an event of default and without permitting acceleration under the terms of the 2066 Notes. Genworth Holdings will not be required to settle deferred interest payments until it has deferred interest for five years or made a payment of current interest. In the event of our bankruptcy, holders will have a limited claim for deferred interest.

Genworth Holdings may redeem the 2066 Notes on November 15, 2036, the “scheduled redemption date,” but only to the extent that it has received net proceeds from the sale of certain qualifying capital securities. Genworth Holdings may redeem the 2066 Notes in whole or in part at their principal amount plus accrued and unpaid interest to the date of redemption.

The 2066 Notes will be subordinated to all existing and future senior, subordinated and junior subordinated debt of Genworth Holdings, except for any future debt that by its terms is not superior in right of payment, and will be effectively subordinated to all liabilities of our subsidiaries. Genworth Financial provides a full and unconditional guarantee to the trustee of the 2066 Notes and the holders of the 2066 Notes, on an unsecured subordinated basis,

of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, the outstanding 2066 Notes, and the full and punctual payment of all other amounts payable by Genworth Holdings under the 2066 Notes indenture in respect of the 2066 Notes.

In connection with the issuance of the 2066 Notes, we entered into a Replacement Capital Covenant, whereby we agreed, for the benefit of holders of our 6.5% Senior Notes due 2034, that Genworth Holdings will not repay, redeem or repurchase all or any part of the 2066 Notes on or before November 15, 2046, unless such repayment, redemption or repurchase is made from the proceeds of the issuance of certain replacement capital securities and pursuant to the other terms

and

conditions set forth in the Replacement Capital

Covenant

Australia

As of December 31, 2019, Genworth Financial Mortgage Insurance Pty Limited, our majority-owned subsidiary, had outstanding one series of subordinated floating rate notes with an interest rate of three-month Bank Bill Swap reference rate plus a margin of 3.50% and maturity date of 2025.

(b)

Non-Recourse

Funding Obligations

As of December 31, 2019 and 2018, Rivermont Life Insurance Company I (“Rivermont I”), our wholly-owned special purpose consolidated captive insurance subsidiary, had outstanding

non-

recour

se funding obli

gations

of $311 million, net of $4 million of deferred borrowing charges, due in 2050 with an interest rate based on

one-month

LIBOR that reset every 28 days plus a fixed margin.

The weighted-average interest rates on the

non-recourse

funding obligations as of December 31, 2019 and 2018 were 3.78% and 4.49%, respectively.

The surplus notes were deposited into a trust that had issued money market securities. Both principal and interest payments on the money market securities were guaranteed by a third-party insurance company. GLAIC, our wholly-owned subsidiary, agreed to indemnify Rivermont I and the third-party insurer for certain limited costs related to the issuance of these obligations.

In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina, Rivermont I redeemed all of its $315 million of outstanding

non-recourse

funding obligations due in 2050 for a

pre-tax

loss of $4 million from the

write-off

of deferred borrowing costs.

Principal amounts under our long-term borrowings (including senior notes) and

non-recourse

funding obligations by maturity were as follows as of December 31, 2019:


(Amounts in millions)	Amount
2020 (1)	$	397
2021		1,083
2022		—
2023		399
2024 and thereafter ( 2)		1,750

Total	$	3,629

(1)	On January 21, 2020, Genworth Holdings fully redeemed its 7.70% senior notes of $397 million originally scheduled to mature in June 2020.

(2)	Our non-recourse funding obligations of $315 million due in 2050 were fully redeemed in January 2020.

(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. In 2017, we repaid $75 million, the entire amount due at maturity related to this repurchase agreement.

Securities lending activity

Under our securities lending program, 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. The reinvested cash collateral is primarily invested in a money market fund approved by the NAIC, U.S. and foreign government securities, U.S. government agency securities, asset-backed securities, corporate debt securities and equity securities. As of December 31, 2019 and 2018, the fair value of securities loaned under our securities lending program was $49 million and $99 million, respectively. As of December 31, 2019 and 2018, the fair value of collateral held under our securities lending program was $51 million and $102 million, respectively, and the offsetting obligation to return collateral of $51 million and $102 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 as of December 31, 2019 and 2018.

Risks associated with securities lending programs

Our securities lending program exposes 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 agreement. 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 program requires 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 agreement

as of December 31:


	2019
(Amounts in millions)	Overnight and continuous		Up to 30 days		31 - 90 days		Greater than 90 days		Total
Securities lending:
Fixed maturity securities:
Non-U.S. government	$	1	$	—	$	—	$	—	$	1
U.S. corporate		34		—		—		—		34
Non-U.S. corporate		16		—		—		—		16

Subtotal, fixed maturity securities		51		—		—		—		51

Total securities lending	$	51	$	—	$	—	$	—	$	51


	2018
(Amounts in millions)	Overnight and continuous		Up to 30 days		31 - 90 days		Greater than 90 days		Total
Securities lending:
Fixed maturity securities:
Non-U.S. government	$	11	$	—	$	—	$	—	$	11
U.S. corporate		67		—		—		—		67
Non-U.S. corporate		23		—		—		—		23

Subtotal, fixed maturity securities		101		—		—		—		101

Equity securities		1		—		—		—		1

Total securities lending	$	102	$	—	$	—	$	—	$	102