Genworth Financial : Q3 Earnings Release

6620 West Broad Street

Richmond, VA 23230

Genworth Financial Announces Third Quarter 2020 Results

Third Quarter Net Income Of $418 Million And Adjusted Operating Income Of $132

Million

• Merger Agreement With China Oceanwide Holdings Group Co., Ltd (Oceanwide) Extended To November 30, 2020; Oceanwide Has Made Significant Progress On Transaction Funding
• U.S. Mortgage Insurance (MI) Segment Adjusted Operating Income Of $141 Million Primarily Driven By Lower Levels Of New Delinquencies And Incurred But Not Reported (IBNR) Favorability
• • $26.6 Billion In New Insurance Written (NIW) Reflecting Robust Mortgage Origination Market
• U.S. Life Insurance Segment Adjusted Operating Income Of $14 Million
• • LTC1 Adjusted Operating Income Of $59 Million Due To Higher Claim Terminations And Lower Claim Incidence
  • Life Insurance Adjusted Operating Loss Of $69 Million Due To Unfavorable Performance In Term Life And Term Universal Life Insurance Blocks
  • Fixed Annuities Adjusted Operating Income Of $24 Million
• Holding Company Cash And Liquid Assets Of $814 Million, Including $74 Million Restricted
• • $436 Million Dividend From U.S. MI To The Holding Company From Proceeds Of The Genworth Mortgage Holdings, Inc. (GMHI)2 Debt Offering Of $750 Million

Richmond, VA (November 4, 2020) - Genworth Financial, Inc. (NYSE: GNW) today reported results for the quarter ended September 30, 2020. The company reported net income3 of $418 million, or $0.82 per diluted share, in the third quarter of 2020, compared with net income of $18 million, or $0.04 per diluted share, in the third quarter of 2019. The company reported adjusted operating income4 of $132 million, or $0.26 per diluted share, in the third quarter of 2020, compared with adjusted operating income of $123 million, or $0.24 per diluted share, in the third quarter of 2019.

"Genworth delivered strong operating performance in the third quarter, driven by outstanding top line and bottom line results in our U.S. mortgage insurance business," said Tom McInerney, President and CEO of

1. Long term care insurance.
2. Genworth's indirect wholly-owned mortgage insurance subsidiary.
3. Unless otherwise stated, all references in this press release to net income (loss), net income (loss) per share, adjusted operating income (loss), adjusted operating income (loss) per share and book value per share should be read as net income (loss) available to Genworth's common stockholders, net income (loss) available to Genworth's common stockholders per diluted share, adjusted operating income (loss) available to Genworth's common stockholders, adjusted operating income (loss) available to Genworth's common stockholders per diluted share and book value available to Genworth's common stockholders per share, respectively.
4. This is a financial measure that is not calculated based on U.S. Generally Accepted Accounting Principles (Non-GAAP). See the Use of Non-GAAP Measures section of this press release for additional information.

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Genworth. "While the economic environment remains unpredictable because of the COVID-19 pandemic, we are confident that we are taking the right steps to enhance liquidity, position our businesses to navigate continued uncertainty and maximize shareholder value. In addition to pursuing the closing of the Oceanwide transaction, we are also making progress against our strategic priorities which include addressing our near- term debt obligations, strengthening our balance sheet and executing our LTC multi-year rate action plan, which remains critical to stabilizing our U.S. life insurance businesses."

The COVID-19 pandemic continues to evolve and impact Genworth's businesses in a number of ways. In the current quarter, the company saw sequential improvement in unemployment trends, lower levels of new delinquencies relative to the second quarter and a robust mortgage origination market, which benefited the U.S. MI business. Mortality remained elevated relative to last year, which had a mixed impact on the LTC and life insurance businesses. While uncertainty remains high, the company is continuing to operate effectively, and its mortgage insurance businesses are maintaining strong capital positions to ensure the businesses are resilient across a wide range of scenarios.

Strategic Update

On October 1, Genworth and Oceanwide announced they agreed to extend the merger agreement deadline to not later than November 30, 2020 to provide Oceanwide with additional time to finalize the funding plan for the transaction, which was delayed due to challenges presented by the global pandemic.

On November 2, the company announced that Oceanwide has made significant progress on the Hony Capital funding and has provided satisfactory documentation to Genworth indicating that Hony Capital expects to be able to finalize the $1.8 billion financing in November, and that Oceanwide is continuing to work diligently with the goal of closing the transaction by November 30, 2020, subject to timely receipt of outstanding regulatory re- approvals, confirmations and/or clearances. Oceanwide is also gathering funds in Mainland China to provide the remaining amount required to pay for the total Genworth purchase price of $5.43 per share. In addition, Oceanwide has requested confirmation of the extension of the acceptance of filing from the Chinese National Development and Reform Commission (NDRC) with respect to the transaction.

The parties are hopeful that Oceanwide's transaction funding will be completed in time to close the transaction by November 30, without the need for an additional extension.

"I am very pleased with Oceanwide's excellent progress since our last update," said Tom McInerney, President and CEO of Genworth. "They have made significant strides to finalize the financing with Hony Capital, and to update the filings required to close the transaction. Based on this progress, we are hopeful we will be able to close the transaction by November 30 and deliver the best value to our shareholders."

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LU Zhiqiang, chairman of Oceanwide, continued, "The Oceanwide team and I are working to finalize the remaining steps of the transaction process as quickly as possible. The acquisition of Genworth remains a strategically important priority for Oceanwide, and we remain committed to finalizing the funding plan for the transaction with the goal of closing the transaction by November 30."

The transaction has now received all U.S. regulatory approvals needed to close the transaction, subject to confirmation from the Delaware Department of Insurance that the acquisition of Genworth's Delaware- domiciled insurer may proceed under the existing approval. With respect to recent regulatory matters: the Financial Industry Regulatory Authority (FINRA) has confirmed that the transaction may close under FINRA Rule 1017(c) prior to receiving its final approval; the government-sponsored enterprises (GSEs) recently re- approved the transaction, subject to certain conditions; and the North Carolina Department of Insurance extended its previously-granted approval through January 24, 2021. Oceanwide needs to receive clearance for currency conversion and transfer of funds from the State Administration of Foreign Exchange, and the NDRC needs to confirm the extension of the acceptance of filing with respect to the transaction, as its prior acceptance of filing has expired. All other required approvals and clearances have been secured.

Financial Performance

Consolidated Net Income & Adjusted Operating Income
			Three months ended September 30
			2020				2019
						Per						Per
						diluted						diluted		Total
(Amounts in millions, except per share)			Total			share			Total			share		% change
Net income available to Genworth's common stockholders	$	418	$	0.82	$	18	$	0.04		NM5
Adjusted operating income	$	132	$	0.26	$	123	$	0.24	7 %
Weighted-average diluted shares		511.5						511.2
						As of September 30
			2020				2019
Book value per share			$	29.19				$	28.57
Book value per share, excluding accumulated other comprehensive
income (loss)			$	20.99				$	21.38

Net investment gains, net of taxes and other adjustments, increased net income by $285 million in the quarter. The investment gains were driven by sales of U.S. Treasury bonds supporting the company's LTC business as part of ongoing portfolio optimization and mark-to-market gains on limited partnerships. Net income in the third quarter of 2019 included $5 million from investment gains, net of taxes and other adjustments.

5 The company defines "NM" as not meaningful for increases or decreases greater than 200 percent.

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Net investment income was $827 million in the quarter, compared to $786 million in the prior quarter and $816 million in the prior year. Net investment income was higher than the prior quarter and prior year as a result of higher income from bond calls and prepayments, limited partnerships and a more favorable inflation impact on U.S. Government Treasury Inflation Protected Securities. The reported yield and the core yield4 for the quarter were 4.82 percent and 4.65 percent, respectively, compared to 4.65 percent and 4.59 percent, respectively, in the prior quarter.

Genworth's effective tax rate on income from continuing operations for the quarter was approximately 25.6 percent. The effective tax rate was above 21 percent due to the tax effect of forward starting swap gains settled prior to the change in the corporate tax rate under the 2017 Tax Cuts and Jobs Act, which continue to be tax effected at 35 percent as they are amortized into net investment income, as well as by the higher tax expense related to foreign operations.

Adjusted operating income (loss) results by business line are summarized in the table below:

Adjusted Operating Income (Loss)
(Amounts in millions)			Q3 20			Q2 20			Q3 19
U.S. Mortgage Insurance	$	141	$	(3)	$	137
Australia Mortgage Insurance			7			1			12
U.S. Life Insurance			14			(5)			(1)
Runoff			19			24			10
Corporate and Other			(49)			(38)			(35)
Total Adjusted Operating Income (Loss)	$	132	$	(21)	$	123

Adjusted operating income (loss) represents income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and other adjustments, net of taxes. A reconciliation of net income (loss) to adjusted operating income (loss) is included at the end of this press release.

Unless specifically noted in the discussion of results for the Australia MI business, references to percentage changes exclude the impact of translating foreign denominated activity into U.S. dollars (foreign exchange). Percentage changes that include the impact of foreign exchange are found in a table at the end of this press release.

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