Second Quarter 2012s2.q4cdn.com/240635966/files/doc_events/GNW 2Q12...All financial data as of June...

Second Quarter 2012Long Term Care Australia Mortgage InsuranceLong Term Care, Australia Mortgage Insurance& U.S. Mortgage InsuranceInvestor MaterialsAugust 1, 2012

©2012 Genworth Financial, Inc. All rights reserved. ©2012 Genworth Financial, Inc. All rights reserved.

Cautionary Note Regarding Forward-Looking StatementsThis presentation contains certain “forward-looking statements” within the meaning of the United States Private Securities p g gLitigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning and include, but are not limited to,statements regarding the outlook for Genworth Financial, Inc.’s (Genworth) future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ

t i ll d t l b l liti l i b i titi k t l t d th f t d i k i l dimaterially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including those discussed in the Appendix, as well as in the risk factors section of Genworth’s Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission (SEC) on February 27, 2012 and Genworth’s Form 10-Q filed with the SEC on May 4, 2012. Genworth undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Selected Operating Performance Measures

All financial data as of June 30, 2012 unless otherwise noted. For additional information, please see Genworth’s second quarter of 2012 earnings release and financial supplement posted at genworth.com.

For important information regarding the use of selected operating performance measures, see the Appendix.

Portions of this presentation should be used in conjunction with the accompanying audio or call transcript

August 1, 2012 12Q12 Earnings Call Long Term Care, Australia MI & U.S. MI

Portions of this presentation should be used in conjunction with the accompanying audio or call transcript.

Long Term Care Agenda

Business Model Evolution & In Force Block Profile1

Levers To Improve Business Performance2

New Business Strategy3


Business Model Evolution1g on

s

Old Generation New GenerationEarned Rate 7.5% - 6.25%

Lapse Rate 5.5% - 4.0%

Earned Rate 6.5% - 4.5%

Lapse Rate 2.0% - 1.0%

Pric

ing

Ass

umpt

io p % %(Ultimate)

MorbidityBased On Experience Of

~15 Yrs / 7,000 Claims (PCS I)~18 Yrs / 25 000 Claims (PCS II)

p % %(Ultimate)

MorbidityBased On Experience Of

~22 Yrs / 45,000 Claims (Choice 1)~32 Yrs / 140 000 Claims (Current Product)

ritin

gria

~18 Yrs / 25,000 Claims (PCS II) ~32 Yrs / 140,000 Claims (Current Product)

MaximumIssue Age 84

MaximumIssue Age 79

Guidelines Guidelines

Und

erw

rC

riter

GuidelinesMedical Records (1980’s)Cognitive Screens (1990’s)Decline Stroke (1996)Decline Insulin Dependent Diabetes (1997)

GuidelinesBroader Cognitive TestingTighter Build GuidelinesFurther Tightening Of Uninsurable Conditions(Heart Disease + Diabetes; Tobacco Use + Diabetes)Prescription Drug Database Check

form

ance

Met

rics ’08 ’09 ’10 ’11

Loss Ratio (%) 90 90 96 104P i ($MM)1 754 733 697 653

’08 ’09 ’10 ’11Loss Ratio (%) 49 48 50 51P i ($MM)1 1 067 1 141 1 198 1 308


Perf M Premiums ($MM)1 754 733 697 653 Premiums ($MM)1 1,067 1,141 1,198 1,308

1Net Of Reinsurance

In Force Block Profile1fil

e1

Old Generation New GenerationIssue Years2 1974-1994 1994-2003

Lives In Force (000) 94 280

Issue Years2 2001-20064 2003-Current

Policies In Force (000) 284 482

Blo

ck P

rof Lives In Force (000) 94 280

In Force Premium ($MM)3 93 532

Average Attained Age 82.6 75.0

% Lif ti P li i 57% 34%

Policies In Force (000) 284 482

In Force Premium ($MM)3 510 992

Average Attained Age 65.9 61.4

% Lif ti P li i 33% 14%

Old Generation Blocks Have Experienced Significant Losses… P i i L A ti G t Th A t l L E i

B % Lifetime Policies 57% 34% % Lifetime Policies 33% 14%

Pricing Lapse Assumptions Greater Than Actual Lapse Experience

Policies With Lifetime Benefits Projected To Perform Worse Than Policies With Non-Lifetime Benefits

Earlier Issued Policies In New Generation Profitable, But Below Pricing

1As Of December 31, 20112Ti i Of St t A l /I l t ti C C M lti l P d t T B M k t d At Th S Ti2Timing Of State Approvals/Implementation Can Cause Multiple Products To Be Marketed At The Same Time3Gross Of Reinsurance/Direct Basis Only4Earlier Series Of New Generation Policies


Performance Improvement Levers2

Average 18% Increase On Certain Older Generation Policies1

A l P i I Of

Seeking An Average Premium Increase In Excess Of 50% On Older Generation

Policies & An Average Premium Increase In Excess of 25% On An Earlier

Series Of Newer Generation Policies O 5 Y

Average 10% Increase On Older Generation Policies

20122010 20112007

Annual Premium Increase Of$60-70MM When Fully

Implemented

Over 5 YearsAnnual Premium Increase Of $200-300MM When Fully Implemented

Older Generation PoliciesAnnual Premium Increase

Of $50-60MM

20122010 20112007

Discount Changes2

Reduced Couples Discount From 40% To 20%39%-20% Increase On Most New

Product Sales To Further Adjust For Reduced Couples Discount From 40% To 20%3

Eliminated Preferred Health From 20% To 0%

Feature Changes2

Suspended Lifetime Benefit OptionSuspended Limited Pay Options

Product Sales To Further Adjust For Low Interest Rate Environment …

Expanded Wellness & Care Coordination Services

Premium Rate Increases Underwriting Changes2

Family History Required On All ApplicationsSchizophrenia History

Cardiovascular Disease & Tobacco Use

Premium Rate IncreasesProduct Changes

1As Of June 30, 2012, The Company Had Received Approvals For Price Increases In 45 yStates, Representing Approximately 80 Percent Of The Targeted Premiums.2Changes Apply To Most Policies, Effective July 30, 2012.3As Of June 30, 2012, 22 States Had Approved


New Business Strategy3

Gender-Based Pricing For SinglesReflects Relative Claims Experience

Use Of Blood & Labs As Underwriting Criteria

2013 Risk Selection Changes2013 Product Changes

Reflects Relative Claims Experience Consistent With Other Insurance Products

Eliminate Lifetime BenefitsCapitates Tail Risk

CriteriaLower Maximum Issue Age From 79To 75

Investment Yield Reflecting Low Rate EnvironmentMore Segmented Approach Drives g ppLower Lapse AssumptionReflects Consumer Need


Australia Mortgage Insuranceg g


Australia Portfolio Segmentation

30%New South Wales

($B) 100.2

0.50%

0.52% TotalDelq Rate

ObservationsRisk In Force By StateGeographic Dispersion In Line With Population

0.76%23%

23%

30%New South Wales

Queensland

Victoria

0.50%

0.36%

Population

Overall Delinquency Rate Improved 2bps Sequentially To 0.52%

Delinquency Rates In Pressured13%11%Western Australia

All Other0.52%0.48%

Risk In Force By Vintage

Delinquency Rates In Pressured Segments Remain Elevated... But Stable

Segment 4Q11 1Q12 2Q12

2005 & Prior

2006

31%

($B) 100.2

0.22%

0 77%

0.52% TotalDelq Rate

Segment 4Q11 1Q12 2Q12

2007‐2008 1.28% 1.25% 1.17%

Queensland 0.81% 0.80% 0.76%

Coastal Queensland 1.12% 1.13% 1.05%

20072006

2009

9%13%11%12%10%

2008

2010

1.03%0.77%

0.89%1.33%

0.33%

Guideline Changes In 2008/1H09 Eliminated Certain Products


5%9%2011 0.10%2012 0.01%

Australia Portfolio UpdateObservationsDelinquency RatesDelinquency Trends Stabilizing As Portfolio Seasons1 4% Portfolio Seasons

2007/2008 Vintages Under Performing Other Books

Small Business/Self Employed1.0%

1.2%

1.4%

‘07 ’08

’07–’08 Self-Employed

Small Business/Self-Employed Continue To Feel Pressure

Strong Performance In Recent Vintages

0.6%

0.8%2009

‘07–’08

Vintages

0 0%

0.2%

0.4%

2010

2011

0.0%1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Months Aging


Australia Direct Business Only

Australia Paid Claims

852 770

Observations# Of Claims PaidPaid Claims Remain Elevated... As Expected

393 396 483p

2Q12 Claims Paid Covered By 1Q12 Reserve Strengthening

Queensland 2007/2008 Vintages &2Q11 3Q11 4Q11 1Q12 2Q12

Average Paid Claim (A$, K)

Queensland, 2007/2008 Vintages & SB/SE1 Remain Key Drivers

Segment 1Q12 2Q12

07 08 SB/SE 107 129

7691

776562

Average Paid Claim (A$, K)

07‐08 SB/SE 107 129

SB/SE 115 119

Coastal Queensland 132 128

Queensland 88 97


2Q11 3Q11 4Q11 1Q12 2Q12 1Small Business/Self-Employed

Australia Loss Reserve Update

Delinquency Mix Influencing % Of Effective RIF... Late Stage78

83

Observations% Of Effective RIF1 Reserved

Effective RIF... Late Stage Delinquencies Transitioning To Foreclosure

Continue To Supplement Quarterly 57

4843

Before Strengthening1Q122Q12

pp Q yActuarial Review With Loan-By-Loan Analysis

14

27

15 16

43

Early Stage Late Stage Foreclosure

Total Loss Reserves @ 2Q12: A$312MM


1Risk In Force

Australia Delinquency RollObservationsQuarterly Trends

2Q11 3Q11 4Q11 1Q12 2Q12 2Q12 New Delinquencies Consistent With 1Q12 Levels

Beginning Balance 7,557 8,193 8,464 7,874 7,837

New 3,983 4,040 3,100 3,555 3,556

Cures (2,954) (3,373) (3,207) (2,740) (3,096)

With 1Q12 Levels

Improving Cure Trend Across Portfolio

Number Of Paid Claims In 2Q12Paid Claims (393) (396) (483) (852) (770)

Ending Balance 8,193 8,464 7,874 7,837 7,527

Number Of Paid Claims In 2Q12 Remained Elevated Relative To 2011

Anticipate Modest Decline In Delinquency Inventory In 2H12Change In Delqs 636 271 (590) (37) (310)

Delinquency Rate 0.56% 0.59% 0.55% 0.54% 0.52%

Delinquency Inventory In 2H12


U.S. Mortgage Insuranceg g


Delinquencies By Aging CategoryPrimary Delinquencies

122,279

107,104101,759 98,613 95,395

89,018 87,464 88,02030%

27% 26% 27% 26% 24% 24% 26%≤3 Payments

87,007

26%79,474

22%74,683

%47%

46% 42% 38% 36% 35%

45%

31%

46%

28% 4-11 Payments

≤3 Payments

45%

29%

48%

30%

22%

28%

22%

4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12Fl A R P D l ($K)

23% 27% 32% 35% 38% 41% 45% 46% ≥12 Payments45% 48% 50%

Flow Average Reserve Per Delq ($K)

18.9 19.2 19.5 20.4 24.3 25.4 29.2 28.8 29.1 30.6 30.6


Reserve Strengthening While Delinquencies Trend Lower

Flow New Delinquency Trends

40,000 HAMP

Flow New Delqs Slowing Since 3Q09 -- Seasonality In 3Q10 & 3Q11(Delinquency Count)

1

36,221 34,955

32,367

36,100 33,609

29,323

26 00830,000

35,000

40,000 HAMPOther ModsSelf-Cures1st Time Delq

Re‐Delq.

24,871 26,008

24,600 22,652

20,353 22,428

21,101

17,430 16,167

20,000

25,000

5 000

10,000

15,000

-

5,000

4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q121Home Affordable Modification Program


New Delinquency / Re-Delinquency Trends Favorable

New Delinquencies -- Bad Books Run Off2005–2008 Books Peaked In 4Q09# Of New Delinquencies

4,000

5,000

3,000

1,000

2,000

01/05 7/05 1/06 7/06 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12

2005 2006 2007 2008


Burn-Out Is Gradual But Meaningful… Historical Seasonal Drop In 1Q

Capital Strategy

Risk To Capital Ratio X:1

33 4

Regulatory Capital Position Maintaining Capital Flexibility•25:1 Waivers – North Carolina Statutory Capital Waiver Extended34 3

28.633.4 Statutory Capital Waiver Extended

Through July 31, 2014Waivers Or No Action In Place From 44 States

29.534.3

50 State Production Flexibility Maintained

•Contingency Plans In Place With GRMAC2; Requires GSE3 Approval

1Q12 1Q122Q12E 2Q12ECombined GMICO1

Currently Writing Business In 5 States: OH, KS, ID, MO, FL

•Discussions On Potential Alternative StructuresCombined GMICO1 Structures

1Genworth Mortgage Insurance Company 2Genworth Residential Mortgage Assurance Corporation3Government Sponsored Entity


2Q12 Risk To Capital Is An Estimate Due To Timing Of Filing Of Statutory Financial Statements

Appendixpp


Definition Of Selected Operating Performance MeasuresManagement uses selected operating performance measures including ''sales," and "insurance in force" or "risk in force" which are commonly used in the insurance g p g p g , yand investment industries as measures of operating performance.

Management regularly monitors and reports sales metrics as a measure of volume of new and renewal business generated in a period. Sales refer to (1) annualized first-year premiums for long term care insurance and (2) new insurance written for mortgage insurance. Sales do not include renewal premiums on policies or contracts written during prior periods. The company considers annualized first-year premiums and new insurance written to be a measure of the company's operating performance because they represent a measure of new sales of insurance policies or contracts during a specified period, rather than a measure of the company's revenues or profitability during that period.

Management regularly monitors and reports insurance in force and risk in force. Insurance in force for the international mortgage business is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. For the risk in force in the international mortgage insurance business, the company has computed an “effective” risk in force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective risk in force has been calculated by applying to insurance in force a factor of 35% that represents the highest expected average per-claim payment for any one underwriting year over the life of the company’s businesses in Canada and Australia. The company considers insurance in force and risk in force to be a measure of the company’s operating performance because they represent a measure of the size of the business at a specific date which will generate revenues and profits in a future period, rather than a measure of the company’s revenues or profitability during that period.

These operating measures enable the company to compare its operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.


Cautionary Note Regarding Forward-Looking Statements This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects ” “intends ” “anticipates ” “plans ” “believes ” “seeks ” “estimates ” “will” or words of similar meaning and include but are not limited toidentified by words such as expects, intends, anticipates, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to, statements regarding the outlook for the company’s future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including the following:•Risks relating to the company’s businesses, including downturns and volatility in global economies and equity and credit markets; downgrades or potential downgrades in the company’s financial strength or credit ratings; interest rate fluctuations and levels; adverse capital and credit market conditions; the impact on the potential extension, replacement or refinancing of the company’s credit facilities; the valuation of fixed maturity, equity and trading securities; defaults, downgrades or other events impacting the value of the company’s fixed maturity securities portfolio; defaults on the company’s commercial mortgage loans or the mortgage loans underlying the company’s investments in commercial p y y p ; p y g g g g y g p ymortgage-backed securities and volatility in performance; goodwill impairments; defaults by counterparties to reinsurance arrangements or derivative instruments; an adverse change in risk based capital and other regulatory requirements; insufficiency of reserves; legal constraints on dividend distributions by the company’s subsidiaries; competition; availability, affordability and adequacy of reinsurance; loss of key distribution partners; regulatory restrictions on the company’s operations and changes in applicable laws and regulations; legal or regulatory investigations or actions; the failure of or any compromise of the security of the company’s computer systems; the occurrence of natural or man-made disasters or a pandemic; the effect of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act; changes in the accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies; impairments of or valuation allowances against the company’s deferred tax assets; changes in expected morbidity and mortality rate; accelerated amortization of deferred acquisition costs and present value of future profits; reputational risks as a result of rate increases on certain in force long term care insurance products; medical advances such as genetic research and diagnostic imaging and related legislation; unexpected changes incertain in force long term care insurance products; medical advances, such as genetic research and diagnostic imaging, and related legislation; unexpected changes in persistency rates; ability to continue to implement actions to mitigate the impact of statutory reserve requirements; the failure of demand for long term care insurance to increase; political and economic instability or changes in government policies; foreign exchange rate fluctuations; unexpected changes in unemployment rates; unexpected increases in mortgage insurance default rates or severity of defaults; the significant portion of high loan to value insured international mortgage loans which generally result in more and larger claims than lower loan-to-value ratios; competition with government owned and government sponsored enterprises offering mortgage insurance; changes in international regulations reducing demand for mortgage insurance; increases in mortgage insurance default rates; failure to meet, or have waived to the extent needed, the minimum statutory capital requirements and hazardous financial condition standards; uncertain results of continued investigations of insured U.S. mortgage loans; possible rescissions of coverage and the results of objections to the company’s rescissions; the extent to which loan modifications and other similar programs may provide benefits to the company; unexpected changes in unemployment and underemployment rates in the United States; further deterioration in economic conditions or a further decline in home prices in the United States; problems associated with foreclosure process defects in the United States that may defer claim payments; changes to the role or structure of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac); competition with government owned and government sponsored enterprises offering U.S. mortgage insurance; changes in regulations that affect the U.S. mortgage insurance business; the influence of Fannie Mae, Freddie Mac and a small number of large mortgage lenders and investors; decreases in the volume of high loan to value mortgage originations or increases in mortgage insurance cancellations in the United States; increases in the use of alternatives to private mortgage insurance in the United States and reductions by lenders in the level of coverage they select; the impact of the use of reinsurance with reinsurance companies affiliated with U.S. mortgage lending customers; legal actions under the Real Estate Settlement Procedures Act of 1974; and potential liabilities in connection with the company’s U S contract underwriting services;liabilities in connection with the company s U.S. contract underwriting services; •Other risks, including the risk that adverse market or other conditions might further delay or impede the planned initial public offering (IPO) of the company’s mortgage insurance business in Australia; the possibility that in certain circumstances the company will be obligated to make payments to General Electric Company (GE) under the tax matters agreement with GE even if the company’s corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control; and provisions of the company’s certificate of incorporation and bylaws and the tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests; and•Risks relating to the company’s common stock, including the suspension of dividends and stock price fluctuations.The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.


p y g p y p y g , , p

Second Quarter 2012s2.q4cdn.com/240635966/files/doc_events/GNW 2Q12...All financial data as of June...

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