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MarketScreener Homepage  >  Equities  >  Nyse  >  OneMain Holdings, Inc.    OMF

ONEMAIN HOLDINGS, INC.

(OMF)
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ONEMAIN : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

07/30/2020 | 08:25am EST

An index to our management's discussion and analysis follows:


Topic                                                   Page

  Forward-Looking Statements                              45
  Overview                                                47
  Recent Developments and Outlook                         48
  Results of Operations                                   51
  Segment Results                                         55
  Credit Quality                                          57
  Liquidity and Capital Resources                         62
  Off-Balance Sheet Arrangements                          67
  Critical Accounting Policies and Estimates              67
  Recent Accounting Pronouncements                        68
  Seasonality                                             68



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                          Forward-Looking Statements



This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are
not statements of historical fact but instead represent only management's
current beliefs regarding future events. By their nature, forward-looking
statements are subject to risks, uncertainties, assumptions, and other important
factors that may cause actual results, performance or achievements to differ
materially from those expressed in or implied by such forward-looking
statements. We caution you not to place undue reliance on these forward-looking
statements, which speak only as of the date they were made. We do not undertake
any obligation to update or revise these forward-looking statements to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events or the non-occurrence of anticipated events,
whether as a result of new information, future developments, or otherwise,
except as required by law. Forward-looking statements include, without
limitation, statements concerning future plans, objectives, goals, projections,
strategies, events, or performance, and underlying assumptions and other
statements related thereto. Statements preceded by, followed by or that
otherwise include the words "anticipates," "appears," "are likely," "believes,"
"estimates," "expects," "foresees," "intends," "plans," "projects," and similar
expressions or future or conditional verbs such as "would," "should," "could,"
"may," or "will" are intended to identify forward-looking statements. Important
factors that could cause actual results, performance, or achievements to differ
materially from those expressed in or implied by forward-looking statements
include, without limitation, the following:

•adverse changes in general economic conditions, including the interest rate
environment and the financial markets;
•risks associated with the COVID-19 pandemic and the mitigation efforts by
governments and related effects on us, our customers, and employees;
•our estimates of the allowance for finance receivable losses may not be
adequate to absorb actual losses, causing our provision for finance receivable
losses to increase, which would adversely affect our results of operations;
•increased levels of unemployment and personal bankruptcies;
•adverse changes in the rate at which we can collect or potentially sell our
finance receivables portfolio;
•natural or accidental events such as earthquakes, hurricanes, tornadoes, fires,
or floods affecting our customers, collateral, or our branches or other
operating facilities;
•war, acts of terrorism, riots, civil disruption, pandemics, disruptions in the
operation of our information systems, or other events disrupting business or
commerce;
•risks related to the acquisition or sale of assets or businesses or the
formation, termination, or operation of joint ventures or other strategic
alliances, including increased loan delinquencies or net charge-offs,
integration or migration issues, increased costs of servicing, incomplete
records, and retention of customers;
•a failure in or breach of our operational or security systems or infrastructure
or those of third parties, including as a result of cyber-attacks, or other
cyber-related incidents involving the loss, theft or unauthorized disclosure of
personally identifiable information, or "PII," of our present or former
customers;
•our credit risk scoring models may be inadequate to properly assess the risk of
customer unwillingness or lack of capacity to repay;
•adverse changes in our ability to attract and retain employees or key
executives to support our businesses;
•increased competition, or changes in customer responsiveness to our
distribution channels, an inability to make technological improvements, and the
ability of our competitors to offer a more attractive range of personal loan
products than we offer;
•changes in federal, state, or local laws, regulations, or regulatory policies
and practices that adversely affect our ability to conduct business or the
manner in which we currently are permitted to conduct business, such as
licensing requirements, pricing limitations or restrictions on the method of
offering products, as well as changes that may result from increased regulatory
scrutiny of the sub-prime lending industry, our use of third-party vendors and
real estate loan servicing, or changes in corporate or individual income tax
laws or regulations, including effects of the Tax Act and the CARES Act;
•risks associated with our insurance operations, including insurance claims that
exceed our expectations or insurance losses that exceed our reserves;
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•our inability to successfully implement our growth strategy for our consumer
lending business or successfully acquire portfolios of personal loans;
•a change in the proportion of secured loans may affect our personal loan
receivables and portfolio yield;
•declines in collateral values or increases in actual or projected delinquencies
or net charge-offs;
•potential liability relating to finance receivables which we have sold or
securitized or may sell or securitize in the future if it is determined that
there was a non-curable breach of a representation or warranty made in
connection with such transactions;
•the costs and effects of any actual or alleged violations of any federal,
state, or local laws, rules or regulations, including any associated litigation;
•the costs and effects of any fines, penalties, judgments, decrees, orders,
inquiries, investigations, subpoenas, or enforcement or other proceedings of any
governmental or quasi-governmental agency or authority and any associated
litigation;
•our continued ability to access the capital markets and maintain adequate
current sources of funds to satisfy our cash flow requirements;
•our ability to comply with our debt covenants;
•our ability to generate sufficient cash to service all of our indebtedness;
•any material impairment or write-down of the value of our assets;
•the ownership of OMH's common stock continues to be highly concentrated, which
may prevent other minority stockholders from influencing significant corporate
decisions and may result in conflicts of interest;
•the effects of any downgrade of our debt ratings by credit rating agencies,
which could have a negative impact on our cost of and/or access to capital;
•our substantial indebtedness, which could prevent us from meeting our
obligations under our debt instruments and limit our ability to react to changes
in the economy or our industry or our ability to incur additional borrowings;
•our ability to maintain sufficient capital levels in our regulated and
unregulated subsidiaries;
•changes in accounting standards or tax policies and practices and the
application of such new standards, policies and practices;
•management estimates and assumptions, including estimates and assumptions about
future events, may prove to be incorrect; and
•various risks relating to continued compliance with the Settlement Agreement
with the U.S. Department of Justice.

We also direct readers to the other risks and uncertainties discussed in other documents we file with the SEC.


If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, our actual results may vary
materially from what we may have expressed or implied by these forward-looking
statements. You should specifically consider the factors identified in this
report and in the documents we file with the SEC, including our 2019 Annual
Report on Form 10-K, that could cause actual results to differ before making an
investment decision to purchase our securities and should not place undue
reliance on any of our forward-looking statements. Furthermore, new risks and
uncertainties arise from time to time, and it is impossible for us to predict
those events or how they may affect us.
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Overview



We are a leading provider of responsible personal loan products, primarily to
non-prime customers. Our network of approximately 1,500 branch offices in 44
states is staffed with expert personnel and is complemented by our centralized
operations and digital presence through online lending. Our digital platform
provides current and prospective customers the option of applying for a personal
loan via our website, www.omf.com. The information on our website is not
incorporated by reference into this report. In connection with our personal loan
business, our insurance subsidiaries offer our customers optional credit and
non-credit insurance, and other products.

In addition to our loan originations, and insurance and other product sales activities, we service loans owned by us and service loans owned by third parties; pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios or other financial assets; and may establish joint ventures or enter into other strategic alliances.

OUR PRODUCTS

Our product offerings include:


•Personal Loans - We offer personal loans through our branch network,
centralized operations, and our website, www.omf.com, to customers who generally
need timely access to cash. Our personal loans are non-revolving, with a
fixed-rate, fixed terms generally between three and six years, and are secured
by automobiles, other titled collateral, or are unsecured. At June 30, 2020, we
had approximately 2.31 million personal loans, of which 53% were secured by
titled property, representing $17.7 billion of net finance receivables, compared
to approximately 2.44 million personal loans, of which 52% were secured by
titled property, totaling $18.4 billion at December 31, 2019.

•Insurance Products - We offer our customers optional credit insurance products
(life insurance, disability insurance, and involuntary unemployment insurance)
and optional non-credit insurance products through both our branch network and
our centralized operations. Credit insurance and non-credit insurance products
are provided by our affiliated insurance companies. We offer GAP coverage as a
waiver product or insurance. We also offer optional home and auto membership
plans of an unaffiliated company.

Our non-originating legacy products include:

•Other Receivables - We ceased originating real estate loans in 2012 and we continue to service or sub-service liquidating real estate loans.

OUR SEGMENT


Beginning in the fourth quarter of 2019, C&I is our only reportable segment. The
remaining components (which we refer to as "Other") consist of (i) our
liquidating SpringCastle Portfolio servicing activity and (ii) our
non-originating legacy operations, which primarily include our liquidating real
estate loans. See Note 15 of the Notes to the Condensed Consolidated Financial
Statements included in this report for more information about our segment.
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                       Recent Developments and Outlook



RECENT DEVELOPMENTS

Management's Response to the COVID-19 Pandemic


COVID-19 has evolved into a global pandemic and has resulted in widespread
volatility and deterioration in economic conditions across the United States.
Governmental authorities have taken a number of steps to combat or slow the
spread of COVID-19, including shutdowns of non-essential businesses,
implementing stay-at-home orders, promoting social distancing measures, and
other actions which have disrupted economic activity. We have been and will
continue to be focused on helping our customers and employees through these
difficult times. We are generally classified as an "essential business" by
government authorities because we play a vital role in providing personal loans
to hardworking Americans in hundreds of local communities. Our long track record
of a strong balance sheet and liquidity profile, disciplined underwriting, and
focus on our customers, allows us to remain well positioned to address the
economic uncertainties, as well as take advantage of opportunities for growth as
the economy recovers. Although we cannot predict how quickly and/or broadly the
economy will recover, we will continue to:

•Maintain strong capital and liquidity: We have maintained a strong balance
sheet and liquidity profile as a result of numerous actions taken over the last
several years, such as deleveraging, increasing the available borrowing capacity
under our revolving conduit facilities, diversifying our funding mix, and
extending our unsecured debt maturities. Our cash and cash equivalents, together
with our potential borrowings under our revolving conduit facilities, provide a
liquidity runway through 2022 under numerous stress scenarios, assuming no
access to the capital markets. This liquidity runway calculation contemplates
all the cash needs of the Company.

•Continue to enhance our underwriting: We quickly took steps to tighten
underwriting standards and reduce originations to higher risk categories of
lending and continue to monitor and evaluate our underwriting standards as we
further understand the evolving impacts the COVID-19 pandemic is having on
local-level economies. We are using our decades of experience and proprietary
data to serve our customers while maintaining an appropriately conservative
portfolio risk-management program.

•Focus on serving our customers: Our top priority is to service and care for our
current customers. We actively engaged with other lenders to put forward
solutions to help our customers through this difficult time. We took steps to
enhance our servicing capacity by shifting branch team members toward a greater
focus on servicing existing loans. Beginning in late March and through April
2020, we increased proactive outreach to customers, offering to support them
through our borrower assistance programs, which includes reduced and deferred
payment options, waiving of late fees, and temporary suspension in credit bureau
reporting.

•Deploy business continuity plans: We deployed our existing business continuity
plans which are designed to ensure operational flexibility, including the
ability of our employees to work remotely. Our hybrid operating model, with
fully scaled branch and central operations teams, can dynamically reroute
application and servicing capabilities to service centers and branches across
the United States. Although a small number of branches were temporarily closed,
primarily for deep cleanings or due to government mandates, and subsequently
reopened, all of our teams, both branch and central operations, remain
operational today. We continue to serve our customers while maintaining social
distancing and other safety protocols.

For further information regarding the impact of COVID-19 on our business,
results of operations, and liquidity and capital resources, see "Outlook" and
"Results of Operations" under Management's Discussion and Analysis of Financial
Condition and Results of Operations in this report.


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Cash Dividends to OMH's Common Stockholders

On July 27, 2020, OMH declared a dividend of $2.33 per share payable on
August 18, 2020 to record holders of OMH's common stock as of the close of
business on August 10, 2020. For information regarding the quarterly dividends
declared by OMH, see "Liquidity and Capital Resources" under Management's
Discussion and Analysis of Financial Condition and Results of Operations in this
report.

Issuance of 8.875% Senior Notes Due 2025 and Notice of Redemption of 8.25% Senior Notes due 2020

On May 14, 2020, OMFC issued a total of $600 million of aggregate principal amount of 8.875% Senior Notes due 2025.

On June 29, 2020, OMFC issued a notice of full redemption of its 8.25% Senior Notes due 2020.


For further information regarding the issuance and notice of redemption of our
unsecured debt, see Note 8 of the Notes to the Condensed Consolidated Financial
Statements included in this report.

Securitization Transaction Completed: OMFIT 2020-1


On May 1, 2020, we completed a private securitization in which OMFIT 2020-1
issued $821 million principal amount of notes backed by personal loans. For
further information regarding the issuance of our secured debt, see "Liquidity
and Capital Resources" under Management's Discussion and Analysis of Financial
Condition and Results of Operations in this report.

Stock Repurchase Program

For information regarding the stock repurchase program, see Note 11 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Appointment of Member of the OMFC Board of Directors and Executive Vice President of OMFC

On January 2, 2020, Adam L. Rosman was appointed to the OMFC Board of Directors and as Executive Vice President. Mr. Rosman replaced John C. Anderson, who resigned as a member of OMFC's board of directors and as Executive Vice President on January 2, 2020.

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OUTLOOK

We continue to manage the impacts of the COVID-19 pandemic and are prepared to
face any additional challenges that may impact our industry as states ease their
stay-at-home orders and move to reopen their economies. As a result of the
COVID-19 pandemic, we expect near-term impacts to continue to affect our
originations, loan loss reserves, and involuntary unemployment insurance claims.
The ultimate impact on our losses depends on the rates of unemployment,
government stimulus measures, state reopenings, and the speed of economic
recovery. There is also uncertainty regarding the effects of a secondary
outbreak of COVID-19 and the related potential for additional shutdowns or
re-shutdowns over the near-term. To the extent economies are suppressed or slow
to recover, without continued government stimulus measures, we could see higher
delinquency trends during the remainder of 2020 and related losses to be
realized in 2021. We may incorporate further changes to the macroeconomic
assumptions within our forecast used in our credit loss allowance model, as well
as changes to our loan loss performance outlook, both of which could lead to
further changes in our allowance for loan losses, reserve rate, and provision
expense. Additionally, as a result of anticipated lower receivables and higher
losses, we are proactively taking measures to reduce our operating expenses.

The full extent to which the COVID-19 pandemic will impact our business and
operating results will depend on future developments that are highly uncertain
and cannot be accurately predicted, including new information that may emerge
concerning COVID-19 and the mitigation efforts by government entities, as well
as our own COVID-19 operational response. We have taken and will continue to
take active and decisive steps in this time of uncertainty and remain committed
to the safety of our employees, while also continuing to serve our customers by
remaining open with appropriate protective protocols in place. While we
anticipate that the economic recovery could be unstable, we believe we are
well-positioned to face these challenges and are prepared for future growth
opportunities. We have served hard working Americans for many decades, through
both changing economic conditions and natural disasters, and will continue to
remain focused on our strategic priorities of strong liquidity, disciplined
underwriting, and serving our customers.
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                             Results of Operations



The results of OMFC are consolidated into the results of OMH. Due to the nominal
differences between OMFC and OMH, content throughout this section relates only
to OMH. See Note 2 of the Notes to the Condensed Consolidated Financial
Statements included in this report for the reconciliation of results of OMFC to
OMH.

COVID-19 PANDEMIC IMPACTS ON RESULTS

The adverse effects caused by the COVID-19 pandemic, mitigation efforts from government stimulus measures, as well as our own operational response has impacted our business, results of operations, and liquidity and capital resources. The following is a summary of the most significant impacts:


•Net finance receivables were $17.7 billion as of June 30, 2020 compared to
$18.4 billion as of December 31, 2019. Initial operational disruptions, combined
with actions taken by management to tighten underwriting standards, which
reduced originations to higher risk categories of lending, and a reduction in
the demand for personal loans, resulted in an overall decline in net finance
receivables. Originations began to be impacted in the last two weeks of March,
with our lowest production levels occurring in April. Originations increased in
May and June as we enhanced our remote origination capabilities and increased
proactive outreach to customers, as well as improvement in customer demand,
although below 2019 levels, as unemployment trends improved.

•The government stimulus measures, our borrower assistance programs, and
collection efforts resulted in strong customer payment trends, which contributed
to a decrease in our 30-89 day delinquency ratio to 1.6% as of June 30, 2020
when compared to 2.5% as of December 31, 2019 and 2.1% as of June 30, 2019.

•Under our borrower assistance programs, we waived late fees for payments due
March 15, 2020 through April 30, 2020, suspended credit bureau reporting for
newly delinquent accounts in March and April of 2020, and offered reduced and
deferred payment options to our customers. Borrower assistance enrollment peaked
in April at 8.0% of loans in the portfolio, and returned to 2.3% at June 30,
2020, which is largely consistent with pre-COVID-19 enrollment levels.

•Our loan loss reserve methodology includes forecasted economic trends and
unemployment levels, which significantly increased our provision for finance
receivable losses as a result of the impacts of COVID-19. The rise in
unemployment claims around the country also resulted in an increase in
involuntary unemployment insurance claims expense. For further information
regarding the impact of COVID-19 on net income for the periods, see "Results of
Operations - OMH's Consolidated Results" under Management's Discussion and
Analysis of Financial Condition and Results of Operations in this report.

•In March, out of an abundance of caution, we elected to draw our revolving
conduit facilities to preserve financial flexibility during the capital market
disruption resulting from the COVID-19 pandemic. During the second quarter of
2020, we subsequently repaid all of our revolving conduit facilities. We also
issued debt securities in both the unsecured and ABS markets. As of June 30,
2020, we had $2.7 billion of cash and cash equivalents, $8.7 billion of
unencumbered personal loans, and $7.1 billion in potential borrowing capacity
from our 14 revolving conduit facilities.

•In the second quarter, the Company incurred direct costs associated with
COVID-19 relating to (i) information technology costs to transition employees to
work remotely, (ii) branch, central operations, and corporate locations
sanitization services and supplies, (iii) installation of protective barriers
and other appropriate safety measures as employees return to work, and (iv)
other costs and fees directly related to COVID-19. The Company also incurred
restructuring costs associated with a reduction in workforce. For further
information regarding directs costs associated with COVID-19 and restructuring
charges, see "Results of Operations - Non-GAAP Financial Measures" under
Management's Discussion and Analysis of Financial Condition and Results of
Operations in this report.

•We did not have any impairments with respect to goodwill, intangible assets,
long-lived assets, and right of use assets at June 30, 2020. We currently do not
anticipate any impairments as it relates to these assets at this time, but we
will continue to monitor and test as appropriate.

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OMH'S CONSOLIDATED RESULTS

See the table below for OMH's consolidated operating results and selected financial statistics. A further discussion of OMH's operating results for our operating segment is provided under "Segment Results" below.

                                                                                                                         At or for the
                                                              At or for the                                          Six Months Ended June
                                                       Three Months Ended June 30,                                            30,
(dollars in millions, except per share
amounts)                                                2020                   2019                 2020                  2019

Interest income                                   $       1,077$     1,000$     2,184$      1,955
Interest expense                                            271                   238                  527                   473
Provision for finance receivable losses                     423                   268                  954                   554
Net interest income after provision for
finance receivable losses                                   383                   494                  703                   928

Other revenues                                              148                   156                  289                   304
Other expenses                                              413                   394                  831                   774
Income before income taxes                                  118                   256                  161                   458
Income taxes                                                 29                    62                   40                   112
Net income                                        $          89           $       194$       121$        346

Share Data:

Earnings per share:

Diluted                                           $        0.66$      1.42$      0.90$       2.54

Selected Financial Statistics *
Finance receivables held for investment:
Net finance receivables                           $      17,721           $ 

16,980 $ 17,721$ 16,980 Number of accounts

                                    2,305,877             2,356,975            2,305,877             2,356,975

Average net receivables                           $      17,909           $ 

16,538 $ 18,144$ 16,342 Yield

                                                     24.16   %             24.19  %             24.16  %              24.06    %
Gross charge-off ratio                                     7.21   %              7.03  %              7.28  %               7.42    %
Recovery ratio                                            (0.89)  %             (0.80) %             (0.89) %              (0.75)   %
Net charge-off ratio                                       6.32   %              6.23  %              6.39  %               6.67    %
30-89 Delinquency ratio                                    1.63   %              2.14  %              1.63  %               2.14    %
Origination volume                                $       2,047           $ 

3,879 $ 4,636$ 6,462 Number of accounts originated

                           194,480               410,347              471,253               686,677
Debt balances:
Long-term debt balance                            $      18,010           $ 

15,551 $ 18,010$ 15,551 Average daily debt balance

                               19,772                15,974               18,724                15,906


* See "Glossary" at the beginning of this report for formulas and definitions of our key performance ratios.

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Comparison of Consolidated Results for the Three and Six Months Ended June 30,
2020 and 2019

Interest income increased $77 million or 7.7% and $229 million or 11.7% for the
three and six months ended June 30, 2020, respectively, when compared to the
same periods in 2019 primarily due to growth in our loan portfolio.

Interest expense increased $33 million or 13.9% and $54 million or 11.4% for the
three and six months ended June 30, 2020, respectively, when compared to the
same periods in 2019 primarily due to an increase in average debt of
$3.8 billion and $2.8 billion, respectively, offset by a lower average cost of
funds.

See Notes 8 and 9 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and our revolving conduit facilities.


Provision for finance receivable losses increased $155 million or 57.8% and $400
million or 72.2% for the three and six months ended June 30, 2020, respectively,
when compared to the same periods in 2019 primarily due to the adoption of ASU
2016-13 and the forecast of elevated unemployment as a result of COVID-19,
partially offset by the decline in finance receivables within the current
periods.

Other revenues decreased $8 million or 5.1% for the three months ended June 30,
2020 when compared to the same period in 2019 primarily due to a decrease in
insurance products and home and auto membership plans sold as a result of lower
loan origination volume, along with a decrease from prior period due to a net
gain on the sale of SpringCastle interests. The decrease was partially offset by
prior period net loss on the repayment of debt.

Other revenues decreased $15 million or 4.9% for the six months ended June 30,
2020 when compared to the same period in 2019 primarily due to a decrease in
investment revenue primarily driven by lower mark-to-market gains on equity
investment securities, a decrease in insurance products and home and auto
membership plans sold as a result of lower loan origination volume, along with
decreases from prior periods due to net gains on sale from the sale of
SpringCastle interests and the sale of a cost method investment. The decrease
was partially offset by prior period net losses on the repayments of debt.

Other expenses increased $19 million or 4.8% and $57 million or 7.4% for the
three and six months ended June 30, 2020 when compared to the same periods in
2019 primarily due to an increase in insurance policy benefits and claims
expense primarily due to the impact of COVID-19 on our involuntary unemployment
insurance products. The increase was partially offset by a decrease in general
operating expenses reflecting our efforts to tightly manage costs, as well as
variable expenses associated with lower loan origination volume.

Income taxes totaled $29 million and $40 million for the three and six months
ended June 30, 2020, respectively, compared to $62 million and $112 million for
the three and six months ended June 30, 2019, respectively, due to lower pre-tax
income in the current periods.

For the three and six months ended June 30, 2020, the effective tax rates were
24.7% and 24.6%, respectively. For the three and six months ended June 30, 2019,
the effective tax rates were 24.3% and 24.5%, respectively. The effective tax
rates differed from the federal statutory rate of 21% primarily due to the
effect of state income taxes.

See Note 13 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on effective tax rates.

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NON-GAAP FINANCIAL MEASURES

Management uses adjusted pretax income (loss), a non-GAAP financial measure, as
a key performance measure of our segment. Adjusted pretax income (loss)
represents income (loss) before income taxes on a Segment Accounting Basis and
excludes direct costs associated with COVID-19, net loss resulting from
repurchases and repayments of debt, acquisition-related transaction and
integration expenses, net gain on sale of cost method investment, restructuring
charges, additional net gain on sale of Spring Castle interests, and net loss on
sale of real estate loans. Management believes adjusted pretax income (loss) is
useful in assessing the profitability of our segment.

Management also uses pretax capital generation, a non-GAAP financial measure, as
a key performance measure of our segment. This measure represents adjusted
pretax income as discussed above and excludes the change in our allowance for
finance receivable losses in the period while still considering the net
charge-offs incurred during the period. Management believes that pretax capital
generation is useful in assessing the capital created in the period impacting
the overall capital adequacy of the Company. Management believes that the
Company's reserves, combined with its equity, represent the Company's loss
absorption capacity.

Management utilizes both adjusted pretax net income (loss) and pretax capital
generation in evaluating our performance. Additionally, both of these non-GAAP
measures are consistent with the performance goals established in OMH's
executive compensation program. Adjusted pretax income (loss) and pretax capital
generation are non-GAAP financial measures and should be considered supplemental
to, but not as a substitute for or superior to, income (loss) before income
taxes, net income, or other measures of financial performance prepared in
accordance with GAAP.

OMH's reconciliations of income (loss) before income tax expense (benefit) on a
Segment Accounting Basis to adjusted pretax income (loss) (non-GAAP) by segment
and Consumer and Insurance pretax capital generation (non-GAAP) were as follows:

                                                                    Three Months Ended                                    Six Months Ended
                                                                         June 30,                                             June 30,
(dollars in millions)                                           2020                   2019             2020                 2019

Consumer and Insurance
Income before income taxes - Segment Accounting Basis       $    128

$ 270$ 179 $ 502 Adjustments:

  Direct costs associated with COVID-19                            6                      -                9                       -
Acquisition-related transaction and integration
expenses                                                           2                      8                8                      14
  Net loss on repurchase and repayment of debt                     -                     12                -                      28
Net gain on sale of cost method investment                         -                      -                -                     (11)
Restructuring charges                                              7                      1                7                       4
Adjusted pretax income (non-GAAP)                           $    143

$ 291$ 203 $ 537


Provision for finance receivable losses                     $    422

$ 263$ 952 $ 539 Net charge-offs

                                                 (282)                  (256)            (578)                   (540)
Pretax capital generation (non-GAAP)                        $    283

$ 298$ 577 $ 536

Other

Income (loss) before income taxes - Segment
Accounting Basis                                            $     (1)$     3$    (2)         $            -

Adjustments:

 Additional net gain on sale of SpringCastle
interests                                                          -                     (7)               -                      (7)
Net loss on sale of real estate loans *                            -                      -                -                       1

Adjusted pretax loss (non-GAAP)                             $     (1)$    (4)$    (2)         $           (6)


* During the six months ended June 30, 2019, the resulting impairment on finance
receivables held for sale remaining after the February 2019 Real Estate Loan
Sale has been combined with the gain on the sale. See Note 6 of the Notes to the
Condensed Consolidated Financial Statements included in this report for more
information regarding the real estate loan sale.
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                                Segment Results



The results of OMFC are consolidated into the results of OMH. Due to the nominal
differences between OMFC and OMH, content throughout this section relate only to
OMH. See Note 2 of the Notes to the Condensed Consolidated Financial Statements
included in this report for the reconciliation of results of OMFC to OMH.

See Note 19 of the Notes to the Consolidated Financial Statements in Part II -
Item 8 included in our 2019 Annual Report on Form 10-K for a description of our
segments and methodologies used to allocate revenues and expenses to each
segment. See Note 15 of the Notes to the Condensed Consolidated Financial
Statements included in this report for reconciliations of segment total to
condensed consolidated financial statement amounts.

CONSUMER AND INSURANCE

OMH's adjusted pretax income and selected financial statistics for C&I on an adjusted Segment Accounting Basis were as follows:

                                                                                                                          At or for the
                                                               At or for the                                          Six Months Ended June
                                                        Three Months Ended June 30,                                            30,
(dollars in millions)                                    2020                   2019                 2020                  2019

Interest income                                    $       1,074$       999$     2,174$      1,953
Interest expense                                             266                   232                  515                   462
Provision for finance receivable losses                      422                   263                  952                   539
Net interest income after provision for
finance receivable losses                                    386                   504                  707                   952
Other revenues                                               144                   156                  281                   307
Other expenses                                               387                   369                  785                   722
Adjusted pretax income (non-GAAP)                  $         143           

$ 291$ 203$ 537


Selected Financial Statistics *
Finance receivables held for investment:
Net finance receivables                            $      17,732

$ 17,016$ 17,732$ 17,016 Number of accounts

                                     2,305,877             2,356,975            2,305,877             2,356,975

Average net receivables                            $      17,921$    16,573$    18,159$     16,376
Yield                                                      24.09   %             24.17  %             24.08  %              24.05    %
Gross charge-off ratio                                      7.22   %              7.11  %              7.29  %               7.51    %
Recovery ratio                                             (0.89)  %             (0.91) %             (0.89) %              (0.86)   %
Net charge-off ratio                                        6.33   %              6.20  %              6.40  %               6.65    %
30-89 Delinquency ratio                                     1.63   %              2.15  %              1.63  %               2.15    %
Origination volume                                 $       2,047

$ 3,879$ 4,636$ 6,462 Number of accounts originated

                            194,480               410,347              471,253               686,677


* See "Glossary" at the beginning of this report for formulas and definitions of our key performance ratios.


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Comparison of Adjusted Pretax Income for the Three and Six Months Ended June 30,
2020 and 2019

Interest income increased $75 million or 7.5% and $221 million or 11.3% for the
three and six months ended June 30, 2020, respectively, when compared to the
same periods in 2019 primarily due to growth in our loan portfolio.

Interest expense increased $34 million or 14.7% and $53 million or 11.5% for the
three and six months ended June 30, 2020, respectively, when compared to the
same periods in 2019 primarily due to an increase in average debt of
$3.8 billion and $2.8 billion, respectively, offset by a lower average cost of
funds.

See Notes 8 and 9 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and our revolving conduit facilities.


Provision for finance receivable losses increased $159 million or 60.5% and $413
million or 76.6% for the three and six months ended June 30, 2020, respectively,
when compared to the same periods in 2019 primarily due to the adoption of ASU
2016-13 and the forecast of elevated unemployment as a result of COVID-19,
partially offset by the decline in finance receivables within the current
periods.

Other revenues decreased $12 million or 7.7% for the three months ended June 30,
2020 when compared to the same period in 2019 primarily due to a decrease in
insurance products and home and auto membership plans sold as a result of lower
loan origination volume.

Other revenues decreased $26 million or 8.5% for the six months ended June 30,
2020 when compared to the same period in 2019 primarily due to a decrease in
investment revenue primarily driven by lower mark-to-market gains on equity
investment securities in the current period and a decrease in insurance products
and home and auto membership plans sold as a result of lower loan origination
volume.

Other expenses increased $18 million or 4.9% and $63 million or 8.7% for the
three and six months ended June 30, 2020 when compared to the same periods in
2019 primarily due to an increase in insurance policy benefits and claims
expense primarily due to the impact of COVID-19 on our involuntary unemployment
insurance products. The increase was partially offset by a decrease in general
operating expenses reflecting our efforts to tightly manage costs, as well as
variable expenses associated with lower loan origination volume.

OTHER

"Other" consists of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which includes primarily our liquidating real estate loans.

OMH's adjusted pretax loss of the Other components on an adjusted Segment Accounting Basis was as follows:

                                                        Three Months Ended                                   Six Months Ended
                                                             June 30,                                            June 30,
(dollars in millions)                                  2020              2019             2020                  2019

Interest income                                    $      1$     2$     3          $            5
Interest expense                                          1                 1                2                       3

Net interest income after provision for
finance receivable losses                                 -                 1                1                       2
Other revenues                                            4                 5                9                      15
Other expenses                                            5                10               12                      23
Adjusted pretax loss (non-GAAP)                    $     (1)$    (4)$    (2)         $           (6)



Net finance receivables of the Other components, reported in "Other assets," on a Segment Accounting Basis were as follows:

                                                  June 30,
(dollars in millions)                         2020       2019

Net finance receivables held for sale:
Other receivables                            $ 61$ 75


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                                Credit Quality



The results of OMFC are consolidated into the results of OMH. Due to the nominal
differences between OMFC and OMH, content throughout this section relate only to
OMH. See Note 2 of the Notes to the Condensed Consolidated Financial Statements
included in this report for the reconciliation of results of OMFC to OMH.

FINANCE RECEIVABLES


Our net finance receivables, consisting of personal loans, were $17.7 billion at
June 30, 2020 and $18.4 billion at December 31, 2019. Our personal loans are
non-revolving, with a fixed-rate, fixed terms generally between three and six
years, and are secured by automobiles, other titled collateral, or are
unsecured. We consider the delinquency status of our finance receivables as our
key credit quality indicator. We monitor the delinquency of our finance
receivable portfolio, including the migration between the delinquency buckets
and changes in the delinquency trends to manage our exposure to credit risk in
the portfolio. Our branch team members work with customers as necessary and
offer a variety of borrower assistance programs to help customers continue to
make payments. See "Results of Operations" under Management's Discussion and
Analysis of Financial Condition and Results of Operations in this report for
further details on our borrower assistance programs.

DELINQUENCY


We monitor delinquency trends to evaluate the risk of future credit losses and
employ advanced analytical tools to manage our exposure. Team members are
actively engaged in collection activities throughout the early stages of
delinquency. We closely track and report the percentage of receivables that are
contractually 30-89 days past due as a benchmark of portfolio quality,
collections effectiveness, and as a strong indicator of losses in coming
quarters. See "Results of Operations" under Management's Discussion and Analysis
of Financial Condition and Results of Operations in this report for further
details on the COVID-19 impact on delinquency.

When finance receivables are contractually 60 days past due, we consider these
accounts to be at an increased risk for loss and we transfer collection of these
accounts to our centralized operations. Use of our centralized operations teams
for managing late stage delinquency allows us to apply more advanced collection
technologies and tools, and drives operating efficiencies in servicing. At 90
days contractually past due, we consider our finance receivables to be
nonperforming.

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The delinquency information for net finance receivables is as follows:
                                               Consumer               

Segment to

                                                  and                    GAAP             GAAP
       (dollars in millions)                   Insurance            Adjustment (a)        Basis

       June 30, 2020
       Current                                $ 17,107             $         (10)      $ 17,097
       30-59 days past due                         169                        (1)           168
       Delinquent (60-89 days past due)            121                         -            121
       Performing                               17,397                       (11)        17,386

       Nonperforming (90+ days past due)           335                         -            335
       Total net finance receivables          $ 17,732             $         (11)      $ 17,721

       Delinquency ratio
       30-89 days past due                        1.63  %                       (b)        1.63  %
       30+ days past due                          3.52  %                       (b)        3.52  %
       60+ days past due                          2.57  %                       (b)        2.57  %
       90+ days past due                          1.89  %                       (b)        1.89  %

       December 31, 2019
       Current                                $ 17,578             $         (28)      $ 17,550
       30-59 days past due                         273                        (1)           272
       Delinquent (60-89 days past due)            182                        (1)           181
       Performing                               18,033                       (30)        18,003

       Nonperforming (90+ days past due)           388                        (2)           386
       Total net finance receivables          $ 18,421             $         (32)      $ 18,389

       Delinquency ratio
       30-89 days past due                        2.47  %                  
    (b)        2.46  %
       30+ days past due                          4.58  %                       (b)        4.56  %
       60+ days past due                          3.09  %                       (b)        3.08  %
       90+ days past due                          2.11  %                       (b)        2.10  %


(a) As a result of the adoption of ASU 2016-13, we converted all purchased
credit impaired finance receivables to purchased credit deteriorated finance
receivables in accordance with ASC Topic 326, which resulted in the gross-up of
net finance receivables and allowance for finance receivable losses of
$15 million on January 1, 2020. See Notes 3, 4, and 5 of the Notes to the
Condensed Consolidated Financial Statements for additional information on the
adoption of ASU 2016-13 included in this report.
(b) Not applicable


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ALLOWANCE FOR FINANCE RECEIVABLE LOSSES

We estimate and record an allowance for finance receivable losses to cover the
estimated lifetime expected credit losses on our finance receivables, effective
with the adoption of ASU 2016-13 on January 1, 2020. Prior to the adoption of
ASU 2016-13, we estimated and recorded an allowance for finance receivable
losses to cover estimated incurred losses on our finance receivables. Our
allowance for finance receivable losses may fluctuate based upon our continual
review of the growth and contractual delinquency of the finance receivable
portfolio and changes in economic conditions.

Our current methodology to estimate expected credit losses used the most recent
macroeconomic forecasts, which incorporated the projected impacts of COVID-19 on
the U.S. economy. We also incorporated estimated impacts from known government
stimulus measures, the involuntary unemployment insurance coverage of our
portfolio, and our borrower assistance efforts. Our forecast leveraged economic
projections from an industry leading forecast provider. At June 30, 2020, our
economic forecast used a reasonable and supportable period of 12 months. The
increase in our allowance for finance receivable losses for the three and six
months ended June 30, 2020 was largely due to these economic considerations
offset by a release in our reserves as a result of the decline in our net
finance receivables in the period. In the near-term, we may experience further
changes to the macroeconomic assumptions within our forecast, as well as changes
to our loan loss performance outlook, both of which could lead to further
changes in our allowance for loan losses, reserve rate, and provision expense.
For further information regarding the impact of COVID-19 on our allowance for
finance receivable losses see "Recent Development and Outlook" and "Results of
Operations" under Management's Discussion and Analysis of Financial Condition
and Results of Operations in this report.

Changes in the allowance for finance receivable losses were as follows:

                                              Consumer       Segment to
                                                 and            GAAP         Consolidated
(dollars in millions)                         Insurance      Adjustment         Total

Three Months Ended June 30, 2020
Balance at beginning of period               $  2,202$     (20)$     2,182
Provision for finance receivable losses           422               1               423
Charge-offs                                      (322)              1              (321)
Recoveries                                         40               -                40
Balance at end of period                     $  2,342$     (18)$     2,324

Three Months Ended June 30, 2019
Balance at beginning of period               $    765$     (32)$       733
Provision for finance receivable losses           263               5               268
Charge-offs                                      (294)              4              (290)
Recoveries                                         38              (5)               33

Balance at end of period                     $    772$     (28)$       744




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                                              Consumer       Segment to
                                                 and            GAAP         Consolidated
(dollars in millions)                         Insurance      Adjustment         Total

Six Months Ended June 30, 2020
Balance at beginning of period               $    849$     (20)$       829
Impact of adoption of ASU 2016-13 (a)           1,119              (1)      

1,118

Provision for finance receivable losses           952               2               954
Charge-offs                                      (658)              1              (657)
Recoveries                                         80               -                80
Balance at end of period                     $  2,342$     (18)$     2,324

Allowance ratio                                 13.21  %             (b)          13.12  %

Six Months Ended June 30, 2019
Balance at beginning of period               $    773$     (42)$       731
Provision for finance receivable losses           539              15               554
Charge-offs                                      (610)              9              (601)
Recoveries                                         70             (10)               60
Balance at end of period                     $    772$     (28)$       744

Allowance ratio                                  4.54  %             (b)           4.38  %


(a) As a result of the adoption of ASU 2016-13, we recorded a one-time
adjustment to the allowance for finance receivable losses. Additionally, we
converted all purchased credit impaired finance receivables to purchased credit
deteriorated finance receivables in accordance with ASC Topic 326, which
resulted in the gross-up of net finance receivables and allowance for finance
receivable losses of $15 million on January 1, 2020. See Notes 3, 4, and 5 of
the Notes to the Condensed Consolidated Financial Statements for additional
information on the adoption of ASU 2016-13 included in this report.
(b) Not applicable.

The current delinquency status of our finance receivable portfolio, inclusive of
recent borrower performance, volume of our TDR activity, level and
recoverability of collateral securing our finance receivable portfolio, and the
reasonable and supportable forecast of economic conditions (after the adoption
of ASU 2016-13) are the primary drivers that can cause fluctuations in our
allowance for finance receivable losses from period to period. We monitor the
allowance ratio to ensure we have a sufficient level of allowance for finance
receivable losses based on the estimated lifetime expected credit losses in our
finance receivable portfolio. The allowance for finance receivable losses as a
percentage of net finance receivables increased from prior periods due to the
adoption of ASU 2016-13 and the impacts of the current economic environment.

See Note 5 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about the changes in the allowance for finance receivable losses.

TDR FINANCE RECEIVABLES


We make modifications to our finance receivables to assist borrowers
experiencing financial difficulties. When we modify a loan's contractual terms
for economic or other reasons related to the borrower's financial difficulties
and grant a concession that we would not otherwise consider, we classify that
loan as a TDR finance receivable.
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Information regarding TDR net finance receivables is as follows:
                                                         Consumer             Segment to
                                                            and                  GAAP          GAAP
     (dollars in millions)                               Insurance            Adjustment      Basis

     June 30, 2020
     TDR net finance receivables                        $    750$     (48)$ 702
     Allowance for TDR finance receivable losses             344                   (23)        321

     December 31, 2019
     TDR net finance receivables                        $    721$     (63)$ 658
     Allowance for TDR finance receivable losses             292                   (20)        272


DISTRIBUTION OF FINANCE RECEIVABLES BY FICO SCORE


There are many different categorizations used in the consumer lending industry
to describe the creditworthiness of a borrower, including prime, near prime, and
sub-prime. While management does not utilize FICO scores to manage credit
quality, we have presented the following on how we group FICO scores into said
categories for comparability purposes across our industry:

•Prime: FICO score of 660 or higher
•Near prime: FICO score of 620-659
•Sub-prime: FICO score of 619 or below

Our customers' demographics are in many respects near the national median but
may vary from national norms in terms of credit and repayment histories. Many of
our customers have experienced some level of prior financial difficulty or have
limited credit experience and require higher levels of servicing and support
from our branch network and central servicing operations.

The following table reflects our personal loans grouped into the categories described above based on borrower FICO credit scores as of the most recently refreshed date or as of the loan origination or purchase date:

             (dollars in millions)       June 30, 2020 *      December 31, 2019

             FICO scores
             660 or higher              $        4,375       $          3,951
             620-659                             4,708                  4,683
             619 or below                        8,638                  9,755
             Total                      $       17,721       $         18,389


* Due to the impact of COVID-19, FICO scores as of June 30, 2020 may have been
impacted due to government stimulus measures, borrower assistance programs, and
potentially inconsistent reporting to credit bureaus.
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                       Liquidity and Capital Resources


SOURCES AND USES OF FUNDS


We finance the majority of our operating liquidity and capital needs through a
combination of cash flows from operations, secured debt, unsecured debt,
borrowings from revolving conduit facilities, and equity. We may also utilize
other sources in the future. As a holding company, all of the funds generated
from our operations are earned by our operating subsidiaries. Our operating
subsidiaries' primary cash needs relate to funding our lending activities, our
debt service obligations, our operating expenses, payment of insurance claims,
and expenditures relating to upgrading and monitoring our technology platform,
risk systems, and branch locations.

We have previously purchased portions of our unsecured indebtedness, and we may
elect to purchase additional portions of our unsecured indebtedness or
securitized borrowings in the future. Future purchases may be made through the
open market, privately negotiated transactions with third parties, or pursuant
to one or more tender or exchange offers, all of which are subject to terms,
prices, and consideration we may determine at our discretion.

During the six months ended June 30, 2020, OMH generated net income of $121
million. OMH net cash inflow from operating and investing activities totaled
$1.3 billion for the six months ended June 30, 2020. At June 30, 2020, our
scheduled principal and interest payments for the remainder of 2020 on our
existing debt (excluding securitizations) totaled $1.3 billion. As of June 30,
2020, we had $8.7 billion UPB of unencumbered personal loans and $113 million
UPB of unencumbered real estate loans. These real estate loans are classified as
held for sale and reported in "Other assets."

Based on our estimates and taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due through 2022.

OMFC's Issuance and Notice of Redemption of Unsecured Debt

For information regarding the issuance and notice of redemption of OMFC's unsecured debt, see Note 8 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Securitizations and Borrowings from Revolving Conduit Facilities


During the six months ended June 30, 2020, we completed one personal loan
securitization (OMFIT 2020-1, see "Securitized Borrowings" below), and redeemed
one personal loan securitization (SLFT 2016-A). At June 30, 2020, we had $8.8
billion in UPB of finance receivables pledged as collateral for our
securitization transactions.

At June 30, 2020, the borrowing capacity was $7.1 billion and no amounts were drawn nor were any personal loans pledged as collateral under our revolving conduit facilities.

See Notes 8 and 9 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt and revolving conduit facilities.

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Shares Repurchased and Retired

During the first quarter of 2020, OMH repurchased and retired 2,031,698 shares
of its common stock at an average price per share of $22.30, for an aggregate
total of approximately $45 million, including commissions and fees. To provide
funding for the OMH stock repurchase and retirement program, the OMFC Board of
Directors authorized multiple dividend payments in the aggregate amount of
$45 million. On March 20, 2020, OMH temporarily suspended its stock repurchase
program. OMH retains the right to reinstate the stock repurchase program as
circumstances change. For additional information regarding the shares
repurchased see Note 11 of the Notes to the Condensed Consolidated Financial
Statements included in this report.

Cash Dividends to OMH's Common Stockholders

As of June 30, 2020, dividend declarations for the current year by OMH's board of directors were as follows:

    Declaration Date                  Record Date                 Payment Date               Dividend Per Share                                   Amount Paid
                                                                                                                                   (in millions)
February 10, 2020               February 26, 2020             March 13, 2020             $           2.83          *       $              386
April 27, 2020                  May 29, 2020                  June 12, 2020                          0.33                                  44
Total                                                                                    $           3.16                  $              430

* Our February 10, 2020 dividend declaration of $2.83 included a quarterly dividend of $0.33 per share.

To provide the primary funding for the dividends, OMFC paid dividends of $426 million to OMH during the six months ended June 30, 2020.


On July 27, 2020, OMH declared a dividend of $2.33 per share payable on
August 18, 2020 to record holders of OMH's common stock as of the close of
business on August 10, 2020. To provide funding for the OMH dividend, the OMFC
Board of Directors authorized a dividend in the amount of up to $315 million
payable on or after August 15, 2020.

While OMH intends to pay its minimum quarterly dividend, currently $0.33 per
share, for the foreseeable future, and announced its intention to evaluate
dividends above the minimum every first and third quarters, all subsequent
dividends will be reviewed and declared at the discretion of the board of
directors and will depend on many factors, including our financial condition,
earnings, cash flows, capital requirements, level of indebtedness, statutory and
contractual restrictions applicable to the payment of dividends, and other
considerations that the board of directors deems relevant. OMH's dividend
payments may change from time to time, and the board of directors may choose not
to continue to declare dividends in the future.

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LIQUIDITY

OMH's Operating Activities

Net cash provided by operations of $1.2 billion for the six months ended June
30, 2020 reflected net income of $121 million, the impact of non-cash items, and
a favorable change in working capital of $53 million. Net cash provided by
operations of $1.1 billion for the six months ended June 30, 2019 reflected net
income of $346 million, the impact of non-cash items, and a favorable change in
working capital of $56 million.

OMH's Investing Activities


Net cash provided by investing activities of $106 million for the six months
ended June 30, 2020 was primarily due to the calls, sales, and maturities of
investment securities partially offset the purchases of available-for-sale
securities. Net cash used for investing activities of $1.3 billion for the six
months ended June 30, 2019 was primarily due to net principal originations of
finance receivables held for investment and held for sale and purchases of
available-for-sale securities, partially offset by calls, sales, and maturities
of available-for-sale securities.

OMH's Financing Activities


Net cash provided by financing activities of $285 million for the six months
ended June 30, 2020 was primarily due to the issuances of 8.875% Senior Notes
due 2025 and OMFIT 2020-1 securitization offset by debt repayments, cash
dividends paid, and the cash paid on the common stock repurchased during the
period. Net cash provided by financing activities of $230 million for the six
months ended June 30, 2019 was primarily due to net issuances of long-term debt
offset by cash dividends paid.

OMH's Cash and Investments

At June 30, 2020, we had $2.7 billion of cash and cash equivalents, which included $240 million of cash and cash equivalents held at our regulated insurance subsidiaries or for other operating activities that is unavailable for general corporate purposes.

At June 30, 2020, we had $1.9 billion of investment securities, which are all held as part of our insurance operations and are unavailable for general corporate purposes.

Liquidity Risks and Strategies


OMFC's credit ratings are non-investment grade, which may have a significant
impact on our cost and access to capital. This, in turn, can negatively affect
our ability to manage our liquidity and our ability or cost to refinance our
indebtedness. There are numerous risks to our financial results, liquidity,
capital raising, and debt refinancing plans, some of which may not be quantified
in our current liquidity forecasts. These risks are further described in our
"Liquidity and Capital Resources" of Management's Discussion and Analysis of
Financial Condition and Results of Operations in Part II - Item 7 included in
our 2019 Annual Report on Form 10-K.

Principal factors that could decrease our liquidity are customer delinquencies
and defaults, a decline in customer prepayments, and a prolonged inability to
adequately access capital market funding. We intend to support our liquidity
position by utilizing strategies that are further described in our "Liquidity
and Capital Resources" of Management's Discussion and Analysis of Financial
Condition and Results of Operations in Part II - Item 7 included in our 2019
Annual Report on Form 10-K.

However, it is possible that the actual outcome of one or more of our plans could be materially different than expected or that one or more of our significant judgments or estimates could prove to be materially incorrect.

OUR INSURANCE SUBSIDIARIES


Our insurance subsidiaries are subject to state regulations that limit their
ability to pay dividends. AHL and Triton did not pay any dividends during the
six months ended June 30, 2020 and 2019. See Note 12 of the Notes to the
Consolidated Financial Statements in Part II - Item 8 included in our 2019
Annual Report on Form 10-K for more information on state regulation restrictions
and the Merit sale.
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OUR DEBT AGREEMENTS


The debt agreements to which OMFC and its subsidiaries are a party include
customary terms and conditions, including covenants and representations and
warranties. See Note 10 of the Notes to the Consolidated Financial Statements in
Part II - Item 8 included in our 2019 Annual Report on Form 10-K for more
information on the restrictive covenants under OMFC's debt agreements, as well
as the guarantees of OMFC's long-term debt.

Securitized Borrowings
We execute private securitizations under Rule 144A of the Securities Act of
1933. As of June 30, 2020, our structured financings consisted of the following:
                                                                 Initial                Current            Current Collateral           Current               Original
                                          Issue Amount         Collateral            Note Amounts               Balance             Weighted Average         Revolving
(dollars in millions)                         (a)                Balance            Outstanding (a)               (b)                Interest Rate             Period

SLFT 2015-B                               $    314$      336            $          265          $        284                      3.83  %              5 years
SLFT 2017-A                                    652                  685                       619                   702                      2.98  %              3 years
OMFIT 2015-3                                   293                  329                       293                   325                      4.21  %              5 years
OMFIT 2016-1                                   500                  570                        72                   157                      5.46  %              3 years
OMFIT 2016-3                                   350                  397                       317                   415                      4.33  %              5 years
OMFIT 2017-1                                   947                  988                       524                   588                      2.74  %              2 years
OMFIT 2018-1                                   632                  650                       600                   683                      3.60  %              3 years
OMFIT 2018-2                                   368                  381                       350                   400                      3.87  %              5 years
OMFIT 2019-1                                   632                  654                       600                   687                      3.79  %              2 years
OMFIT 2019-2                                   900                  947                       900                   995                      3.30  %              7 years
OMFIT 2019-A                                   789                  892                       750                   892                      3.78  %              7 years
OMFIT 2020-1 (c)                               821                  958                       821                   958                      4.12  %              2 years

ODART 2017-2                                   605                  624                       156                   185                      3.38  %               1 year
ODART 2018-1                                   947                  964                       900                   964                      3.56  %              2 years
ODART 2019-1                                   737                  750                       700                   750                      3.79  %              5 years
Total securitizations                     $  9,487$   10,125$        7,867$      8,985


(a) Issue Amount includes the retained interest amounts as applicable and the
Current Note Amounts Outstanding balances reflect pay-downs subsequent to note
issuance and exclude retained interest amounts.
(b) Inclusive of in-process replenishments of collateral for securitized
borrowings in a revolving status as of June 30, 2020.
(c) On May 1, 2020, we issued $821 million of notes backed by personal loans.
The notes mature in May of 2032. We initially retained $71 million of the Class
C notes and subsequently sold the Class C notes on May 29, 2020.
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Revolving Conduit Facilities
In addition to the structured financings, we have access to 14 revolving conduit
facilities with a total borrowing capacity of $7.1 billion as of June 30, 2020:
                                                                                Amount
      (dollars in millions)                       Advance Maximum Balance       Drawn

      Rocky River Funding, LLC                   $                 400         $   -
      OneMain Financial Funding IX, LLC                            650             -
      Mystic River Funding, LLC                                    850             -
      Fourth Avenue Auto Funding, LLC                              200             -
      OneMain Financial Funding VIII, LLC                          650             -
      Thayer Brook Funding, LLC                                    250             -
      Hubbard River Funding, LLC                                   250             -
      Seine River Funding, LLC                                     650             -
      New River Funding, LLC                                       250             -
      Hudson River Funding, LLC                                    500             -
      Columbia River Funding, LLC                                  500             -
      St. Lawrence River Funding, LLC                              250             -
      OneMain Financial Funding VII, LLC                           850             -
      OneMain Financial Auto Funding I, LLC                        850             -
      Total                                      $               7,100         $   -


See "Liquidity and Capital Resources - Sources and Uses of Funds - Securitizations and Borrowings from Revolving Conduit Facilities" above for information on the transaction completed subsequent to June 30, 2020.

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                         Off-Balance Sheet Arrangements


We have no other material off-balance sheet arrangements as defined by SEC rules, and we had no material off-balance sheet exposure to losses associated with unconsolidated VIEs at June 30, 2020 or December 31, 2019.


                   Critical Accounting Policies and Estimates



We consider the following policies to be our most critical accounting policies
because they involve critical accounting estimates and a significant degree of
management judgment:

ALLOWANCE FOR FINANCE RECEIVABLE LOSSES


We estimate the allowance for finance receivable losses primarily on historical
loss experience using a cumulative loss model applied to our finance receivable
portfolios. Our gross credit loss expectation is offset by the estimate of
future recoveries using historical recovery curves. Our finance receivables are
primarily segmented in the loss model by contractual delinquency status. Other
attributes in the model include collateral mix and recent credit score. To
estimate the gross credit losses, the model utilizes a roll rate matrix to
project the first 12 months of losses and historical cohort performance to
project the expected losses over the remaining term. Our methodology relies
solely on historical loss experience to forecast the corresponding future
outcomes. These patterns are then applied to the current portfolio to obtain an
estimate of future losses. We also consider key economic trends including
unemployment rates and bankruptcy filings. Forecasted macroeconomic conditions
extend to our reasonable and supportable forecast period and revert to a
historical average. No new volume is assumed. Renewals are a significant piece
of our new volume and are considered a terminal event of the previous loan. We
have elected not to measure an allowance on accrued finance charges as it is our
policy to reverse finance charge amounts previously accrued after four
contractual payments become past due.

Management exercises its judgment when determining the amount of the allowance
for finance receivable losses. Our judgment is based on quantitative analyses,
qualitative factors, such as recent portfolio, industry, and other economic
trends, and experience in the consumer finance industry. We adjust the amounts
determined by our model for management's estimate of the effects of model
imprecision which include but are not limited to, any changes to underwriting
criteria and portfolio seasoning.

TDR FINANCE RECEIVABLES


When we modify a loan's contractual terms for economic or other reasons related
to the borrower's financial difficulties and grant a concession that we would
not otherwise consider, we classify that loan as a TDR finance receivable. Loan
modifications primarily involve a combination of the following to reduce the
borrower's monthly payment: reduce interest rate, extend the term, defer or
forgive past due interest or forgive principal. Account modifications that are
deemed to be a TDR finance receivable are measured for impairment in accordance
with the authoritative guidance for the accounting for impaired loans.

The allowance for finance receivable losses related to our TDR finance
receivables represents loan-specific reserves based on an analysis of the
present value of expected future cash flows. We establish our allowance for
finance receivable losses related to our TDR finance receivables by calculating
the present value (discounted at the loan's effective interest rate prior to
modification) of all expected cash flows less the recorded investment in the
aggregated pool. We use certain assumptions to estimate the expected cash flows
from our TDR finance receivables. The primary assumptions for our model are
prepayment speeds, default rates, and loss severity rates.

FAIR VALUE MEASUREMENTS


Management is responsible for the determination of the fair value of our
financial assets and financial liabilities and the supporting methodologies and
assumptions. We employ widely used financial techniques or utilize third-party
valuation service providers to gather, analyze, and interpret market information
and derive fair values based upon relevant methodologies and assumptions for
individual instruments or pools of finance receivables. When our valuation
service providers are unable to obtain sufficient market observable information
upon which to estimate the fair value for a particular security, we determine
fair value either by requesting brokers who are knowledgeable about these
securities to provide a quote, which is generally non-binding, or by employing
widely used financial techniques.

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GOODWILL AND OTHER INTANGIBLE ASSETS

We test goodwill for potential impairment annually as of October 1 of each year
and whenever events occur or circumstances change that would more likely than
not reduce the fair value of our reporting unit below its carrying amount. If
the qualitative assessment indicates that it is more likely than not that the
reporting unit's fair value is less than its carrying amount, we proceed with
the quantitative impairment test. When necessary, the fair value of the
reporting unit is calculated utilizing the income approach, which uses
prospective financial information of the reporting unit discounted at a rate
that we estimate a market participant would use.

For indefinite-lived intangible assets, we review for impairment at least
annually and whenever events occur or circumstances change that would indicate
the assets are more likely than not to be impaired. We first complete an annual
qualitative assessment to determine whether it is necessary to perform a
quantitative impairment test. If the qualitative assessment indicates that the
assets are more likely than not to have been impaired, we proceed with the fair
value calculation of the assets. The fair value is determined in accordance with
our fair value measurement policy.

For those net intangible assets with a finite useful life, we review such intangibles for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.


                       Recent Accounting Pronouncements


See Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this report for discussion of recently issued accounting pronouncements.


                                  Seasonality



Our personal loan volume is generally highest during the second and fourth
quarters of the year, primarily due to marketing efforts and seasonality of
demand. Demand for our personal loans is usually lower in January and February
after the holiday season and as a result of tax refunds. Delinquencies on our
personal loans are generally lower in the first and second quarters and tend to
rise throughout the remainder of the year. These seasonal trends contribute to
fluctuations in our operating results and cash needs throughout the year. Our
normal seasonality trends continue to be affected by the COVID-19 pandemic and
mitigating efforts from government stimulus measures.

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