UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 9, 2010
Date of Report
(Date of earliest event reported)

GENWORTH FINANCIAL, INC.
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	001-32195	 	33-1073076	
(State or other jurisdiction of
incorporation or organization)	 	(Commission File Number)	 	(I.R.S. Employer
Identification No.)	
			
6620 West Broad Street, Richmond, VA	 		 	23230	
(Address of principal executive offices)	 		 	(Zip Code)	
(804) 281-6000
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02	Results of Operations and Financial Condition.	
The condensed consolidated financial statements of Genworth Financial Mortgage Insurance Pty Limited, an indirect subsidiary of Genworth Financial, Inc., as of June 30, 2010 and December 31, 2009, and for the three and six months ended June 30, 2010 and 2009, are included in Exhibit 99.1 to Item 9.01 of this Current Report on Form 8-K.
The information contained in this Current Report on Form 8-K (including the exhibit) is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as otherwise expressly stated in such filing. This information may be included or incorporated by reference in registration statements or reports filed under the Securities Act, or the Exchange Act, in connection with the issuance of asset-backed securities by one or more third parties.
 
Item 9.01	Financial Statements and Exhibits.	
The following material is furnished as an exhibit to this Current Report on Form 8-K:

Exhibit
Number	  	Description of Exhibit	
		
99.1	  	Genworth Financial Mortgage Insurance Pty Limited Condensed Consolidated Financial Statements as of June 30, 2010 and December 31, 2009 and for the three and six months ended June 30, 2010 and 2009.	
 
2

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	 		 	GENWORTH FINANCIAL, INC.	
				
DATE: August 9, 2010	 		 	By:	 	/s/    Amy R. Corbin        	
	 		 		 	Amy R. Corbin
Vice President and Controller
(Principal Accounting Officer)	
 
3

Exhibit 99.1
Index to Condensed Consolidated Financial Statements
Genworth Financial Mortgage Insurance Pty Limited

 	  	Page	
Financial Statements:	  		
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009 (Unaudited)	  	2	
Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009	  	3	
Condensed Consolidated Statements of Changes in Stockholder’s Equity for the six months ended June 30, 2010 and
2009 (Unaudited)	  	4	
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (Unaudited)	  	5	
 
1

Genworth Financial Mortgage Insurance Pty Limited
Condensed Consolidated Statements of Income
(U.S. dollar amounts in thousands)
(Unaudited)
The unaudited interim financial information has not been reviewed by an independent registered
public accounting firm.

 	  	Three months ended
June 30,	  	Six months ended
June 30,	
 	  	2010	  	2009	  	2010	  	2009	
Revenues:	  			  			  			  			
Premiums	  	$	84,856	  	$	74,586	  	$	166,040	  	$	138,316	
Net investment income	  	 	37,793	  	 	29,340	  	 	74,769	  	 	55,027	
Net investment gains (losses)	  	 	126	  	 	378	  	 	274	  	 	2,966	
Other income	  	 	614	  	 	292	  	 	860	  	 	410	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total revenues	  	 	123,389	  	 	104,596	  	 	241,943	  	 	196,719	
	  	 	 	  	 	 	  	 	 	  	 	 	
Losses and expenses:	  			  			  			  			
Net losses and loss adjustment expenses	  	 	36,390	  	 	41,004	  	 	72,682	  	 	79,578	
Acquisition and operating expenses, net of deferrals	  	 	15,000	  	 	12,405	  	 	30,401	  	 	23,866	
Amortization of deferred acquisition costs and intangibles	  	 	9,463	  	 	6,450	  	 	18,456	  	 	11,720	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total losses and expenses	  	 	60,853	  	 	59,859	  	 	121,539	  	 	115,164	
	  	 	 	  	 	 	  	 	 	  	 	 	
Income before income taxes	  	 	62,536	  	 	44,737	  	 	120,404	  	 	81,555	
Provision for income taxes	  	 	20,590	  	 	16,696	  	 	37,810	  	 	27,504	
	  	 	 	  	 	 	  	 	 	  	 	 	
Net income	  	$	41,946	  	$	28,041	  	$	82,594	  	$	54,051	

Supplemental disclosures:	  			  			  			  			
Total other-than-temporary impairments	  	$	—  	  	$	—  	  	$	—  	  	$	—  	
Portion of other-than-temporary impairments included in other comprehensive income (loss)	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Net other-than-temporary impairments	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
Other investment gains (losses)	  	 	126	  	 	378	  	 	274	  	 	2,966	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total net investment gains (losses)	  	$	126	  	$	378	  	$	274	  	$	2,966	
	  	 	 	  	 	 	  	 	 	  	 	 	
See Notes to Condensed Consolidated Financial Statements
 
2

Genworth Financial Mortgage Insurance Pty Limited
Condensed Consolidated Balance Sheets
(U.S. dollar amounts in thousands, except share amounts)
The unaudited interim financial information has not been reviewed by an independent registered
public accounting firm.

 	  	June 30,
2010	  	December 31,
2009	
 	  	(unaudited)	  	 	
Assets	  			  			
Investments:	  			  			
Fixed maturity securities available-for-sale, at fair value	  	$	2,463,552	  	$	2,430,035	
Short-term investments	  	 	8,875	  	 	51,496	
	  	 	 	  	 	 	
Total investments	  	 	2,472,427	  	 	2,481,531	
	  	 	 	  	 	 	
Cash and cash equivalents	  	 	98,956	  	 	215,278	
Accrued investment income	  	 	35,639	  	 	34,706	
Prepaid reinsurance premiums	  	 	580	  	 	639	
Deferred acquisition costs	  	 	87,902	  	 	92,356	
Goodwill	  	 	6,326	  	 	6,736	
Related party receivables	  	 	14,684	  	 	8,082	
Other assets	  	 	31,098	  	 	29,980	
	  	 	 	  	 	 	
Total assets	  	$	2,747,612	  	$	2,869,308	
	  	 	 	  	 	 	
Liabilities and stockholder’s equity	  			  			
Liabilities:	  			  			
Reserve for losses and loss adjustment expenses	  	$	163,959	  	$	201,959	
Unearned premiums	  	 	934,902	  	 	1,036,745	
Net deferred tax liability	  	 	15,044	  	 	4,879	
Related party payables	  	 	57,285	  	 	39,852	
Other liabilities and accrued expenses	  	 	33,972	  	 	52,035	
	  	 	 	  	 	 	
Total liabilities	  	 	1,205,162	  	 	1,335,470	
	  	 	 	  	 	 	
Stockholder’s equity:	  			  			
Ordinary shares – No par value; 1,401,558,880 and 1,401,558,500 shares authorized and issued as of June 30, 2010 and December 31, 2009, respectively	  	 	—  	  	 	—  	
Additional paid-in capital	  	 	613,626	  	 	610,149	
	  	 	 	  	 	 	
Accumulated other comprehensive income (loss):	  			  			
Net unrealized investment gains (losses):	  			  			
Net unrealized gains (losses) on securities not other-than-temporarily impaired	  	 	27,321	  	 	3,627	
Net unrealized gains (losses) on other-than-temporarily impaired securities	  	 	—  	  	 	—  	
	  	 	 	  	 	 	
Net unrealized investment gains (losses)	  	 	27,321	  	 	3,627	
Foreign currency translation adjustments	  	 	148,071	  	 	249,224	
	  	 	 	  	 	 	
Total accumulated other comprehensive income (loss)	  	 	175,392	  	 	252,851	
Retained earnings	  	 	753,432	  	 	670,838	
	  	 	 	  	 	 	
Total stockholder’s equity	  	 	1,542,450	  	 	1,533,838	
	  	 	 	  	 	 	
Total liabilities and stockholder’s equity	  	$	2,747,612	  	$	2,869,308	
	  	 	 	  	 	 	
See Notes to Condensed Consolidated Financial Statements
 
3

Genworth Financial Mortgage Insurance Pty Limited
Condensed Consolidated Statements of Changes in Stockholder’s Equity
(U.S. dollar amounts in thousands)
The unaudited interim financial information has not been reviewed by an independent registered
public accounting firm.

 	  	Additional
paid-in
capital	  	Accumulated
other
comprehensive
income (loss)	 	 	Retained
earnings	  	Total
stockholder’s
equity	 	
Balances as of December 31, 2009	  	$	610,149	  	$	252,851	  	 	$	670,838	  	$	1,533,838	  	
	  			  				 			  	 	 	 	
Comprehensive income (loss):	  			  				 			  				
Net income	  	 	—  	  	 	—  	  	 	 	82,594	  	 	82,594	  	
Net unrealized gains on investment securities	  	 	—  	  	 	23,694	  	 	 	—  	  	 	23,694	  	
Foreign currency translation adjustments	  	 	—  	  	 	(101,153	) 	 	 	—  	  	 	(101,153	) 	
	  			  				 			  	 	 	 	
Total comprehensive income (loss)	  			  				 			  	 	5,135	  	
Capital contribution	  	 	3,477	  	 	—  	  	 	 	—  	  	 	3,477	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Balances as of June 30, 2010	  	$	613,626	  	$	175,392	  	 	$	753,432	  	$	1,542,450	  	

															
 	  	Additional
paid-in
capital	  	Accumulated
other
comprehensive
income (loss)	 	 	Retained
earnings	  	Total
stockholder’s
equity	 	
Balances as of December 31, 2008	  	$	558,925	  	$	(44,673	) 	 	$	538,058	  	$	1,052,310	  	
	  			  				 			  	 	 	 	
Cumulative effect of change in accounting	  	 	—  	  	 	(865	) 	 	 	865	  	 	—  	  	
Comprehensive income (loss):	  			  				 			  				
Net income	  	 	—  	  	 	—  	  	 	 	54,051	  	 	54,051	  	
Net unrealized gains on investment securities	  	 	—  	  	 	(21,442	) 	 	 	—  	  	 	(21,442	) 	
Foreign currency translation adjustments	  	 	—  	  	 	171,615	  	 	 	—  	  	 	171,615	  	
	  			  				 			  	 	 	 	
Total comprehensive income (loss)	  			  				 			  	 	204,224	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Balances as of June 30, 2009	  	$	558,925	  	$	104,635	  	 	$	592,974	  	$	1,256,534	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
See Notes to Condensed Consolidated Financial Statements
 
4

Genworth Financial Mortgage Insurance Pty Limited
Condensed Consolidated Statements of Cash Flows
(U.S. dollar amounts in thousands)
(Unaudited)
The unaudited interim financial information has not been reviewed by an independent registered
public accounting firm.

 	  	Six months ended
June 30,	 	
 	  	2010	 	 	2009	 	
Cash flows from operating activities:	  				 				
Net income	  	$	82,594	  	 	$	54,051	  	
Adjustments to reconcile net income to net cash from operating activities:	  				 				
Amortization of investment discounts and premiums	  	 	(192	) 	 	 	(1,161	) 	
Net investment (gains) losses	  	 	(274	) 	 	 	(2,966	) 	
Acquisition costs deferred	  	 	(18,595	) 	 	 	(18,129	) 	
Amortization of deferred acquisition costs and intangibles	  	 	18,456	  	 	 	11,720	  	
Deferred income taxes	  	 	3,816	  	 	 	(1,654	) 	
Corporate overhead allocation	  	 	7,501	  	 	 	8,493	  	
Change in certain assets and liabilities:	  				 				
Accrued investment income and other assets	  	 	(9,693	) 	 	 	(11,244	) 	
Reserve for losses and loss adjustment expenses	  	 	(26,565	) 	 	 	34,653	  	
Unearned premiums	  	 	(46,777	) 	 	 	174,318	  	
Other liabilities	  	 	(849	) 	 	 	5,899	  	
	  	 	 	 	 	 	 	 	
Net cash from operating activities	  	 	9,422	  	 	 	253,980	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				
Proceeds from maturities and repayments of fixed maturity securities and short-term investments	  	 	606,161	  	 	 	121,411	  	
Purchases of fixed maturity securities and short-term investments	  	 	(723,050	) 	 	 	(363,131	) 	
	  	 	 	 	 	 	 	 	
Net cash from investing activities	  	 	(116,889	) 	 	 	(241,720	) 	
	  	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	  	 	(8,855	) 	 	 	(92,075	) 	
	  	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	  	 	(116,322	) 	 	 	(79,815	) 	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents at beginning of period	  	 	215,278	  	 	 	408,182	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	  	$	98,956	  	 	$	328,367	  	
	  	 	 	 	 	 	 	 	
See Notes to Condensed Consolidated Financial Statements
 
5

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2010 and 2009
(Unaudited)
(1) Nature of Business, Formation of Genworth Mortgage and Basis of Presentation
Genworth Financial Mortgage Insurance Pty Limited (“Genworth Mortgage” or the “Company” as appropriate) offers mortgage insurance products in Australia and New Zealand and is headquartered in Sydney, Australia. In particular, the Company offers primary mortgage insurance, known as “lenders mortgage insurance,” or LMI, and portfolio credit enhancement policies. The principal product is LMI, which is generally single premium business and provides 100% coverage of the loan amount in the event of a mortgage default.
The Company’s condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the United States Securities and Exchange Commission (“SEC”) disclosure requirements for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These condensed consolidated financial statements include all adjustments considered necessary by management to present a fair statement of the financial position, results of operations, and cash flow for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The condensed consolidated financial statements included herein should be read in conjunction with the audited financial statements and related notes contained in our 2009 year end financial statements on Form 8-K furnished on March 30, 2010.
The Company’s management has determined that the Company has one reportable operating segment, mortgage insurance.
Genworth Mortgage, formerly GE Mortgage Insurance Company Pty Limited, is a wholly-owned subsidiary of Genworth Financial Mortgage Insurance Holdings Pty Limited and was incorporated in Australia on November 10, 2003. The ultimate parent company of Genworth Mortgage is Genworth Financial, Inc. (“Genworth”). Genworth was incorporated in Delaware on October 23, 2003.
The condensed consolidated financial statements are presented in U.S. dollars. The accompanying financial statements include Genworth Financial Mortgage Indemnity Limited and are prepared on a consolidated basis. All inter company transactions have been eliminated in the consolidated financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation.
(2) Accounting Pronouncements
Recently adopted
Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities
On January 1, 2010, we adopted new accounting guidance for determining which enterprise, if any, has a controlling financial interest in a VIE and requires additional disclosures about involvement in variable interest entities (“VIEs”). Under this new accounting guidance, the primary beneficiary of a VIE is the enterprise that has the power to direct the activities of a VIE that most significantly impacts the VIE’s economic performance and has the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. Upon adoption of this new accounting guidance, we were required to consolidate certain VIEs, if any, including previously qualified special purpose entities and investment structures. The adoption of this accounting guidance did not have any impact on our consolidated financial statements as we do not have any controlling financial interests in a VIE.
 
6

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
Fair Value Measurements and Disclosures - Improving Disclosures about Fair Value Measurements
On January 1, 2010, we adopted new accounting guidance requiring additional disclosures for significant transfers between Level 1 and 2 fair value measurements and clarifications to existing fair value disclosures related to the level of disaggregation, inputs and valuation techniques. The adoption of this new accounting guidance did not have a material impact on our consolidated financial statements.
Not Yet Adopted
In July 2010, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that will require additional disclosures about the credit quality of loans, lease receivables and other long-term receivables and the related allowance for credit losses. This new accounting guidance will be effective for us on December 31, 2010 and January 1, 2011. We do not expect the adoption of this new accounting guidance to have a material impact on our consolidated financial statements.
In March 2010, the FASB issued new accounting guidance clarifying the scope exception for embedded credit derivatives and when those features would be bifurcated from the host contract. Under the new accounting guidance, only embedded credit derivative features that are in the form of subordination of one financial instrument to another would not be subject to the bifurcation requirements. Accordingly, upon adoption of this new accounting guidance, we are required to bifurcate embedded credit derivatives that no longer qualify under the amended scope exception. In conjunction with our adoption, we elected fair value option for certain fixed maturity securities. This accounting guidance was effective for us on July 1, 2010. We do not expect the adoption of this new accounting guidance to have a material impact on our consolidated financial statements.
In January 2010, the FASB issued new accounting guidance to require additional disclosures about purchases, sales, issuances, and settlements in the rollforward of Level 3 fair value measurements. This new accounting guidance will be effective for us on January 1, 2011. We do not expect the adoption of this new accounting guidance to have a material impact on our consolidated financial statements.
(3) Investments
Net Investment Income
Sources of net investment income were as follows for the periods presented:

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(U.S. dollar amounts in thousands)	  	2010	 	 	2009	 	 	2010	 	 	2009	 	
Fixed maturity securities	  	$	37,663	  	 	$	26,766	  	 	$	73,217	  	 	$	48,639	  	
Cash and cash equivalents	  	 	1,361	  	 	 	3,252	  	 	 	4,051	  	 	 	7,396	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross investment income before expenses and fees	  	 	39,024	  	 	 	30,018	  	 	 	77,268	  	 	 	56,035	  	
Expenses and fees	  	 	(1,231	) 	 	 	(678	) 	 	 	(2,499	) 	 	 	(1,008	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	  	$	37,793	  	 	$	29,340	  	 	$	74,769	  	 	$	55,027	  	

7

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:

 	  	Three months ended
June  30,	 	 	Six months ended
June 30,	 	
(U.S. dollar amounts in thousands)	  	2010	 	 	2009	 	 	2010	 	 	2009	 	
Available-for-sale investment securities:	  				 				 				 				
Realized gains on sale	  	$	1,722	  	 	$	468	  	 	$	1,915	  	 	$	3,056	  	
Realized losses on sale	  	 	(1,596	) 	 	 	(90	) 	 	 	(1,641	) 	 	 	(90	) 	
Impairments:	  				 				 				 				
Total other-than-temporary impairments	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
Portion of other-than-temporary impairments included in other comprehensive income (loss) (“OCI”)	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net other-than-temporary impairments	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment gains (losses)	  	$	126	  	 	$	378	  	 	$	274	  	 	$	2,966	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The aggregate fair value of securities sold at a loss during the three months ended June 30, 2010 and 2009 was $216 million and $3 million, respectively, which was approximately 99% and 97%, respectively, of book value. The aggregate fair value of securities sold at a loss during the six months ended June 30, 2010 and 2009 was $226 million and $3 million, respectively, which was approximately 99% and 97%, respectively, of book value.
Unrealized Investment Gains (Losses)
Net unrealized gains and losses on investment securities classified as available-for-sale are reduced by deferred income taxes that would have resulted had such gains and losses been realized. Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:

(U.S. dollar amounts in thousands)	  	June 30,
2010	 	 	December 31,
2009	 	
Net unrealized gains (losses) on available-for-sale investment securities:	  				 				
Fixed maturity securities	  	$	39,030	  	 	$	5,181	  	
Deferred income taxes	  	 	(11,709	) 	 	 	(1,554	) 	
	  	 	 	 	 	 	 	 	
Net unrealized investment gains (losses)	  	$	27,321	  	 	$	3,627	  	
	  	 	 	 	 	 	 	 	
The change in net unrealized gains (losses) on available-for-sale securities reported in accumulated other comprehensive income (loss) was as follows as of or for the periods indicated:

 	  	As of or for the three
months ended
June 30,	 	
(U.S. dollar amounts in thousands)	  	2010	 	 	2009	 	
Beginning balance	  	$	381	  	 	$	20,727	  	
Cumulative effect of change in accounting	  	 	—  	  	 	 	(865	) 	
Unrealized gains (losses) arising during the period:	  				 				
Unrealized gains (losses) on investment securities	  	 	38,612	  	 	 	(21,833	) 	
Provision for deferred taxes	  	 	(11,584	) 	 	 	6,782	  	
	  	 	 	 	 	 	 	 	
Change in unrealized investment gains (losses)	  	 	27,028	  	 	 	(15,051	) 	
Reclassification adjustments to net investment (gains) losses, net of taxes of $38 and $132	  	 	(88	) 	 	 	(246	) 	
	  	 	 	 	 	 	 	 	
Ending balance	  	$	27,321	  	 	$	4,565	  	

8

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
The change in net unrealized gains (losses) on available-for-sale securities reported in accumulated other comprehensive income (loss) was as follows as of or for the periods indicated:

 	  	As of or for the six
months ended
June 30,	 	
(U.S. dollar amounts in thousands)	  	2010	 	 	2009	 	
Beginning balance	  	$	3,627	  	 	$	26,872	  	
Cumulative effect of change in accounting	  	 	—  	  	 	 	(865	) 	
Unrealized gains (losses) arising during the period:	  				 				
Unrealized gains (losses) on investment securities	  	 	34,123	  	 	 	(28,038	) 	
Provision for deferred taxes	  	 	(10,237	) 	 	 	8,524	  	
	  	 	 	 	 	 	 	 	
Change in unrealized investment gains (losses)	  	 	23,886	  	 	 	(19,514	) 	
Reclassification adjustments to net investment (gains) losses, net of taxes of $82 and $1,038	  	 	(192	) 	 	 	(1,928	) 	
	  	 	 	 	 	 	 	 	
Ending balance	  	$	27,321	  	 	$	4,565	  	
	  	 	 	 	 	 	 	 	
Fixed Maturity Securities
As of June 30, 2010, the amortized cost or cost, gross unrealized gains and losses and fair value of the fixed maturity securities classified as available-for-sale were as follows:

 	  	 	  	Gross unrealized gains on securities	  	Gross unrealized losses on securities	  	 	
(U.S. dollar amounts in thousands)	  	Amortized
cost or
cost	  	Not other-than-
temporarily
impaired	  	Other-than-
temporarily
impaired	  	Not other-than-
temporarily
impaired	 	 	Other-than-
temporarily
impaired	  	Fair
value	
Fixed maturity securities:	  			  			  			  				 			  			
Government—non-U.S.	  	$	252,138	  	$	6,180	  	$	—  	  	$	(92	) 	 	$	—  	  	$	258,226	
Corporate—U.S.	  	 	110,434	  	 	161	  	 	—  	  	 	(189	) 	 	 	—  	  	 	110,406	
Corporate—non-U.S.	  	 	2,023,748	  	 	36,149	  	 	—  	  	 	(5,943	) 	 	 	—  	  	 	2,053,954	
Residential mortgage-backed securities	  	 	40,966	  	 	—  	  	 	—  	  	 	—  	  	 	 	—  	  	 	40,966	
	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	
Total available-for-sale securities	  	$	2,427,286	  	$	42,490	  	$	—  	  	$	(6,224	) 	 	$	—  	  	$	2,463,552	
	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	
As of December 31, 2009, the amortized cost or cost, gross unrealized gains and losses and fair value of the fixed maturity securities classified as available-for-sale were as follows:

 	  	 	  	Gross unrealized gains on securities	  	Gross unrealized losses on securities	  	 	
(U.S. dollar amounts in thousands)	  	Amortized
cost or
cost	  	Not other-than-
temporarily
impaired	  	Other-than-
temporarily
impaired	  	Not other-than-
temporarily
impaired	 	 	Other-than-
temporarily
impaired	  	Fair
value	
Fixed maturity securities:	  			  			  			  				 			  			
Government—non-U.S.	  	$	272,595	  	$	2,469	  	$	—  	  	$	(2,173	) 	 	$	—  	  	$	272,891	
Corporate—U.S.	  	 	121,390	  	 	415	  	 	—  	  	 	(466	) 	 	 	—  	  	 	121,339	
Corporate—non-U.S.	  	 	2,030,869	  	 	20,826	  	 	—  	  	 	(15,890	) 	 	 	—  	  	 	2,035,805	
	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	
Total available-for-sale securities	  	$	2,424,854	  	$	23,710	  	$	—  	  	$	(18,529	) 	 	$	—  	  	$	2,430,035	

9

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of June 30, 2010:

 	  	Less than 12 months	  	12 months or more	
(U.S. dollar amounts in thousands)	  	Fair value	  	Gross
unrealized
losses	 	 	Number of
securities	  	Fair value	  	Gross
unrealized
losses	 	 	Number of
securities	
Description of Securities	  			  				 		  			  				 		
Fixed maturity securities:	  			  				 		  			  				 		
Government—non-U.S.	  	$	—  	  	$	—  	  	 	—  	  	$	8,307	  	$	(92	) 	 	1	
Corporate—U.S.	  	 	27,395	  	 	(23	) 	 	3	  	 	10,372	  	 	(166	) 	 	2	
Corporate—non-U.S.	  	 	77,906	  	 	(1,996	) 	 	13	  	 	275,806	  	 	(3,947	) 	 	23	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	105,301	  	$	(2,019	) 	 	16	  	$	294,485	  	$	(4,205	) 	 	26	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
% Below cost—fixed maturity securities:	  			  				 		  			  				 		
<20% Below cost	  	$	105,301	  	$	(2,019	) 	 	16	  	$	293,846	  	$	(4,031	) 	 	25	
20-50% Below cost	  	 	—  	  	 	—  	  	 	—  	  	 	639	  	 	(174	) 	 	1	
>50% Below cost	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	105,301	  	$	(2,019	) 	 	16	  	$	294,485	  	$	(4,205	) 	 	26	

Investment grade	  	$	105,301	  	$	(2,019	) 	 	16	  	$	294,485	  	$	(4,205	) 	 	26	
Below investment grade	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	105,301	  	$	(2,019	) 	 	16	  	$	294,485	  	$	(4,205	) 	 	26	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
The investment securities in an unrealized loss position as of June 30, 2010 consisted of 42 securities and accounted for unrealized losses of $6 million. Of these unrealized losses of $6 million, all were investment grade (rated “AAA” through “BBB-”) and 97% were less than 20% below cost. The fair value on securities less than 20% below cost has been impacted by credit spreads that have widened since acquisition and reflect uncertainty surrounding the extent and duration of government involvement in European and Australian financial institutions and potential capital restructuring of these institutions. In our examination of these securities, we considered all available evidence, including the issuers’ financial condition and current industry events to develop our conclusion on the amount and timing of the cash flows expected to be collected. Based on this evaluation, we determined that the unrealized losses on these securities represented temporary impairments as of June 30, 2010.
Despite the considerable analysis and rigor employed on our structured securities, it is at least reasonably possible that the underlying collateral of these investments will perform worse than current market expectations. Such events may lead to adverse changes in cash flows on our holdings and potential future write-downs within our portfolio. We expect our investments in corporate securities will continue to perform in accordance with our conclusions about the amount and timing of estimated cash flows. Although we do not anticipate such events, it is at least reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize potential future write-downs within our portfolio of corporate securities.
 
10

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of investment securities, aggregated by investment type and length of time that individual investment securities were in a continuous unrealized loss position, as of December 31, 2009:

 	  	Less than 12 months	  	12 months or more	
(U.S. dollar amounts in thousands)	  	Fair value	  	Gross
unrealized
losses	 	 	Number of
securities	  	Fair value	  	Gross
unrealized
losses	 	 	Number of
securities	
Description of Securities	  			  				 		  			  				 		
Fixed maturity securities:	  			  				 		  			  				 		
Government—non-U.S.	  	$	137,755	  	$	(2,173	) 	 	7	  	$	—  	  	$	—  	  	 	—  	
Corporate—U.S.	  	 	—  	  	 	—  	  	 	—  	  	 	21,937	  	 	(466	) 	 	4	
Corporate—non-U.S.	  	 	777,557	  	 	(13,441	) 	 	59	  	 	75,754	  	 	(2,449	) 	 	15	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	915,312	  	$	(15,614	) 	 	66	  	$	97,691	  	$	(2,915	) 	 	19	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
% Below cost—fixed maturity securities:	  			  				 		  			  				 		
<20% Below cost	  	$	915,312	  	$	(15,614	) 	 	66	  	$	97,691	  	$	(2,915	) 	 	19	
20-50% Below cost	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
>50% Below cost	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	915,312	  	$	(15,614	) 	 	66	  	$	97,691	  	$	(2,915	) 	 	19	

Investment grade	  	$	915,312	  	$	(15,614	) 	 	66	  	$	97,691	  	$	(2,915	) 	 	19	
Below investment grade	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	915,312	  	$	(15,614	) 	 	66	  	$	97,691	  	$	(2,915	) 	 	19	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
The scheduled maturity distribution of fixed maturity securities as of June 30, 2010 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties .

(U.S. dollar amounts in thousands)	  	Amortized
cost or cost	  	Fair
value	
Due one year or less	  	$	358,329	  	$	359,574	
Due after one year through five years	  	 	1,570,507	  	 	1,593,651	
Due after five years through ten years	  	 	439,825	  	 	450,709	
Due after ten years	  	 	17,659	  	 	18,652	
	  	 	 	  	 	 	
Subtotal	  	 	2,386,320	  	 	2,422,586	
Residential mortgage-backed securities	  	 	40,966	  	 	40,966	
	  	 	 	  	 	 	
Total	  	$	2,427,286	  	$	2,463,552	
	  	 	 	  	 	 	
As of June 30, 2010, $90 million of investments were subject to certain call provisions. Typically, call provisions provide the issuer the ability to redeem a security, prior to its stated maturity, at or above par.
Investment Concentrations
As of June 30, 2010, securities issued by finance and insurance industry groups and foreign state government represented approximately 25% and 43%, respectively, of the corporate fixed maturity securities portfolio held by the Company.
 
11

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
As of June 30, 2010, the Company held $372 million in corporate fixed maturity securities issued by the New South Wales Treasury Corporation, which comprised of 24% of total stockholder’s equity. Additionally, the Company held $332 million in corporate fixed maturity securities issued by Queensland Treasury Corp, which comprised 22% of total stockholder’s equity. No other single issuer exceeded 10% of total stockholder’s equity.
(4) Fair Value Measurements
Recurring Fair Value Measurements
We have fixed maturity securities which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.
Fixed maturity securities
The valuations of fixed maturity securities are determined using a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information.
We utilize certain third-party data providers when determining fair value. We consider information obtained from third-party pricing services as well as third-party broker provided prices, or broker quotes, in our determination of fair value. Additionally, we utilize internal models to determine the valuation of securities using an income approach where the inputs are based on third-party provided market inputs. While we consider the valuations provided by third-party pricing services and broker quotes, management determines the fair value of our investment securities after considering all relevant and available information. We also obtain an understanding of the valuation methodologies and procedures used by third-party data providers to ensure sufficient understanding to evaluate the valuation data received and determine the appropriate fair value.
In general, we first obtain valuations from pricing services. If a price is not supplied by a pricing service, we will typically seek a broker quote. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for identical securities are not readily observable and these securities are not typically valued by pricing services. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quote valuation is available, we determine fair value using internal models.
For pricing services, we obtain an understanding of the pricing methodologies and procedures for each type of instrument. In general, a pricing service does not provide a price for a security if sufficient information is not readily available to determine fair value or if such security is not in the specific sector or class covered by a particular pricing service. Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs.
For private fixed maturity securities, we utilize an internal model to determine fair value and utilize public bond spreads by sector, rating and maturity to develop the market rate that would be utilized for a similar public bond. We then add an additional premium to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We assign each security an internal rating to determine appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds to determine whether the spreads utilized would be considered observable inputs for the private placement being valued. To determine the significance of unobservable inputs, we calculate the impact on the valuation from the unobservable input and will classify a security as Level 3 when the impact on the valuation exceeds 10%.
For remaining securities priced using internal models, we maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.
 
12

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
The following table summarizes the primary sources considered when determining fair value of each class of fixed maturity securities as of June 30, 2010.

(U.S. dollar amounts in thousands)	  	Total	  	Level 1	  	Level 2	  	Level 3	
Government—non-U.S.:	  			  			  			  			
Pricing services	  	$	257,486	  	$	—  	  	$	257,486	  	$	—  	
Internal models	  	 	740	  	 	—  	  	 	—  	  	 	740	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total government—non-U.S.	  	 	258,226	  	 	—  	  	 	257,486	  	 	740	
	  	 	 	  	 	 	  	 	 	  	 	 	
Corporate—U.S.:	  			  			  			  			
Pricing services	  	 	110,406	  	 	—  	  	 	110,406	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total U.S. corporate	  	 	110,406	  	 	—  	  	 	110,406	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Corporate—non-U.S.:	  			  			  			  			
Pricing services	  	 	2,053,954	  	 	—  	  	 	2,053,954	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total corporate—non-U.S.	  	 	2,053,954	  	 	—  	  	 	2,053,954	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Residential mortgage-backed securities:	  			  			  			  			
Internal models	  	 	40,966	  	 	—  	  	 	40,966	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total residential mortgage-backed	  	 	40,966	  	 	—  	  	 	40,966	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total fixed maturity securities	  	$	2,463,552	  	$	—  	  	$	2,462,812	  	$	740	

13

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
The following tables set forth our assets that are measured at fair value on a recurring basis as of the dates indicated:

 	  	June 30, 2010	
(U.S. dollar amounts in thousands)	  	Total	  	Level 1	  	Level 2	  	Level 3	
Assets	  			  			  			  			
Investments:	  			  			  			  			
Fixed maturity securities:	  			  			  			  			
Government—non-U.S.	  	$	258,226	  	$	—  	  	$	257,486	  	$	740	
U.S. corporate	  	 	110,406	  	 	—  	  	 	110,406	  	 	—  	
Corporate—non-U.S.	  	 	2,053,954	  	 	—  	  	 	2,053,954	  	 	—  	
Residential mortgage-backed securities	  	 	40,966	  	 	—  	  	 	40,966	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total fixed maturity securities	  	$	2,463,552	  	$	—  	  	$	2,462,812	  	$	740	

													
 	  	December 31, 2009	
(U.S. dollar amounts in thousands)	  	Total	  	Level 1	  	Level 2	  	Level 3	
Assets	  			  			  			  			
Investments:	  			  			  			  			
Fixed maturity securities:	  			  			  			  			
Government—non-U.S.	  	$	272,891	  	$	—  	  	$	272,113	  	$	778	
U.S. corporate	  	 	121,339	  	 	—  	  	 	121,339	  	 	—  	
Corporate—non-U.S.	  	 	2,035,805	  	 	—  	  	 	2,034,443	  	 	1,362	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total fixed maturity securities	  	$	2,430,035	  	$	—  	  	$	2,427,895	  	$	2,140	

14

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:

 	  	 	  	Total realized and
unrealized gains
(losses)	 	 	 	  	 	  	 	 	 	 	  	 	
(U.S. dollar amounts in thousands)	  	Beginning
balance
as of
April 1,
2010	  	Included
in net
income	  	Included
in OCI	 	 	Purchases, sales
issuances and
settlements, net	  	Transfer
in Level 3	  	Transfer
out of
Level 3 (1) 	 	 	Ending
balance
as of
June 30,
2010	  	Total gains
(losses)
included in
net income
attributable
to assets
still held	
Fixed maturity securities:	  			  			  				 			  			  				 			  			
Government—non-U.S.	  	$	763	  	$	—  	  	$	(23	) 	 	$	—  	  	$	—  	  	$	—  	  	 	$	740	  	$	—  	
Corporate—non-U.S.	  	 	—  	  	 	—  	  	 	—  	  	 	 	—  	  	 	—  	  	 	—  	  	 	 	—  	  	 	—  	
Residential mortgage-backed securities	  	 	44,516	  	 	—  	  	 	—  	  	 	 	—  	  	 	—  	  	 	(44,516	) 	 	 	—  	  	 	—  	
	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	
Total Level 3 assets	  	$	45,279	  	$	—  	  	$	(23	) 	 	$	—  	  	$	—  	  	$	(44,516	) 	 	$	740	  	$	—  	

(1)       The transfer out of Level 3 resulted from a change in the observability of inputs used to determine fair value.	

 	  	 	  	Total realized and
unrealized gains
(losses)	 	 	 	  	 	  	 	  	 	  	 	
(U.S. dollar amounts in thousands)	  	Beginning
balance
as of
April 1,
2009	  	Included
in net
income	  	Included
in OCI	 	 	Purchases, sales
issuances and
settlements, net	  	Transfer
in Level 3	  	Transfer
out of
Level 3	  	Ending
balance
as of
June 30,
2009	  	Total gains
(losses)
included in
net income
attributable
to assets
still held	
Fixed maturity securities:	  			  			  				 			  			  			  			  			
Corporate—non-U.S.	  	$	—  	  	$	623	  	$	(99	) 	 	$	—  	  	$	4,033	  	$	—  	  	$	4,557	  	$	623	
	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total Level 3 assets	  	$	—  	  	$	623	  	$	(99	) 	 	$	—  	  	$	4,033	  	$	—  	  	$	4,557	  	$	623	

																											
 	  	 	  	Total realized and
unrealized gains
(losses)	 	 	 	  	 	  	 	 	 	 	  	 	
(U.S. dollar amounts in thousands)	  	Beginning
balance
as of
January 1,
2010	  	Included
in net
income	  	Included
in OCI	 	 	Purchases, sales
issuances and
settlements, net	  	Transfer
in Level 3	  	Transfer
out of
Level 3 (1) 	 	 	Ending
balance
as of
June 30,
2010	  	Total gains
(losses)
included in
net income
attributable
to assets
still held	
Fixed maturity securities:	  			  			  				 			  			  				 			  			
Government—non-U.S.	  	$	778	  	$	—  	  	$	(38	) 	 	$	—  	  	$	—  	  	$	—  	  	 	$	740	  	$	—  	
Corporate—non-U.S.	  	 	1,362	  	 	—  	  	 	—  	  	 	 	—  	  	 	—  	  	 	(1,362	) 	 	 	—  	  	 	—  	
Residential mortgage-backed securities	  	 	—  	  	 	—  	  	 	—  	  	 	 	44,516	  	 	—  	  	 	(44,516	) 	 	 	—  	  	 	—  	
	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	
Total Level 3 assets	  	$	2,140	  	$	—  	  	$	(38	) 	 	$	44,516	  	$	—  	  	$	(45,878	) 	 	$	740	  	$	—  	

(1)       The transfer out of Level 3 was primarily related to residential mortgage-backed securities and private fixed corporate—non U.S. securities and resulted from a change in the observability of inputs used to determine fair value.	
 
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Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)

 	  	 	  	Total realized and
unrealized gains
(losses)	 	 	 	  	 	  	 	  	 	  	 	
(U.S. dollar amounts in thousands)	  	Beginning
balance
as of
January 1,
2009	  	Included
in net
income	  	Included
in OCI	 	 	Purchases, sales
issuances and
settlements, net	  	Transfer
in Level 3	  	Transfer
out of
Level 3	  	Ending
balance
as of
June 30,
2009	  	Total gains
(losses)
included in
net income
attributable
to assets
still held	
Fixed maturity securities:	  			  			  				 			  			  			  			  			
Corporate—non-U.S.	  	$	—  	  	$	613	  	$	(111	) 	 	$	—  	  	$	4,055	  	 	—  	  	$	4,557	  	$	613	
	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total Level 3 assets	  	$	—  	  	$	613	  	$	(111	) 	 	$	—  	  	$	4,055	  	$	—  	  	$	4,557	  	$	613	
	  	 	 	  	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either net investment gains (losses) within the condensed consolidated statements of income or OCI within stockholder’s equity based on the appropriate accounting treatment for the instrument.
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity consists of purchases and sales of fixed maturity securities.
The amount presented for unrealized gains (losses) for assets still held as of the reporting date primarily represents accretion on certain fixed maturity securities which were recorded in net investment gains (losses).
 
16

Genworth Financial Mortgage Insurance Pty Limited
Notes to Condensed Consolidated Financial Statements—(Continued)
Six Months Ended June 30, 2010 and 2009
(Unaudited)
 
(6) Securitization Entities
Part of the Company’s product offering includes portfolio credit enhancement policies to Australian regulated lenders that have originated housing loans for securitization in the Australian, European and U.S. markets. Portfolio mortgage insurance serves as an important form of credit enhancement for the Australian securitization market and the Company’s portfolio credit enhancement coverage is generally purchased for low loan-to-value, seasoned loans written by regulated institutions.
As of June 30, 2010 and December 31, 2009, the Company had a maximum exposure to loss from the provision of portfolio credit enhancement to securitization trusts sponsored by third parties of $158 million and $177 million, respectively. The exchange rate for calculating the maximum exposure to loss of translating the Australian dollar into the U.S. dollar as of June 30, 2010 and December 31, 2009 was $0.84 and $0.90, respectively. This exposure was calculated based on the expectation of a 1 in 250 year event. The Company has applied the Australian Prudential Regulation Authority (“APRA”) stress scenario to calculate this exposure. The Company holds sufficient capital resources to meet this obligation were it to occur.
(7) Statutory Accounting
Genworth Mortgage prepares financial statements for its regulator, APRA, in accordance with the accounting practices prescribed by the regulator, which is a comprehensive basis of accounting other than U.S. GAAP. The main differences were as follows:
 
 	•	 	Premium is recognized on a cash receipts basis.	
 
 	•	 	Deferred acquisition costs are not recognized.	
 
 	•	 	A premium liability is recognized representing the unexpired risk portion of insurance policies written. The premium liability is valued as the present value of the expected future claim payments.	
 
 	•	 	Loss and loss adjustment expense reserves include a risk margin and are discounted to present value.	
The Company’s APRA net income after tax, capital base, minimum capital requirement and solvency ratio were as follows as of and for the year ended December 31:

(U.S. dollar amounts in thousands)	  	2009	
APRA net income after tax	  	$	132,449	
	  	 	 	
APRA capital base	  	$	1,794,029	
APRA minimum capital requirement	  	$	1,368,170	
APRA solvency ratio	  	 	1.31	
The APRA solvency ratio is the combined amounts of Genworth Financial Mortgage Insurance Pty Limited and its wholly-owned subsidiary, Genworth Financial Mortgage Indemnity Limited.
Under the prudential regulation framework in Australia, mortgage insurers are required to establish a catastrophic risk charge defined as a 1 in 250 year event. The Company is required to maintain adequate capital to fund this charge, in addition to normal insurance liabilities, by ensuring that its capital base exceeds its minimum capital requirement at all times.
As of June 30, 2010, the APRA solvency ratio was 1.58.
The Company’s ability to pay dividends to Genworth Financial Mortgage Insurance Holdings Pty Limited is restricted to the extent the payment of dividends exceeds current year income. Any dividend above this level requires prior approval from APRA. In addition, any dividend payment must result in the Company continuing to meet the APRA minimum capital requirement.
 
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