Q2 2021 Genworth Financial Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to Genworth financial second quarter 2021earnings conference call. My name is Lauren and I will be your coordinator today at this time all participants are in a listen only mode. We will facilitate a question and answer session towards the end of the.

Today's conference.

As a reminder of this conference is being recorded for replay purposes.

So we ask that you refrain from using cell phones speaker phones or headsets during the Q&A portion of today's call.

I would now like to turn the presentation over to Tim Owens, Vice President of Investor Relations. Mr. Owens You May proceed.

Thank you operator, good morning, and thank you for joining Genworth second quarter 2021 earnings call for speakers of all of them out. This morning. So please excuse any sound quality of technical issues that may arise.

Our press release and financial supplement were released last night and this morning, our earnings presentation was posted to our website and will be referenced during our call.

We encourage you to review all of these materials.

Today, you will hear from our President and Chief Executive Officer, Tom Mcinerney, followed by Dan Sheehan, Our Chief Financial Officer, and Chief Investment Officer.

Due to applicable security law and publicity restrictions for comments regarding preparations for an IPO of our U S mortgage segment and act will be limited to our prepared remarks.

Following our prepared comments, we will open up the call for a question and answer period.

In addition to our speakers Rohit Gupta, Chief Executive Officer, and act will be available to take care of questions.

During the call. This morning, we may make various forward looking statements. Our actual results may differ materially from such statements.

We advise you to read the cautionary notes regarding forward looking statements in our earnings release and related presentation as well as the risk factors of our most recent annual report on form 10-K as filed with the SEC the.

This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors.

Financial supplement earnings release, and Investor materials, non-GAAP measures have been reconciled to GAAP, where required in accordance with the FCC rules.

Also references the statutory results are estimates of the timing of filing the statutory statements.

And now I'll turn the call over to our President and CEO Tom Mcinerney.

Thank you Tim Good morning, everyone and thank you for joining Genworth second quarter earnings call.

We reported very strong operating performance in the second quarter.

The reasonable man them across our businesses, while making progress under the strategic plan to create long term values in.

In Q2, Genworth delivered net income of $240 million and adjusted operating income of $194 million driven by continued strong performance at our U S mortgage insurance business now known as of that as.

As well as in our long term care of insurance business.

Of that reported very strong results with adjusted operating income of 135 billion compared with 126 million of the prior quarter.

Adjusted operating loss of $3 million in the prior year periods realm.

The relative to the prior quarter and at reported higher New insurance written lower earned premiums and of 32% decrease of new delinquencies.

Results reflected the loss ratio of 12%, which compares favorably to the prior quarter due to lower losses from new delinquencies and higher reserve strengthening in the prior quarter.

The U S life insurance reported adjusted operating income of $71 million for the quarter.

Compared with $62 million in the prior quarter and an adjusted operating loss of $5 million in the prior year.

The results were primarily driven by LTC insurance, which reported adjusted operating income of $98 million, reflecting higher earnings from in force rate actions, including benefit reductions related to a legal settlement.

Net investment income versus both the prior quarter and prior year.

We successfully managed capital levels during the second quarter.

Ending the quarter with the very strong P. Myers ratio of 165 per cent and in that for nearly $2 billion above published requirements and risk based capital and our principle of life insurance company Glick of approximately 270%.

Genworth also ended the second quarter with a very strong cash position of $842 million in cash and liquid assets at the holding company level.

Our strong performance over the past several quarters provides a solid foundation for us to write the next Gen horse chapter as.

That's the long term shareholders know genworth financial stability and flexibility has significantly improved over the past several years.

We are now on a more stable trajectory as a result of continued strong operating performance, particularly at it now.

Strategic actions, we've taken to reduce debt and excellent progress to further reduce the risks associated with our legacy LTC insurance blocks.

We have adequate liquidity to meet our financial obligations valuable expertise and capabilities and a focused strategy to drive long term shareholder value creation.

Moving forward our primary strategic focus in the near term is to continue to reduce holding company debt in July we fully retired the remaining 2021 of maturities producing parent holding company debt by an additional $513 million to approximately 2 billion, including our previously disclosed liabilities to <unk>.

The of approximately $345 million.

Our goal is to reduce holding company debt to a sustainable level of approximately 1 billion, creating more financial flexibility for genworth to return capital to shareholders and make prudent investments in future growth. Since 2013, we have reduced holding company debt by a block buy of total of approximately 2.2 billion.

Related to the obligation to accept I mentioned last quarter of the Axa has initiated a lawsuit in the U K against the earn out there seeking to recover of payouts. It made the policyholders for missile of payment protection insurance, a significant portion of which Joe has agreed to reimburse as part of the 2020 settlement.

Lawsuit against and that there is an ongoing matter and as with typical litigation, we expect the process to play out over the next 18 to 24 months as I've said before Genworth is entitled to certain recoveries at the may receive frozen the inter well any recoveries would be very positive for genworth. Our plans are not reliant.

Upon those potential reimbursements beyond that we can't comment further on this litigation.

The further accelerated our efforts to reduce debt.

And improve it and ask the Genworth credit ratings, we remain focused on partially monetizing our ownership of an app for a month minority IPO of up to 19.9%.

As we of consider various options for the NASA over the past several years, our objective has been to protect and ultimately unlock its value.

Enabling us to maximize value for genworth shareholders and any potential transaction.

The board and I continue to believe that the future IP of the Nab is the best option to do just that we.

We maintain a positive long term outlook for the sector based on the strong positive trends in the U S housing market I'd expect the tailwind that's the.

On the continues to recover from COVID-19.

Continuing to monitor the market and we remain prepared for recommenced, the IPO process subject to various conditions and approvals when market conditions improve.

However, as a reminder, we are currently in registration with the SEC.

As a result of applicable publicity restrictions I won't provide any additional details about or discuss the timing of the potential offering we.

We will be very limited on our Thomas about it other than for the youngest quarterly results.

We expect our majority ownership stake in an app to generate a significant dividend stream in the future as we work to move of our legacy LTC books to breakeven and build the profitable New LTC company. We have received approval for the North Carolina. The department of insurance, the dividend $200 million of capital from GEMCO to enact holdings in the fourth.

Order of 2021 subject to market conditions business performance other regulatory approvals and compliance with applicable GSE requirements. This increases our confidence in the not issuing of 200 million dividend in the fourth quarter.

Following the planned IPO, we intend to maintain our ownership of an accurate of interest for the foreseeable future.

While preserving the option to distribute the remainder of to Genworth shareholders and it's actually a spin off it's out of an attractive option in the future.

That's we are working towards stabilizing our leg legacy LTC portfolio through our multi year rate action plan for my route which will enable us to focus on our long term LTC growth strategy. We have made exceptional progress on this effort with over $15.5 billion of net present value from LTC premium increases.

And benefit reductions achieved since 2012, including an incremental 49 million in rate actions approved during the second quarter.

These rate actions provided more options for policyholders, including reduced benefit of stable premium of options, which continued to be selected at a higher frequency buyer of policies. We are working to develop even more benefit options for our policyholders to choose from when faced with the right actions as of June 32021.

Approximately 59% of Genworth LTC policyholders has accepted all premium increases in full 27% of taken a reduced benefit option and 14% have opted for a non forfeiture option.

We do see our legacy LTC liabilities to the my Rep and other rate accident initiatives is critical to achieving breakeven on an economic basis for the legacy LTC business over time, our current long term cumulative improvement target on the net present value basis is roughly 22 and a half billion in rate actions.

It's just the amount needed to address the current expected shortfall in our legacy LTC books of business.

Having achieved 15 of half billion against the current target of 22 and a half billion means.

Means we are approximately 2 thirds of the way towards achieving breakeven I would note that we will complete our annual LTC assumptions review later this year this target could change over time as our experience of balls.

Given the state regulators have and will continue to spread LTC premium increases over several years, returning our legacy LTC portfolio to breakeven on an economic basis is likely 5 to 7 years or more away.

We are proud of our steady progress towards this goal in the my revenue remains an important strategic initiative for Genworth since achieving breakeven will will expand optionality and increase the potential of long term value of our overall company to shareholders.

With these key initiatives underway, we have begun to focus our growth strategy and the future of LTC insurance and we are advancing our plans for a new insurance company to create a leading possible LTC insurance business in the U S.

As I've said before there's a great need for long term care solutions in the U S with 54 million Americans, aged 65 and older at the end of 2019, and where that number of expected to increase to 95 billion by 'twenty 60, while at the same time care costs are rising rapidly.

COVID-19 has heightened the focus of long term care of among legislators and the general public.

We believe it also has accelerated the long term trend of singers increasingly seeking to receive care in their homes.

As was evident throughout the pandemic, if not well before enabling more more must be done to protect and empower seniors enabling them to remain in the settings of the choice of received the services and support they need to maintain their dignity as they age.

Unfortunately, many older adults, especially those in the middle class of limited options to pay for long term care and the existing funny GAAP simply is too large for either of the public or private sectors. The fill on their own. That's why we believe partnership with the public and private sectors is critical.

We believe the government and private sectors can collaborate successfully to address the long term care dilemma and we are encouraged to see an acknowledgment of this necessary allies and recently introduced legislation, including the well being of insurance for seniors to be at home for wish Act.

Those by U S Rep, Thomas Swayze, we're especially pleased to see the public education is a vital component of his legislation.

Focusing greater awareness of the likelihood of require long term care during ones later years. The programs that may cover of care needs and the options available for that scare we encourage families to have the necessary conversations with their loved ones. The take appropriate steps to ensure that resources are available to fund the long term care needs.

We.

These recent developments will reignite conversations about reform of the long term care of system in the U S and we are eager to participate in land our unique expertise in this effort.

There are only a few players in the LTC insurance market today.

Severe financial challenges arising from the legacy LTC business with all of the key to success in the future is to learn from the past the design, new insurance products with lower and more predictable risks.

The access of experienced with LTC. We've also identified several opportunities adjacent to insurance, including products and services that help people navigate a complex and fragmented support system to find the best care.

We believe the successful reinvigoration of the U S. L. T C market will address both financing and services and ultimately will hopefully reduce the likelihood of people needing care and are of lessening the care that they need.

We have a clear picture of the large addressable market for LTE solutions in the U S and are working hard on developing a new and improved go to market strategy.

As we've mentioned previously we also see compelling long term opportunities in China.

But have decided to focus our efforts on launching of U S business in the near term.

Why is the launch this new business sometime in 2022 and partnership with highly rated third parties, while John was the most significant contribution to any potential partnership would be our intellectual property and expertise. We may also invest a prudent level of capital.

We look forward to updating shareholders with more details in due course.

To sum up we are laser focused on 5 key priorities, 1 reduced our holding company debt to approximately $1 billion.

To maximizing the value of an act 3 returning capital to shareholders for.

For achieving economic breakeven and stabilizing the legacy LTC portfolio.

And finally preparing to launch the new LTC joint venture in the U S.

I believe the current market value of our shares does not reflect genworth intrinsic value.

And that's the key to driving significant shareholder value will be our execution on these 5 priorities in the near term.

After reaching our 1 billion debt target and realizing the resumption of dividends from an app to the parent company, we expect to generate reliable and sustainable future cash flows that will enable genworth to consider returning cash to shareholders through a regular dividend and gross share repurchases. We now this is especially important step for our shareholders.

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We will also be in a strong position to continue to prudently invest in new LTC business opportunities, where we are uniquely qualified and positioned to win.

We are extremely proud of the work we've done to put the company on this path.

Genworth has an engaged board and leadership team of skilled and dedicated work force and the unparalleled experience and expertise to create long term value with that I'll now turn the call over to Dan to discuss the second quarter results and financial position in more detail.

Thanks, Tom and good morning, everyone. I am pleased with the continued progress made during the quarter with strong earnings and capital ratios in our enact U S mortgage insurance segment.

Strong results from our long term care insurance business and increase liquidity at the holding company.

We ended the quarter with more than 842 million and holding company cash.

Subsequent to quarter end, we retired our remaining September 2021 debt of 513 million, which reduced parent company debt to approximately $2 billion, including the acts of liability.

We reported net income available to genworth shareholders for the quarter of $240 million and adjusted operating income of $194 million.

Included in net income for the quarter was 46 million of non operating items, mostly consisting of mark to market increases on limited partnerships in our investment portfolio.

Turning to the snack segment the U S mortgage and housing market continues to demonstrate positive momentum characterized by a large origination market increasing home prices and the continuation of decreasing new delinquencies from the pandemic driven peak.

Despite the challenges of low housing inventory and rising home prices affordability remains favorable supported by prevailing low interest rates.

During the quarter, we estimate the originations market accelerated its transitioned to purchase originations, which is a positive trend for the private mortgage insurance industry as we experienced approximately 4 times higher penetration and purchase originations versus refinances.

For the second quarter and Act reported adjusted operating income of 135 million and the loss ratio of 12 per cent compared to adjusted operating income of 126 million and the loss ratio of 22% in the prior quarter.

The improvement in results was primarily driven by lower new delinquencies compared to the prior quarter.

In addition insurance in force grew approximately 10% versus the prior year, primarily driven by over 100 billion and new insurance written over the last 4 quarters.

New insurance written and an act was $26.7 billion in the quarter up 7% versus the prior quarter, driven primarily by a larger purchase origination market and down 6% versus the prior year, primarily driven by lower estimated market share.

The healthy and prudent M. I market has enabled us to continue to write new business at the attractive low to mid teen returns.

We see the market and underwriting conditions, including the pricing environment as being well within our risk adjusted return appetite.

Ultimately, we expect our second quarter, new insurance written with its strong credit profile and attractive pricing.

Positively contribute to our future profitability and return on equity going forward.

Our persistency increased 7 points compared to the previous quarter and 4 points compared to second quarter 2020, driven by a modest increase in interest rates and the decline in the percentage of in force policies with mortgage rates above prevailing rates.

However, the overall low interest rate environment, and resulting refinance activity continues to drive low persistency across our insurance portfolio.

Premiums were lower versus the prior quarter and flat to the prior year impacted by lower single premium cancellations higher ceded premiums and lapse of older higher price policies offset by insurance in force growth.

While single premium cancellations remained elevated we did see of 6 million to all the declined to $20 million this quarter for 26 million last quarter and $35 million last year.

Ceded premiums were up 2 million this quarter, the $18 million for $16 million last quarter and reflect the expansion of our credit risk transfer programs.

We've added of disclosure of this quarter in our investor presentation to provide additional insights regarding changes in our base of net earned premium rates over time.

As noted on page 5 of the Investor presentation, our base premium rates of decline modestly from lapse, driven attrition within the quarter with more meaningful reductions in the net premium rate driven by the impacts of changes in single premium cancellations and ceded premiums.

Since June we've been providing investors of monthly reported delinquency activity and have now seen for consecutive quarters of improving delinquency trends with sequentially lower new delinquencies and cures in excess of these delinquencies.

For the quarter tours of approximately 14500 were up 7% sequentially and continued to outpace new delinquencies.

New delinquency rate for new delinquencies over policies in force with 0.7%, which reflects the return to pre pandemic levels. We're encouraged by this milestone which reflects ongoing recovery from the pandemic.

New delinquencies of approximately 7000 during the quarter were down 30% sequentially with 45% reported and new forbearance plans.

These delinquencies resulted in $30 million in loss expense in the quarter.

Additionally, we released for millions of IV in our reserves related to June delinquencies that have not yet been reported by services to us and which we expect will be lower than had been assumed in our prior IV in our reserves.

The release of I B in our reserves was offset by other losses consistent with the prior quarter, our expected ultimate claim rate on new delinquencies was approximately 8%.

We ended the quarter with approximately 33500 total delinquencies or delinquency rate of 3.6% in total approximately 64 per cent of our total delinquency the rent forbearance plans.

Importantly, 94 per cent of our delinquencies have mark to market loan to values, reflecting at least 10% borrower equity and 60% of mark to market loan to values reflect the at least 20 per cent borrower equity using March 2021 home prices.

We believe this level of embedded home price appreciation across our delinquencies could have a positive impact on future claim rates and severity of claims as forbearance plans expire and foreclosure moratorium ends.

Turning to the U S life segment, we reported adjusted operating income of 71 million in the quarter, which compared to adjusted operating income of $62 million for the prior quarter and an adjusted operating loss of $5 million in the prior year.

Overall results in the segment were driven by strong variable investment income and benefit reductions of long term care.

Mortality was lower in the quarter as impacts related to the COVID-19 pandemic for less.

In long term care adjusted operating income was $98 million in the second quarter compared to 95 million in the prior quarter and $48 million in the prior year.

I do want to remind investors, while we have a positive lifetime GAAP margin on a long term share blocks. The emergence of profit over time is uneven.

Under GAAP, we deferred a portion of our LTC profitability by accumulating of profit followed by losses reserves to help cover projected losses in the future.

As of the second quarter of the pre tax balance of this reserve was 957 million.

Up from $625 million as of year end 2020.

This had an earnings impact of $125 million after tax during the quarter.

For the quarter variable investment income and L. T. C was up 35 million of after tax versus the prior quarter and 63 million of after tax versus the prior year, reflecting higher limited partnership income gains on treasury inflation protected securities and bond calls and prepayments.

We look forward, we would expect this investment performance to moderate.

Claim terminations in the second quarter was significantly lower versus the prior quarter and prior year and recently trended towards more normalized patterns as noted on page 11 of the investor presentation to remind investors. We had previously established a reserve of 158 million for mortality experienced during the pandemic to reflect our view of.

The remaining claim population is less likely to terminate than the pre pandemic average due to the pandemic impacting our most vulnerable claimants. However, with the significant decline of mortality in the second quarter. We did not establish additional reserves for this mortality adjustment for a reduced the portion of the accumulative balanced, leaving a remaining reserve.

<unk> of 143 million.

As the pandemic continues to develop mortality experienced may fluctuate in the near term and we would increase or decrease the COVID-19 mortality adjustment accordingly.

Although new active claims trended up gradually in the first half of 2021 incidence remains lower than pre pandemic levels and drove continued favorable IV in our development during the quarter.

Pending claim submissions, which are a leading indicator of future new claim incidents increased during the quarter and based on this experience. We expect incidents to continue to trend higher in the quarters ahead.

Earnings from in force rate actions increased versus the prior year and prior quarter, driven primarily by benefit reductions, including the impacts of the benefit reduction of elections related to a legal settlement that favorably impacted this quarter by $71 million or $22 million after adjusting for profit followed by losses.

At this time, it's difficult to assess the overall impact of the legal settlement will have going forward as full implementation of the settlement will take another 2 to 3 quarters the.

The settlement applies for a subset of our choice, 1 policyholders or approximately 20% of more than 1 million of long term care insurance policyholders and provides additional clarity in the future rate actions with expanded benefit reduction of non forfeiture options.

We also have an agreement in principle for a nationwide settlement on a base of similar to the choice 1 settlement subject of full documentation of court approval, which applies to our P. C. S..1 P. C. S..2 policy forms the comprised approximately 15% of our long term care insurance policyholders.

Shifting to enforce rate action approvals for LTC during the quarter, we received approvals impacting approximately 81 million of premiums with the weighted average approval rate of 60%.

For the first half of 2021 we received approvals impacting 477 million of premiums with the weighted average approval rate of 43% compared to 257 million of premiums and a weighted average approval rate of 30% for the first half of 2020, while quarterly approvals are uneven we expect approvals in the second half of.

2021to be strong based on pending filings with the few large states.

We do expect to complete our claims the assumption review of the fourth quarter, we're monitoring emerging experience, particularly in mortality and benefit utilization.

While this work is ongoing preliminary indications are that our claim reserve assumptions are holding up in the aggregate in the fourth quarter. We also plan to complete our review of our active life reserve assumptions, including mortality benefit utilization interest rates and in force rate actions among other assumptions.

And the assumption changes the result in pressure to our active life margins will be assessed for inclusion in our multiyear rate action plan.

For 2021 assumption updates, we're generally not including data from 2020 and setting any long term assumptions as we do not yet have sufficient information around longer term effects of the pandemic.

Turning to the life insurance overall mortality for the quarter continued to be elevated versus historical experience, although improved versus the prior quarter. The.

The second quarter included an estimate of approximately $9 million after tax and COVID-19 claims based upon death certificates received to date despite improvement versus the prior quarter from the decrease in COVID-19 claims mortality remained higher than the prior year.

The impact of term life insurance products from shop lapses has moderated as the result of the reinsurance agreements in place related to the 20 year term block issued in 2000 of 1 <unk>.

Total term life insurance DAC amortization reduced earnings by 12 million of after tax for $13 million of after tax in the prior quarter and $27 million in the prior year.

We will likely see additional shock lapse the amortization next year with a 20 year of block issued in 2002, which is not reinsured, although the impacts are anticipated to be smaller than 2019 of 2020, given the smaller size of the blocks.

And our Universal life products, we recorded a 13 million of after tax charge for DAC Recoverability down from 17 million in the prior quarter.

The charges in the first 2 quarters of this year reflected the unfavorable mortality experience and continued block runoff.

Similar to L. T. C will also complete our annual review of life insurance assumptions, including mortality persistency in the interest rates in the fourth quarter.

As we complete our review we're closely monitoring our elevated mortality experience, including older age mortality as well as mortality improvement and potential changes for our assumptions could negatively impact our earnings in the fourth quarter.

In fixed annuities adjusted operating earnings of $13 million for the quarter was lower compared to the prior quarter and prior year, primarily from lower mortality and single premium immediate annuities and unfavorable impacts from the decline in interest rates during the quarter.

In the run off segment, our adjusted operating income was 15 million for the second quarter versus 12 million in the prior quarter and $24 million last year.

Equity market performance was more favorable versus the prior quarter and less favorable versus the prior year.

Rounding out the results corporate and other is adjusted operating loss was 27 million and was improved from last quarter in the prior year, primarily driven by lower interest expense of.

Our deleveraging efforts this year and moving forward are projected to decrease the losses in the segment in the quarters ahead.

Turning to capital levels and the enact segment, we finished the quarter with an estimated P. Myers sufficiency ratio of 165% for approximately 1.9 billion above published requirements.

The improvement of our P. Meyer of sufficiency versus the prior quarter was driven by strong business cash flows lower required assets related to declining delinquent inventory.

<unk> capital credit from our forward excess of loss reinsurance transaction and.

The execution of an insurance linked note on a portion of our 2020 book, which provided approximately 300 million of P Myers credit at origination.

As Tom mentioned subsequent to the second quarter <unk>, our flagship entity received approval from North Carolina, The department of insurance, our domestic regulator to dividends and $200 million in the fourth quarter.

While subject to market conditions business performance and other regulatory approvals, including compliance for the applicable GSE requirements. Our confidence has increased in the enact issuing of 200 million of all of the dividend in the fourth quarter.

We expect capital in Genworth life insurance company of Glick as a percentage of company action level RBC to be approximately 270% up from 254% at the end of the first quarter.

Life's statutory earnings in the second quarter benefited from LTC earnings for the impact of in force rate actions and claim experience.

Statutory earnings for LTC are generally higher than GAAP earnings because of the concept of profit followed by losses does not exist for statutory accounting.

Statutory earnings or more lines of taxable earnings, which has contributed cash tax payments to the holding company over the last few quarters, and which we expect to continue.

Turning to the holding company were very pleased with the improvement of our liquidity and financial flexibility as we've retired more than $1.2 billion of debt through July while maintaining prudent cash buffers for forward debt service obligations.

Page 18 of the Investor presentation provides the detailed quarterly cash activities for the second quarter, including intercompany tax payments of 112 million, which we do expect to continue in the near term although at lower rates.

As I mentioned earlier, we ended the quarter in a very strong cash position was 842 million of cash and liquid assets for $655 million above our targeted cash buffer.

This excludes approximately $284 million in cash held at an axe holding companies.

As we look forward, we believe that our liquidity and financial flexibility profile should improve even further with cash on hand expected intercompany tax payments the planned minority IPO of enact and resumption of the dividends our financial flexibility should improve meaningfully.

Once our parent debt level reaches approximately 1 billion will be in a better position to return capital to shareholders and make prudent investments in future growth.

In closing, we've taken numerous steps to improve the liquidity and financial flexibility of our holding company and the position of our businesses. We're pleased with our financial progress and remain focused on providing value to all key stakeholders.

1 final note as Tim noted earlier, the applicable securities laws of restrictions our comments regarding the status of preparations and other matters related to the planned enact the IPO will be limited to our prepared remarks with that we'll now open the line for questions.

Ladies and gentlemen, we will now begin the Q&A portion of the call. As a reminder, please refrain from using cell phones speaker phones or headsets press star 1 to ask a question.

That any time of your question has already been answered or you would like to withdraw. Your question. Please press star 2 to be removed from the queue. Please press star 1 now.

Okay.

Okay.

Yeah.

Yeah.

Sure.

Yes.

Sure.

Yes.

Okay.

Yeah.

Yeah.

And once again that is star of wanted to ask a question.

We will take our first question for Don Espey with Shah capital.

Hi, good morning, all.

2 questions for Tom.

Tom.

And of all of the fundamental improvements.

Genworth equity.

It's been just the perennial underperformer for so long now.

What else needs to change to get sentiment on the more virtuous and deserved footing.

Yeah.

I'd say that.

We believe the board and I and Dan that the company is in a in a very strong position we've made enormous progress over the last several years.

We do think we're in a position with our debt at 2 billion at this point.

Looking forward to moving towards our long term target of of 1 billion that will be in a position to return capital to shareholders and we think that's a.

A very important part of <unk>.

Getting the the share price to to where we think its appropriate given all the progress made I did say in my remarks.

We think the intrinsic value of Genworth shares is higher than where it's currently trading.

The up a little bit this morning, but we think there's quite a ways to go in and we're doing all we can I listed the 5 priorities.

That we have we think that's the right path and we are.

We would hope to see the shares.

Yep.

Be closer to what we think is the value of given all of this all of the steps we've done the last.

Several quarters to position the company well.

Okay and.

And along.

Along the similar topic.

For the ratings agencies.

Completely out of touch to your balance sheet improvements.

You know I'll I'll, let Dan and maybe ROE that give you details I would say.

I've been around a long time over 40 years and I would say.

Rating agencies are very good at reducing ratings.

But they they do take longer it seems then they should certainly we believe the ratings are far below where they deserve to be because of all the balance sheet strength and we've done but.

I think they they tend to be slower on the uptick day.

Dan and Dan obviously spends a lot of time with the rating agencies for both of the holding company and the subsidiaries of enroll it obviously spend time with them regarding that and Dan ROE hit are also on the call. If you want to add any comments to that for down that would be great.

Yes, Thanks, Tom.

I'll just make a couple of comments 1 is that we do have regular communications with them and we're presenting them information ahead of when it comes out to the street and so they're very well informed.

I would argue of probably.

More of a frequent visitor that most of there in part because we think we've got a very good story to tell.

Especially over the last few quarters.

The big debt wall that we added in 2021, we've addressed at this point.

And we're in a very strong cash position to manage our challenges going forward.

Generally I think they have a very positive view of U S MRI, but because we have limited sources of capital at the holding company they've really been in a holding pattern waiting for the potential IPO of the enact and despite the improvement.

They still have not been willing to move at this point, we continue to share our story.

And they'll make their decisions independent of us, but we do we do believe we've kept them very well informed along the way.

And certainly they've been made and kept abreast of all of the progress we've been making.

Yeah, Don the only thing I would add to Dan's comments on Tom's comments is that we are at double B plus for.

The genco from S&P, <unk> III from Moody's and Triple B minus from Fitch and we believe that of our performance continues to be very strong as we recover from the pandemic. We delivered the strong net operating income strong loss performance in a very strong balance sheet with hundreds of 65% P Myers sufficiency and $1.9 billion of buffer.

All of our focus is going to continue to be on our performance and we believe that the ratings will come along with that.

So for your focus on taking the right steps as Tom outlined and we believe that that would lead to the right ratings outcome of our standalone ratings for of our business are comparable to our peers. So that is in the investment grade range and then the overall entity ratings would follow with performance.

Okay.

Okay.

Thanks, I'll take care.

Thanks, Tom.

And as a reminder, that is star 1 to ask a question.

Ladies and gentlemen, as there are no further questions I will now turn the call back over to Mr. Mcinerney for closing comments.

Lauren Thank you very much and thank you for all of you for joining the call today for <unk>.

Cited about downward for the next chapter and we look forward to continuing to update you as we execute against our plan and our 5 key priorities that we outlined today.

Thank you for your interest and support of Genworth zone with that I'll turn the back the call over to Lauren.

Ladies and gentlemen, this concludes Genworth financial second quarter Conference call. Thank you for your participation at this time the call will end.

Yeah.

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Yes.

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