Segment Information

9 Months Ended

Sep. 30, 2023

Segment Information

(18) Segment Information

We have the following three operating segments: Enact; Long-Term Care Insurance; and Life and Annuities. The products in the Life and Annuities segment include traditional and non-traditional life insurance

(term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), fixed annuities and variable annuities (which include variable life insurance), none of which are actively marketed or sold. In addition to our three operating segments, we also have Corporate and Other, which includes debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are reported outside of our operating segments, such as certain international businesses and discontinued operations. Corporate and Other also includes start-up results related to fee-based services, care support and advice, clinical assessments and consulting offered by CareScout to advance our senior care growth initiatives.

We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. GAAP and tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other.

The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year. U.S. GAAP generally requires an annualized effective tax rate to be used for interim reporting periods, utilizing projections of full year results. However, in certain circumstances it is appropriate to record the actual effective tax rate for the period if a reliable full year estimate cannot be made. See note 17 for a discussion of the effective tax rates used for our segments and Corporate and Other for the three and nine months ended September 30, 2023 and 2022.

We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income and assets. Our President and Chief Executive Officer (Principal Executive Officer), who serves as our chief operating decision maker, evaluates segment performance and allocates resources on the basis of “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders.” We define adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders 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) available to Genworth Financial, Inc.’s common stockholders 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) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, 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) available to Genworth Financial, Inc.’s common stockholders 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) available to Genworth Financial, Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.

Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders 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.

The following is a summary of revenues for our segments and Corporate and Other for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
(Amounts in millions)	2023		2022		2023		2022
Revenues:
Enact segment	$	299	$	275	$	857	$	818
Long-Term Care Insurance segment		1,082		1,087		3,323		3,290
Life and Annuities segment:
Life insurance		347		352		1,055		1,092
Fixed annuities		68		91		237		299
Variable annuities		34		37		105		114
Life and Annuities segment		449		480		1,397		1,505
Corporate and Other		1		6		—		15
Total revenues	$	1,831	$	1,848	$	5,577	$	5,628

The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating income available to Genworth Financial, Inc.’s common stockholders and a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other for the periods indicated:

	Three months ended September 30,						Nine months ended September 30,
(Amounts in millions)	2023			2022			2023			2022
Net income available to Genworth Financial, Inc.’s common stockholders	$	29		$	136		$	288		$	535
Add: net income from continuing operations attributable to noncontrolling interests		31			35			94			103
Add: net income from discontinued operations attributable to noncontrolling interests		—			—			—			—
Net income		60			171			382			638
Less: income from discontinued operations, net of taxes		—			5			2			2
Income from continuing operations		60			166			380			636
Less: net income from continuing operations attributable to noncontrolling interests		31			35			94			103
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders		29			131			286			533
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net (1)		43			58			13			(3	)
Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges (2)		(26	)		(32	)		(35	)		(78	)
(Gains) losses on early extinguishment of debt (3)		—			3			(1	)		7
Expenses related to restructuring		—			—			4			1
Pension plan termination costs		—			6			—			6
Taxes on adjustments		(4	)		(8	)		4			14
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders	$	42		$	158		$	271		$	480

(1) For the nine months ended September 30, 2023, net investment (gains) losses were adjusted for the portion attributable to noncontrolling interests of $2 million.

(2) Changes in fair value of market risk benefits and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(2) million and $(5) million for the three months ended September 30, 2023 and 2022, respectively, and $(9) million and $(30) million for the nine months ended September 30, 2023 and 2022, respectively.

(3) During the nine months ended September 30, 2023, we repurchased $11 million principal amount of Genworth Holdings’ senior notes due in June 2034 for a pre-tax gain of $1 million. During the three and nine months ended September 30, 2022, we paid a pre-tax make-whole premium of $2 million and wrote off $1 million of bond consent fees and deferred borrowing costs related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in February 2024. Additionally, during the nine months ended September 30, 2022, we repurchased $130 million principal amount of Genworth Holdings’ senior notes due in February 2024 for a pre-tax loss of $4 million.

	Three months ended September 30,						Nine months ended September 30,
(Amounts in millions)	2023			2022			2023			2022
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
Enact segment	$	134		$	156		$	423		$	458
Long-Term Care Insurance segment		(71	)		26			(91	)		116
Life and Annuities segment:
Life insurance		(25	)		(28	)		(69	)		(112	)
Fixed annuities		17			15			41			48
Variable annuities		5			7			23			13
Life and Annuities segment		(3	)		(6	)		(5	)		(51	)
Corporate and Other		(18	)		(18	)		(56	)		(43	)
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders	$	42		$	158		$	271		$	480

Other than pension plan termination costs incurred in the third quarter of 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.

The following is a summary of total assets for our segments and Corporate and Other as of the dates indicated:

(Amounts in millions)	September 30, 2023		December 31, 2022
Assets:
Enact segment	$	6,000	$	5,712
Long-Term Care Insurance segment		42,927		44,156
Life and Annuities segment		35,111		37,975
Corporate and Other		1,428		1,871
Total assets	$	85,466	$	89,714