Q2 2025 Genworth Financial Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Genworth Financial's second quarter 2025 earnings Conference call.
My name is Karen 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 this conference call. As a reminder, the conference is being recorded for replay purposes. Also 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 Christine dual head of Investor Relations. Please go ahead.
Thank you and good morning, welcome to Genworth second quarter 2025 earnings call a slide presentation that accompanies this call is available on the Investor Relations section of the Genworth website, investor Dot Genworth Dot com.
Our earnings release and financial supplement can also be found there and we encourage you to review these materials.
Making today will be Tom Mcinerney, President and Chief Executive Officer, and Jerome Upton Chief Financial Officer.
Following our prepared remarks, we will open the call up for a question and answer period.
In addition to our speakers to Molla Arlen <unk>, President and CEO of our U S life insurance business, Great care was general counsel.
Salt Gaber, Chief investment Officer, and Samir Shah CEO of Kerr Scout services will also be available to take your 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, that's fine.
With the FCC.
This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors in our investor materials non-GAAP measures have been reconciled to GAAP, where required in accordance with SEC rules.
Also references to statutory results are estimates due to the timing of the filing of the statutory statements and now I'll turn the call over to our President and CEO Tom Mcinerney.
Thank you Christine and thank you to everyone on the line protecting the time to join Genworth second quarter earnings call.
Genworth had a solid second quarter as we continue to advance our long term strategic priorities.
<unk> reported net income of $51 million in the quarter adjusted.
Adjusted operating income was 68 million or <unk> 16 per share.
In large part by another strong quarter from an App, which contributed $141 million to our adjusted operating income.
Total estimated pretax statutory income for our U S life insurance companies was $81 million.
Primarily by the net favorable impacts to annuities from equity market and interest rate movement in the quarter.
I will discuss this and other financial results in more detail later in the call.
Our liquidity position remains strong as we ended the quarter with cash and liquid assets of $248 million.
During the quarter, we continued to execute and drive progress against our three strategic priorities.
First and <unk>, a key source of cash flow and continues to generate strong value for genworth shareholders as its market value increases.
They have seen and Aker announced yesterday that it now expects to return approximately 400 million of capital to shareholders. This year.
Underscoring its continued operational strength and robust financial performance.
Since <unk> IPO in 2021, our stake and then act as provided Genworth with over $1 billion in capital returns supporting our ability to buy back shares.
Since our current buyback programs initial authorization, we have repurchased a total of $630 million worth of shares.
An average price of $5.80 as of July 30.
Turning to our next strategic priority, we continue to maintain our self sustaining customer centric LTC life and annuity legacy businesses, we have.
Done this primarily by executing on our multiyear rate action program or Mira, which has proven to be our most effective lever for maintaining self sustainability.
We secured 41 million of gross incremental premium approvals in the second quarter with an average premium increase of 36%.
This brings us to a killed a total of approximately $31 6 billion and net present value achieved.
As discussed on last quarter's call. We continue to anticipate lower approvals this year compared to 2024 and align with our long term plans for the program.
Our third and final strategic priority is driving long term growth through care scope.
<unk> is designed to read value for Genworth in three ways.
Lowering savings to our U S life insurance companies, providing new sources of revenue and growing genworth valuation over the long term.
On the services side, we expanded our product offerings with the launch of care plans as we work to help people understand and fine, but long term care services they need.
For about $250 you can initiate a care plan from Kerr Scott Dotcom that begins with a virtual care evaluation conducted by a curse got licensed nurse.
Sam has done with the detailed plan that suggest appropriate care strategies and local resources tailored to the individual's physical cognitive social and environmental needs for.
For the millions of caregivers, who may be overwhelmed by the urgency or complexity of their loved ones care needs. A care plan can be a helpful resource and understanding the level and type of care need along with options to meet those needs.
Turning to the tariffs got quality network, we recently expanded network access to consumers and all 50 states.
Anyone searching for home care can now access the network <unk> Dot com, where he can filter for location and specific care needs to connect with quality providers providers cover the cost of the network by paying fees associated with successful career placements.
In addition to helping families navigate the aging journey, the new care plans offering and the expansion of the network will contribute to fee based revenue growth in line with our strategy of diversifying our earnings and scaling our capital light services business we.
We're also continuing to work with insurance carriers with closed LTC blocks to leverage the network as an enhancement to their customer experience and claims management strategy.
We have ongoing pilots with two carriers and we are engaged in constructive discussions with several others about tapping into the network potentially making this channel a significant source of future revenues.
The network continues to grow now comprising nearly 650 homecare providers, approximately 90% of whom have agreed to rates below the median cost of care and their respective ZIP codes. We also expect to add assisted living communities to the network in the coming months expanding the care settings available through the network.
The network now covers greater than 90% of the age 65, plus census population in the U S and continued strong interest among care providers indicates that we have a significant runway ahead of us and growing and sustaining our network.
We achieved nearly 1400 successful matches so far this year between Genworth, LTC policyholders and Carescout quality network providers as of the end of the second quarter.
We have raised our full year estimate to 2850 matches.
As the network and <unk> brand awareness grow we predict but a larger portion of Genworth LTC claimants will choose care options within network providers.
Helping them maximize these benefit dollar and enabling genworth to realize an estimated one to one and a half billion and claims savings overtime.
Shifting to cares got insurance, we expect to reenter the market with our inaugural low risk Standalone LTC insurance product later this year.
This product offers a compelling customer value proposition as the cost of care continues to rise and will be priced conservatively to reduce risk deliver attractive returns and help mitigate the need for future rate increases.
The new product has already secured approvals in 29 jurisdictions and we are targeting approvals and 30 to 35 States are ahead of our launch.
Additionally, we have submitted a worksite version of the product to the Interstate insurance compact, enabling distribution through employers and association channels.
Our initial capital investment and carers got insurance. This year represents the majority of the funding we expect to allocate to this business over the next three years due in part to the delayed timing of the expected plenty of Caris got insurance and resulting decrease in investment income earned in the entity in 2025.
Modestly increasing our expected 2025 investment from 75 million to 85 million to meet the regulatory requirements to maintain sufficient capital to cover losses by a multiple of five as we establish carrasquel insurance future capital contributions may vary based on sales level and mix and.
In addition to investment performance and operating expenses.
Last week, we shared that the UK High Court has issued a favorable judgment in the axis and Embraer litigation findings and then they're liable for losses, resulting from the mis selling of payment protection insurance. We are pleased with the court's judgment, which validates our long standing belief that Santander or bearish response.
The ability for these legacy liabilities the court awarded Axa damages interest cost and expenses of approximately 680 million pounds.
$911 million using a one pound to $1 34 exchange rate.
While the trial court denied San Anders initial request for permission to appeal. The courts judgment is still subject to Santander seeking permission to appeal from the appellate court.
If the judgment is paid in full and any appeals are favorably resolved genworth would expect to recover at that time approximately $750 million.
These proceeds have not been factored into our capital allocation plans. Once we receive we plan to deploy them in line with our stated capital allocation priorities invest.
Investing in growth through Carescout, returning cash to shareholders through our buyback program and opportunistically paying down debt.
Before I turn it over to Jerome I'd like to briefly address recent policy developments affecting the U S long term care landscape.
As the Medicaid changes included in the recently passed tax and budget legislation.
Medicaid remains the pair of last resort as well as the primary payer for a long term care services in the U S.
I believe the rising cost of LTC services are baby boomers, particularly the 95%, who lack private LTC insurance coverage and the pressures on families and Medicaid financial resources.
The discounts provided by care Scotts quality network, even more valuable in the future.
The number of 80 year old Baby Boomers is expected to double by 2045, and 90% of seniors today have a strong preference for at home care, while about 30% of seniors report difficulties with activities of daily living.
As detailed in our latest cost of care report homecare costs have surpassed $77000 per year on average and costs have increased significantly in the last few years.
As the long term care funding crisis comes into greater focus we are encouraged to see momentum in congress towards identifying innovative sustainable solutions like the wish Act.
Parison do co sponsored by Representatives from Swasey of New York, and John Malone error of Michigan.
The wish act would establish a public private framework to provide financial support for individuals requiring long term care, while also encouraging broader access to private insurance products.
We believe private market solutions like those offered by Carescout represent a critical step forward for.
A combination of modern LTC insurance and services products improved access to quality care and practical care navigation and significantly mitigate the growing strain and product programs like Medicaid.
In closing we are very encouraged by the steady progress we've made across Genworth, three strategic priorities and by the financial strength and operational performance. We continue to see at an act.
We remain confident in our ability to execute and sustain this momentum through the remainder of 2025 with that I'll hand, it over to Jerome for more in depth review of our financial performance.
Thank you Tom and good morning, everyone.
We continue to build on our solid foundation enhanced financial flexibility and deliver on our strategic priorities.
And that once again drove robust operating performance and continues to maintain a strong capital and liquidity position.
We also advanced our multiyear rate action plan made significant progress building Coeur Scout and continued to return capital to shareholders.
I'll start with an overview of our financial performance and drivers then provide an update on our investment portfolio and holding company liquidity before we open the call for Q&A.
As shown on slide seven second quarter, adjusted operating income was $68 million driven by an act.
Our long term care insurance segment reported an adjusted operating loss of $37 million driven by a remeasurement loss, primarily related to unfavorable actual variances from expected experience or a to E.
The unfavorable eight AE of $42 million was driven by lower terminations and higher benefit utilization.
Partially offset by the recapture of a block of LTC policies previously assumed by Genworth.
<unk> and a pretax gain of $26 million in the quarter.
As we have previously noted in 2023 and 2024, we saw an average quarterly loss from the AE of about $65 million in LTC.
While the favorable seasonal impact for mortality, we observed in the first quarter subsided as anticipated we.
We continue to expect that we could see losses at this average level throughout 2025.
As a reminder, quarterly fluctuations in U S. GAAP results do not impact our cash flows economic value or how we manage the business.
Life and annuities reported an adjusted operating loss of $7 million in the second quarter.
This included an adjusted operating loss of $20 million in life insurance, which improved versus the prior quarter due to lower mortality.
Partially offset by adjusted operating income of $13 million from annuities.
Corporate and other we reported at $29 million loss for the second quarter, which was higher than the prior year loss of $10 million, primarily driven by favorable tax timing in the second quarter of 2024.
Now taking a closer look at our next second quarter performance on slide eight.
Enact delivered $141 million and adjusted operating income up slightly versus the prior quarter, but down versus the prior year.
Selecting a lower reserve release.
Primary insurance in force grew 1% year over year to 270 billion supported by New insurance written and continued elevated persistency.
As shown on slide nine and acts favorable $48 million pre tax reserve release drove a loss ratio of 10%.
And that's estimated P. Myers sufficiency ratio remained strong at 165%.
Or approximately 2 billion above requirements.
Genworth share of an <unk> book value, including a OCI has increased to $4 2 billion at the end of the second quarter.
Up from $4 1 billion at year end 2024.
And that continues to deliver significant capital returns to genworth, including $94 million returned in the second quarter.
Looking ahead and that continues to operate with solid business fundamentals and a strong balance sheet and is well positioned to navigate the uncertainties in the macroeconomic environment.
As Tom mentioned.
<unk> now expects to return a total of approximately 400 million to its shareholders in 2025.
Based on our approximate 81% ownership position, we now expect to receive around $325 million from an act for the full year.
Turning to long term care insurance on slide 10, we continue to proactively manage LTC risk and maintain self sustainability and the legacy U S life insurance companies.
Our multiyear rate action plan or my wrap.
It remains our most effective tool for reducing tail risk and L. P C.
As at the end of the second quarter, we have achieved approximately $31 6 billion of in force rate actions on a net present value basis.
As part of the my wrap we offer a suite of options to help policyholders manage premium increases while maintaining meaningful coverage.
And to enable us to reduce our exposure to certain higher cost benefit features such as 5% compound benefit inflation options and large lifetime benefit amounts.
About 60% of our policy holders offered a benefit reduction have elected to do so lowering our long term risk.
These initiatives have helped reduce our exposure to individual LTC policies with a 5% compound benefit inflation feature decreasing notably to approximately 36% down from 57% in 2014.
In addition to the Mira and other benefit reduction strategies were reducing risk in innovative ways, including through the Kerr Scott quality network, and our live well age well intervention program.
Which deliver value for policy holders, while also driving claim savings over time.
As we have said before we are committed to managing the U S life insurance companies is a closed system.
Leveraging their existing reserves and capital to cover future claims.
We will not put capital into the legacy life insurance companies and given the long tail nature of our LTC insurance policies with peak claim years still over a decade away. We do not expect capital returns from these companies.
Slide 11 shows statutory pretax results for the U S life insurance companies was income of $81 million for the quarter.
The LTC loss of $26 million reflected the anticipated decline from seasonally high mortality in the first quarter.
Earnings from in force rate actions of $342 million were down from 445 million in the prior year.
As the prior year included a significant benefit from the implementation of the LTC legal settlements, which are now complete.
Life insurance reported income of $18 million, driven by favorable seasonal impacts versus the prior quarter.
And our annuity products reported income of $89 million, reflecting the net favorable impact of equity market and interest rate movements in the quarter.
The consolidated risk based capital ratio for Genworth life insurance company or Glick is estimated to be 304% at the end of June consistent with the end of March reflecting strong statutory earnings offset by higher required capital from continued investment in the limited partnership portfolio.
Palio.
Blake's consolidated balance sheet remains sound with capital and surplus of $3 6 billion as of the end of June.
Our final statutory results will be available on our investor website with our second quarter filings later this month.
Moving to our investment portfolio, which is summarized on slide 12, we remain confident in our positioning and believe we have the right strategy to remain resilient and navigate periods of market volatility.
The majority of our assets are in investment grade fixed maturities, along with an allocation to alternatives.
Collectively we continue to invest in these assets on behalf of our life insurance companies at yields of approximately 7%.
Our net investment income for the quarter reflects both improved distributions and valuations from our alternatives portfolio.
Which is composed mainly of diversified private equity investments and has targeted returns of approximately 12%.
As a reminder, the alternative asset program has the potential to experience uneven performance from quarter to quarter based on market volatility, but we are focused on investing for the long term, where we are confident that our track record of robust returns will prevail.
We remain committed to growing our alternative assets within regulatory limitations as it is a natural fit with long tail liabilities.
Next turning to the holding company on slide 13.
We received $94 million in capital from an act and ended the quarter with $248 million of cash and liquid assets or $120 million net of advanced cash payments from our subsidiaries for future obligations of approximately $128 million.
This includes the remainder of our initial capital investment of $85 million into the new cashed out insurance company. This year.
We exclude these advanced cash payments when evaluating holding company liquidity for the purpose of capital allocation and calculating the buffer to our debt service target.
Turning to capital on Slide 14, we also expect to invest approximately $45 million to $50 million of Kerr Scott services in 2025, as we continue to build out the platform.
This investment will go towards adding new products and customers, establishing a strong foundation to scale the business.
Moving to shareholder returns, we repurchased $30 million of shares in the second quarter at an average price of $7 <unk> per share and another $10 million in July.
For the full year 2025, we now expect to allocate between $100 million to $150 million to share repurchases, which excludes any potential proceeds from the successful resolution of the Axa litigation matter.
This range may vary depending on business performance market conditions, holding company cash and our share price.
We're very pleased with the value we've created for shareholders through our share repurchase program.
Our holding company debt stands at $790 million and we have financial flexibility given the strength of our balance sheet and sustainable cash flows from an act.
We continue to maintain a disciplined capital structure with a cash interest coverage ratio of approximately six.
As Tom mentioned, we are pleased with the court's judgment in the Axa Santander litigation.
If the judgment is paid in full and any appeals are favorably resolved genworth would expect to recover at that time, approximately $750 million subject to movements in foreign exchange rates.
We do not expect to pay taxes on this recovery.
These proceeds have not been factored into our capital allocation plans, but our capital allocation priorities remain unchanged.
We will continue to invest in long term growth through care Scout.
We returned cash to shareholders through our share repurchase program when our share price trades below intrinsic value.
And opportunistically retire debt.
In closing.
We're delivering on our strategic priorities, while proactively managing our liabilities and risk.
The multi year rate action plan and additional risk mitigation strategies are ensuring the self sustainability of the legacy LTC block and we will continue to focus on delivering sustainable long term growth through a nap and care scout, while returning meaningful value to shareholders through share repurchases and opportunistic debt retirement.
Now, let's open up 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 one to ask a question.
If at any time. Your question has already been answered or you would like to withdraw. Your question. Please press star two to be removed from the queue.
Please press star one now.
We will take our first question from Ryan Krueger with K B W.
Your line is now open.
Hey, Thanks, good morning.
Had some questions on the lawsuit.
The first one is on the appeal.
The appellate court can you give us any color on the process. There do you have any.
Any sense of when a decision either way can be made.
Good question, Ryan obviously, a lot of shareholders are interested in that I have asked Greg Carolina, Our general counsel.
To be here he was in London throughout the core trial has a obviously a good understanding of the process. So I would just ask Greg to.
To give you and the other investors and people on the call.
An update on what the processes from here going forward. Thanks.
Thanks, Tom and thanks for the question Ryan.
Unlike in the United States, where most of the people will be familiar with there is no appeal as of right in the United Kingdom.
Is that permission needs to be sought and granted permission can be saw it directly from the trial court.
Or from the appellate court as Tom mentioned in his prepared remarks, Santander already sought permission from the trial judge.
And that was denied.
Santander now has until August 15th to seek permission from the appellate court.
Once that permission is requested.
Pellet court would likely take about two to three months.
To decide whether to grant permission.
Permission denied cases pretty much over.
Permission is granted it could take anywhere from 12 to 18 months inclusive of the time the two to three months for the request for permission.
For the appeal to be decided.
Thanks, one quick follow up on that so.
I guess, if they did grant permission to appeal.
If they go up to 18 months.
The payment.
Current until till after that 12 to 18 month process and everything was decided or would it.
I recall going back to the January that's the case that you actually had been paid prior to.
The appeal being decided.
Yes, yes, that's right.
There is no stay of the judgment.
The court's order requiring payment by August 15th is still in place.
It has not been adjusted there is no automatic stay and no state has been sought so as of today payment is still required by August 15th.
Okay, great. Thank you and then unrelated follow up was just on the use of proceeds.
I heard your comments on potential uses.
Another possibility it sounds like this isn't your plan I just wanted to check on it I guess another possibility would be you pay down in January.
And your spinoff and act and then that would result.
Elimination probably of the discount in your stock trades at relative to the implied some of the parts value. So just wanted some updated thoughts on that is that being considered at all or do you feel like theres reasons not to pursue that path.
So Ryan I think for use of proceeds.
Jerome and I are still looking at that I think what youll see is.
As in the past.
Get them out of that will be used for share buybacks.
Then.
Opportunities if there are any for.
Further care Scott investments, although we don't see a significant.
Uh huh.
Faster investment in there unless there are inorganic small add on acquisition opportunities, which they come to us from time to time, and then opportunistically repurchasing debt, but.
It's a great question and we get it a lot I want to remind you and.
The market investors that just paying down the debt does not allow us to do the spin off.
I laid out in the annual meeting because we have.
When we get a lot of questions on this the remain co, but even if we eliminate used all the proceeds in.
Proceeds from that to eliminate the 790 million of debt.
We still can't do the spinoff its not viable.
Because the remain co.
Which would then be the U S life businesses long term care life, and annuity and the Carryout businesses. None of those have positive cash flow that can be paid to the holding company and therefore, we the screen is something we will look at but it will require would be.
That the Kerr Scott businesses.
Achieve breakeven and we've said, we think thats around five years and then once they're in a position to be a regular dividend payer, which we expect at some point then the spinoff options viable.
Okay, Great now that makes sense. Thank you.
Okay.
As a reminder, if you would like to ask a question you May press Star one on your telephone keypad now again Thats star one to ask a question.
Once again Thats Star one if you would like to ask a question.
We will take our next question from Pete Enderlin with Amazing partners.
Please go ahead good morning.
Good morning.
What about the possibility of at some point initiating a common stock dividend.
If there are any specific restrictions now, but those could go away if you get the amount from axa.
So Pete it's a good question, we get quite a bit I would say.
We talk a lot to our shareholders.
I'd say at this point, the vast majority of shareholders, 80% or more.
Our encouraging us to use excess cash for buybacks versus debt repurchases unless they're good pricing in the markets for the debt.
So we.
We continue to look at other opportunities.
Because shareholders prefer the repurchases versus instituting a regular dividend, which certainly is a possibility of an option.
This point, we've decided not to.
I'll look at it David but it's but the board.
And management look at that on an ongoing basis, so that could be a possibility at some point.
Okay. Thanks, a lot.
Thank you Pete.
Our next question will return to Ryan Krueger with K B W.
Thanks, guys one more on that.
David is there any consideration or potential for settlement.
That would just eliminate the possibility of an appeal and there. The reason I ask is it sounds like.
That could happen is youll receive the $750 million.
But then if they were to grant Santander or the right to appeal you'd have you'd at least have a risk of having to payback proceeds which I would think would then make it more difficult to deploy all of them. So I just wanted to hear any any thoughts on if that has any material.
Utility there.
So Ryan what I would say is you never know on settlement I would go back to what we've been saying for a number of years, we've always thought that the liability for these mis selling claims was on the bank sends and they're not on the insurance companies, which we owned and then <unk>.
Bart.
No.
We thought we had a strong case I think the court.
Decision is pretty clear.
They agreed with that so we're you know we're open we're always open to talking but because we feel very good about the prospects of prevailing.
If there is if there is an appeal and it's within it's granted.
I think if the only thing that.
I would consider would be some time value of money I will I want Greg to comment because.
With the payment being made that actually doesn't come to us it's paid to ask but Greg you want to just cover how the process works when the payment is made.
Even weather and then talking about then how that interacts with weather and appeals granted are not really sure.
That's exactly right.
Both you and your own made clear.
Clear in your prepared remarks.
In fact, if Santander pays the judgment on August 15th that payment goes to Axa.
But if the appeal process is still underway that is a request for permission to appeal has been made or if it has been granted.
Ask it doesn't pay genworth its share of the recovery until all appeals have been favorably resolved.
So that is the process of that.
How that would work.
As far as.
Settlement I agree with all of Tom's remarks, we feel optimistic about our ability to rebut any appeal thats made even if permission is granted.
Okay. Thanks for that clarification. So you won't receive the proceeds on August 15th.
Pros that youll receive the proceeds.
Possibly a few months later, if the request to appeal is denied but if not it won't be until that process is completed.
That's right.
For some reason Santander does not seek for request for permission to appeal now is putting into it or if they do request permission then two to three months after that if the request is denied if it is granted then somewhere 12 12 to 18 months once the appeal is resolved favorably decided.
Okay understood. Thanks.
Our next question comes from Joshua <unk> with credit sites. Your line is now open.
Hello. Good morning, Thank you for taking my question.
I appreciate the commentary on thinking about the deployment of the litigation proceeds, but does the receipt of funds, perhaps give you an opportunity to maybe recalibrate, where you want to be in certain categories. For example, like.
A target level of holdco liquidity or target level of overall indebtedness.
Just wondering if if there if the actual receipt of funds make you revisit.
Revisit any of these or any other items.
Josh Good morning. This is Sharon. Thank you for the question I would <unk>.
First highlight that.
Of course, when we get a quantum of the proceeds of this magnitude we will be assessing all options.
And how we allocate that capital I think Tom and I, both highlighted we're going to follow our normal capital allocation approach.
We'll be looking at holding company cash, but I have to tell you, we're very comfortable with where we are in the buffer.
That we hold which is two times our debt service and I would just also highlight to you Josh when you think about our leverage right now excluding U S life.
We're 20% right around 20%.
We have debt service of around $50 million.
Dollars per year, we have six times interest coverage.
So we're comfortable with where we are in the leverage but back to your macro question of course, we will evaluate everything we're pleased with the outcome of the case.
But we're comfortable with holding company cash we're comfortable with our leverage. So you know we will most likely continue to focus on share buybacks when our share price is trading at this level.
Got it thank you very much.
We will take our next question from Colin Devine with <unk> Associates. Please go ahead.
Good morning, gentlemen, I have two questions.
None of them are on the Santander I think.
Got it on the bottom of that.
The first one can you give us a little more color on the LTC recapture.
Size of the policy and also clarify lift for 26 million gain.
Our post tax.
And then the second.
Question relates to the new LTC products.
<unk> being written under the legacy companies.
Or are you going to be offering goes Kerr Scott and Sharon.
So ill, let Jerome have the first one and Colin I will take this that Glenn and nice to hear from you Colin.
Thanks, Tom.
Hi.
Cowen Good morning, Jerome and thank you for the question on the recapture.
I would dimension this as the business was ceded to us sometime ago and.
And it ultimately became subject to arbitration.
The ceding company had requested a return of assets and reserves that were simply in our view materially higher than what we believe to be fair and therefore, it became subject to arbitration.
The outcome of the arbitration was favorable to Genworth and the auditors agreed with our lower return of assets and reserves.
And the settlement was final in May and giving rise to this one time gain I will highlight we paid roughly $24 million and had $50 million on the books for U S. GAAP. So thats, how you get to the 20 states.
So collyn any follow up on that for Jerome and if not I will take the second question.
Sure. Tom can you just kind of a sense of the size of the underlying liabilities.
Related to that trading and if you're comfortable.
The arbitration was with on the other side.
The arbitration was with Blue Cross Blue Shield in Nebraska. It has been disclosed in our publicly filed documents and the quantum the quantum of the liability was $50 million of the reserves that we had on the books was roughly $50 million.
Okay.
Thank you.
Great.
Okay. Thank you.
Yes. Thank you John for the question and then turn to your second part on long term care. So just to remind you we view.
The genworth.
The legacy life operating companies.
To be standalone separate self sustaining.
And all of the new business.
We're writing the new long term care insurance business. So the first product, which I said it has been approved for sale in 29 states and wed like to have 30 to 35 of them. There is no magic number there before we launch so that's a traditional long term care insurance product that we think is priced conservatively good returns for us.
And with the fact that we will be reviewing the pricing assumptions against reality overtime and seeking increases if we need to although on this product is designed where we won't need an increase but it's hard to.
Be sure of that given that the duration of the liabilities is 30 years as I also said, we're now in the process we filed with the.
Insurance compact, which is 'twenty three 'twenty four states for a worksite version.
Out of that product and then we have at.
In annuity hybrid new product design that we're working on we expect that to come out.
Sometime in early next year, and then we will expand the offerings from there all of those products will be when we're funding this new insurance company care Scott Insurance company.
Domiciled in Virginia, with 85 million in that New company will be the issuer of all the new long term care insurance or funding solutions going forward.
Tom just to clarify the Carescout insurance that is tough farmer Genworth insurance company.
Is that correct.
Yes.
Well, we the Genworth insurance got we did.
Bye.
A shell company many years ago in North Carolina.
We rebranded that care scout.
Yes, so going for the new services business in insurance versus where branded care Scott and then it was re domicile to Virginia, So and that is <unk> insurance company.
Thank you and that is just to clarify that is owned directly by the holding company.
Correct.
Not in a chain.
Not in the chain that owns the like the three Genworth legacy life company, if that timeline is correct Scott.
Thank you very much appreciate it. Thanks, Thank you Colin and nice to hear from you.
Yes, yes.
So keep in touch.
Okay.
Ladies and gentlemen, I will now turn the call back over to Mr. Mcinerney for closing comments.
Sarah Thank you very much and I want to thank.
Brian Pete Josh.
Josh and calling for their questions I think they're very good questions and obviously a lot of our shareholders investors and the market are interested in that so I think we're doing.
Great job on our three strategic priorities, we're very pleased with the way the axa.
Litigation played out.
We think the judge got it right.
And going forward, we're very optimistic about the growth in <unk>, both on the services side with our Krsko quality network on the insurance side.
We now have the benefit of.
The potential.
Axa proceeds when any of any appeal is resolved and pluses in the earlier call today, if any of you were on that before.
And at that day of increase there.
Capital return for all shareholders this year from $3 $50 million to $400 million and so we still have.
Obviously, a very strong cash free cash flow generator and <unk>. So we feel we're very good shape.
Going forward and we look forward to increase from return obviously with the significant new proceeds significant more capital return through to shareholders principally through the buybacks, we'll look at the debt Opportunistically.
As Jerome said.
At 20% if you take all the GAAP equity of the life companies out is we're still among the lowest.
Our debt to capital in the industry very very low.
Millions of annual interest so we.
We feel very very good position and for those of you who have followed us for a long time I mean, I think we're stronger today than we've ever been and we.
Now have a significant improvement in.
And the financial strength of the company, obviously those proceeds represent a big part of our existing market cap.
Want to thank all of you for the call I want to thank the four questioners I think there were questions that we get a lot and look forward to updating you next quarter. Thank you very much and with that I.
I will turn the call back to you.
Ladies and gentlemen, this concludes Genworth Financial's second quarter conference call. Thank you for your participation at this time the call will end.
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