GENWORTH FINANCIAL 3Q26 EARNINGS CALL - GENWORTH FINANCIAL INC

Financial Performance:

• Reported a net loss of $41 million for Q3 2026; adjusted operating income excluding the closed block was $102 million.
• Enact reported adjusted operating income of $132 million, driven by a $37 million pre-tax reserve release and strong cure performance, offsetting seasonal loss increases.
• Corporate and other segment posted an adjusted operating loss of $30 million due to CareScout investments and holding company debt service.
• Closed block reported an adjusted operating loss of $146 million, primarily driven by an $111 million pre-tax Actuarial to Expected (AtoE) liability remeasurement loss in LTC due to lower mortality and higher utilization.
• Holding company liquidity ended at $320 million, though $200 million is reserved for future tax obligations related to reinsurance restructuring and tax refunds.
• Received $122 million in capital returns from Enact in Q3; total cumulative share repurchases since 2022 exceeded $1 billion.
• Holding company debt reduced to $747 million after retiring $21 million of principal debt at a discount.

Guidance and Future Outlook:

• Revised full-year 2026 capital return expectation from Enact to approximately $485 million (down from prior estimates).
• Updated full-year 2026 share repurchase guidance to a range of $275 million to $300 million.
• Maintains full-year 2026 revenue target of $25 million for CareScout Services despite match volumes pacing below the previously estimated 7,500 total matches.
• Full-year 2026 investment in CareScout Services estimated at $55 million; no additional capital expected for CareScout Insurance in 2026.
• Expects benefit reductions to become a more significant component of in-force management as the Multi-Year Rate Action Plan (MIRAP) enters later stages.
• Anticipates materially unfavorable GAAP assumption updates in the fourth quarter, particularly for LTC, driven by cost of care and utilization trends.
• Projects positive margins for Genworth Life Insurance Company (GLIC) following statutory cash flow testing.

Business Segments and Product Lines:

• Enact: New insurance written declined to $14.1 billion due to higher mortgage rates, though persistency remained strong; book value increased to $275 billion. Enact secured a new forward quota share reinsurance agreement for the 2028 book year.
• CareScout Services: Network now includes 1,200 home care locations (98% U.S. coverage for 65+) and 1,200 senior living communities, with a target of 2,000 communities by year-end. Facilitated 1,500 matches in Q3, with year-to-date matches doubling.
• CareScout Insurance: Launched "Care Assurance Worksite" in August; product approved in 40 states.
• Closed Block: Implemented a new voluntary "Family Caregiver Benefit" allowing policyholders to use benefits for family-provided care (up to 75% of median hourly cost). Cumulative benefit reductions/premium increases since 2012 total $35 billion NPV; 62% of offered policyholders elected benefit reductions.
• Reinsurance: Entered a replacement reinsurance structure for universal life products in October to comply with new statutory accounting guidance taking effect year-end.

Market and Competitive Landscape:

• Aging care market driven by 70 million Baby Boomers aged 62-80, creating long-term demand for comprehensive care platforms.
• National partnerships established with Atria Senior Living and Brookdale to scale the CareScout senior living network.
• Enact maintains a strong PMIRS sufficiency ratio of 158%, with $1.8 billion above requirements, positioning it to navigate dynamic macroeconomic environments.

Risks and Challenges:

• AtoE Variance: Lower mortality trends resulted in higher-than-expected LTC reserve liabilities in Q3, though these do not impact cash flows.
• AXA Santander Litigation: The UK Court of Appeals ruled against the company; an appeal to the UK Supreme Court is pending with an estimated 1-3 month timeline for the initial decision. No recoveries are factored into capital plans.
• Statutory Accounting Changes: New industry-wide statutory guidance adopted in late 2025 is expected to negatively impact Q4 statutory P&L and RBC ratios, though GAAP results remain unaffected.
• Match Volume: CareScout Services match volume is currently pacing below levels required to hit the original 7,500 annual target.

Management Commentary and Tone:

• Leadership Transition: Founder and CEO Tom McInerney announced his retirement effective end of 2026, expressing confidence in successor Jerome Upton and the management team.
• Strategic Confidence: Management maintains a positive tone regarding the execution of the three strategic priorities (shareholder value via Enact, CareScout growth, and closed block sustainability).
• Discipline: Emphasized a disciplined approach to capital allocation, prioritizing share repurchases, debt reduction, and CareScout investment while maintaining a 9x cash interest coverage ratio.

Analyst Questions and Answers:

• Holding Company Liquidity: Jerome Upton clarified that the elevated $200 million reserve for future obligations includes an $80 million tax refund and set-aside funds to offset future tax losses from the reinsurance restructuring.
• Litigation Timeline: Greg Carawan estimated the UK Court of Appeal will take 1-3 months to decide on permission to appeal the AXA Santander case.
• Tax Impacts: Clarified that while the reinsurance structure impacts statutory results and creates tax losses at the subsidiary level, it does not affect GAAP results or holding company cash flow availability.

Other Key Points:

• Share count reduced by 27% (from 511 million to 370 million) since the repurchase program began in 2022.
• Enact's ownership stake remains approximately 81%, though future participation in Enact buybacks may decrease slightly.
• 170 local CareScout advisors across 33 states are guiding families; the business model relies on one-time placement fees, aiming for diversified, scalable revenue over time.
• Management reiterated that the closed block is self-sustaining and will not receive capital injections or generate capital returns.