Table of Contents

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

FORM 10-Q

 
x 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2010
OR
 
¨ 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from                    to                         
Commission file number 001-32195

GENWORTH FINANCIAL, INC.
(Exact Name of Registrant as Specified in its Charter)

 
			
Delaware	 	33-1073076	
(State or Other Jurisdiction of
Incorporation or Organization)	 	(I.R.S. Employer
Identification Number)	
		
6620 West Broad Street
Richmond, Virginia	 	23230	
(Address of Principal Executive Offices)	 	(Zip Code)	
(804) 281-6000
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   x	 	Accelerated Filer   ¨	
Non-accelerated Filer   ¨	 	Smaller reporting company   ¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
At July 26, 2010, 489,335,077 shares of Class A Common Stock, par value $0.001 per share, were outstanding.

 

Table of Contents
 TABLE OF CONTENTS

 	  	Page	
PART I—FINANCIAL INFORMATION	  	3	
		
Item 1. Financial Statements	  	3	
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and  2009 (Unaudited)	  	3	
Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009	  	4	
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June  30, 2010 and 2009 (Unaudited)	  	5	
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and  2009 (Unaudited)	  	7	
Notes to Condensed Consolidated Financial Statements (Unaudited)	  	8	
		
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	62	
		
Item 3. Quantitative and Qualitative Disclosures About Market Risk	  	131	
		
Item 4. Controls and Procedures	  	131	
		
PART II—OTHER INFORMATION	  	132	
		
Item 1. Legal Proceedings	  	132	
		
Item 1A. Risk Factors	  	132	
		
Item 6. Exhibits	  	133	
		
Signatures	  	134	
 
2

Table of Contents
 PART I—FINANCIAL INFORMATION
 Item 1.    Financial Statements
 GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
(Unaudited)

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	  	    2010    	 	 	    2009    	 	 	2010	 	 	2009	 	
Revenues:	  				 				 				 				
Premiums	  	$	1,470	  	 	$	1,502	  	 	$	2,940	  	 	$	3,004	  	
Net investment income	  	 	823	  	 	 	781	  	 	 	1,588	  	 	 	1,492	  	
Net investment gains (losses)	  	 	(139	) 	 	 	(53	) 	 	 	(209	) 	 	 	(823	) 	
Insurance and investment product fees and other	  	 	256	  	 	 	253	  	 	 	512	  	 	 	544	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	  	 	2,410	  	 	 	2,483	  	 	 	4,831	  	 	 	4,217	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Benefits and expenses:	  				 				 				 				
Benefits and other changes in policy reserves	  	 	1,340	  	 	 	1,492	  	 	 	2,655	  	 	 	3,000	  	
Interest credited	  	 	211	  	 	 	263	  	 	 	424	  	 	 	538	  	
Acquisition and operating expenses, net of deferrals	  	 	499	  	 	 	456	  	 	 	974	  	 	 	897	  	
Amortization of deferred acquisition costs and intangibles	  	 	179	  	 	 	212	  	 	 	363	  	 	 	459	  	
Interest expense	  	 	109	  	 	 	114	  	 	 	224	  	 	 	210	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total benefits and expenses	  	 	2,338	  	 	 	2,537	  	 	 	4,640	  	 	 	5,104	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before income taxes	  	 	72	  	 	 	(54	) 	 	 	191	  	 	 	(887	) 	
Benefit for income taxes	  	 	(5	) 	 	 	(4	) 	 	 	(98	) 	 	 	(368	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	  	 	77	  	 	 	(50	) 	 	 	289	  	 	 	(519	) 	
Less: net income attributable to noncontrolling interests	  	 	35	  	 	 	—  	  	 	 	69	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	$	42	  	 	$	(50	) 	 	$	220	  	 	$	(519	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:	  				 				 				 				
Basic	  	$	0.09	  	 	$	(0.11	) 	 	$	0.45	  	 	$	(1.20	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.08	  	 	$	(0.11	) 	 	$	0.45	  	 	$	(1.20	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted-average common shares outstanding:	  				 				 				 				
Basic	  	 	489.1	  	 	 	433.2	  	 	 	489.0	  	 	 	433.2	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	494.2	  	 	 	433.2	  	 	 	493.9	  	 	 	433.2	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental disclosures:	  				 				 				 				
Total other-than-temporary impairments	  	$	(24	) 	 	$	(476	) 	 	$	(101	) 	 	$	(1,073	) 	
Portion of other-than-temporary impairments included in other comprehensive income (loss)	  	 	(27	) 	 	 	324	  	 	 	(30	) 	 	 	324	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net other-than-temporary impairments	  	 	(51	) 	 	 	(152	) 	 	 	(131	) 	 	 	(749	) 	
Other investment gains (losses)	  	 	(88	) 	 	 	99	  	 	 	(78	) 	 	 	(74	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net investment gains (losses)	  	$	(139	) 	 	$	(53	) 	 	$	(209	) 	 	$	(823	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See Notes to Condensed Consolidated Financial Statements
 
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 GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except per share amounts)

 	  	June 30,
2010	 	 	December 31,
2009	 	
 	  	(Unaudited)	 	 	 	 	
Assets	  				 				
Investments:	  				 				
Fixed maturity securities available-for-sale, at fair value	  	$	53,386	  	 	$	49,752	  	
Equity securities available-for-sale, at fair value	  	 	199	  	 	 	159	  	
Commercial mortgage loans	  	 	7,208	  	 	 	7,499	  	
Restricted commercial mortgage loans related to securitization entities	  	 	535	  	 	 	—  	  	
Policy loans	  	 	1,467	  	 	 	1,403	  	
Other invested assets	  	 	4,042	  	 	 	4,702	  	
Restricted other invested assets related to securitization entities ($373 at fair value)	  	 	374	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Total investments	  	 	67,211	  	 	 	63,515	  	
Cash and cash equivalents	  	 	4,586	  	 	 	5,002	  	
Accrued investment income	  	 	696	  	 	 	691	  	
Deferred acquisition costs	  	 	7,170	  	 	 	7,341	  	
Intangible assets	  	 	789	  	 	 	934	  	
Goodwill	  	 	1,313	  	 	 	1,324	  	
Reinsurance recoverable	  	 	17,279	  	 	 	17,332	  	
Other assets	  	 	1,024	  	 	 	954	  	
Deferred tax asset	  	 	—  	  	 	 	92	  	
Separate account assets	  	 	10,284	  	 	 	11,002	  	
	  	 	 	 	 	 	 	 	
Total assets	  	$	110,352	  	 	$	108,187	  	
	  	 	 	 	 	 	 	 	
Liabilities and stockholders’ equity	  				 				
			
Liabilities:	  				 				
Future policy benefits	  	$	29,929	  	 	$	29,469	  	
Policyholder account balances	  	 	28,338	  	 	 	28,470	  	
Liability for policy and contract claims	  	 	6,302	  	 	 	6,567	  	
Unearned premiums	  	 	4,238	  	 	 	4,714	  	
Other liabilities ($183 and $—other liabilities related to securitization entities)	  	 	6,287	  	 	 	6,298	  	
Borrowings related to securitization entities ($51 at fair value)	  	 	525	  	 	 	—  	  	
Non-recourse funding obligations	  	 	3,437	  	 	 	3,443	  	
Short-term borrowings	  	 	730	  	 	 	930	  	
Long-term borrowings	  	 	4,331	  	 	 	3,641	  	
Deferred tax liability	  	 	904	  	 	 	303	  	
Separate account liabilities	  	 	10,284	  	 	 	11,002	  	
	  	 	 	 	 	 	 	 	
Total liabilities	  	 	95,305	  	 	 	94,837	  	
	  	 	 	 	 	 	 	 	
Commitments and contingencies	  				 				
			
Stockholders’ equity:	  				 				
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 578 million and 577 million shares issued as of June 30, 2010 and December 31, 2009, respectively; 489 million shares outstanding as of June 30, 2010 and December 31, 2009	  	 	1	  	 	 	1	  	
Additional paid-in capital	  	 	12,078	  	 	 	12,034	  	
	  	 	 	 	 	 	 	 	
Accumulated other comprehensive income (loss):	  				 				
Net unrealized investment gains (losses):	  				 				
Net unrealized gains (losses) on securities not other-than-temporarily impaired	  	 	208	  	 	 	(1,151	) 	
Net unrealized gains (losses) on other-than-temporarily impaired securities	  	 	(179	) 	 	 	(247	)	
	  	 	 	 	 	 	 	 	
Net unrealized investment gains (losses)	  	 	29	  	 	 	(1,398	) 	
	  	 	 	 	 	 	 	 	
Derivatives qualifying as hedges	  	 	1,162	  	 	 	802	  	
Foreign currency translation and other adjustments	  	 	140	  	 	 	432	  	
	  	 	 	 	 	 	 	 	
Total accumulated other comprehensive income (loss)	  	 	1,331	  	 	 	(164	) 	
Retained earnings	  	 	3,221	  	 	 	3,105	  	
Treasury stock, at cost (88 million shares as of June 30, 2010 and December 31, 2009)	  	 	(2,700	) 	 	 	(2,700	) 	
	  	 	 	 	 	 	 	 	
Total Genworth Financial, Inc.’s stockholders’ equity	  	 	13,931	  	 	 	12,276	  	
Noncontrolling interests	  	 	1,116	  	 	 	1,074	  	
	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	15,047	  	 	 	13,350	  	
	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	  	$	110,352	  	 	$	108,187	  	
	  	 	 	 	 	 	 	 	
See Notes to Condensed Consolidated Financial Statements
 
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 GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Amounts in millions)
(Unaudited)

 	 	Common
stock	 	Additional
paid-in
capital	 	Accumulated
other
comprehensive
income (loss)	 	 	Retained
earnings	 	 	Treasury
stock, at
cost	 	 	Total
Genworth
Financial,
Inc.’s
stockholders’
equity	 	 	Noncontrolling
interests	 	 	Total
stockholders’
equity	 	
Balances as of December 31, 2009	 	$	1	 	$	12,034	 	$	(164	) 	 	$	3,105	  	 	$	(2,700	) 	 	$	12,276	  	 	$	1,074	 	 	$	13,350	  	
	 			 			 				 				 				 				 				 	 	 	 	
Cumulative effect of change in accounting, net of taxes and other adjustments	 	 	—  	 	 	—  	 	 	91	  	 	 	(104	) 	 	 	—  	  	 	 	(13	) 	 	 	—  	  	 	 	(13	) 	
Comprehensive income (loss):	 			 			 				 				 				 				 				 				
Net income (loss)	 	 	—  	 	 	—  	 	 	—  	  	 	 	220	  	 	 	—  	  	 	 	220	  	 	 	69	  	 	 	289	  	
Net unrealized gains (losses) on securities not other-than-temporarily impaired	 	 	—  	 	 	—  	 	 	1,268	  	 	 	—  	  	 	 	—  	  	 	 	1,268	  	 	 	9	  	 	 	1,277	  	
Net unrealized gains (losses) on other-than-temporarily impaired securities	 	 	—  	 	 	—  	 	 	68	  	 	 	—  	  	 	 	—  	  	 	 	68	  	 	 	—  	  	 	 	68	  	
Derivatives qualifying as hedges	 	 	—  	 	 	—  	 	 	360	  	 	 	—  	  	 	 	—  	  	 	 	360	  	 	 	—  	  	 	 	360	  	
Foreign currency translation and other adjustments	 	 	—  	 	 	—  	 	 	(292	) 	 	 	—  	  	 	 	—  	  	 	 	(292	) 	 	 	(15	) 	 	 	(307	) 	
	 			 			 				 				 				 				 				 	 	 	 	
Total comprehensive income (loss)	 			 			 				 				 				 				 				 	 	1,687	  	
Dividends to noncontrolling interests	 	 	—  	 	 	—  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(21	) 	 	 	(21	) 	
Stock-based compensation expense and exercises and other	 	 	—  	 	 	24	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	24	  	 	 	—  	  	 	 	24	  	
Other capital transactions	 	 	—  	 	 	20	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	20	  	 	 	—  	  	 	 	20	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances as of June 30, 2010	 	$	1	 	$	12,078	 	$	1,331	  	 	$	3,221	  	 	$	(2,700	) 	 	$	13,931	  	 	$	1,116	  	 	$	15,047	  	

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GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY— (CONTINUED)
(Amounts in millions)
(Unaudited)

 	 	Common
stock	 	Additional
paid-in
capital	 	Accumulated other
comprehensive
income (loss)	 	 	Retained
earnings	 	 	Treasury
stock, at
cost	 	 	Total
stockholders’
equity	 	
Balances as of December 31, 2008	 	$	1	 	$	11,477	 	$	(3,062	) 	 	$	3,210	  	 	$	(2,700	) 	 	$	8,926	  	
	 			 			 				 				 				 	 	 	 	
Cumulative effect of change in accounting, net of taxes and other adjustments	 	 	—  	 	 	—  	 	 	(349	) 	 	 	355	  	 	 	—  	  	 	 	6	  	
Comprehensive income (loss):	 			 			 				 				 				 				
Net income (loss)	 	 	—  	 	 	—  	 	 	—  	  	 	 	(519	) 	 	 	—  	  	 	 	(519	) 	
Net unrealized gains (losses) on securities not other-than-temporarily impaired	 	 	—  	 	 	—  	 	 	1,378	  	 	 	—  	  	 	 	—  	  	 	 	1,378	  	
Net unrealized gains (losses) on other-than-temporarily impaired securities	 	 	—  	 	 	—  	 	 	(14	) 	 	 	—  	  	 	 	—  	  	 	 	(14	) 	
Derivatives qualifying as hedges	 	 	—  	 	 	—  	 	 	(213	) 	 	 	—  	  	 	 	—  	  	 	 	(213	) 	
Foreign currency translation and other adjustments	 	 	—  	 	 	—  	 	 	391	  	 	 	—  	  	 	 	—  	  	 	 	391	  	
	 			 			 				 				 				 	 	 	 	
Total comprehensive income (loss)	 			 			 				 				 				 	 	1,023	  	
Stock-based compensation expense and exercises and other	 	 	—  	 	 	15	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances as of June 30, 2009	 	$	1	 	$	11,492	 	$	(1,869	) 	 	$	3,046	  	 	$	(2,700	) 	 	$	9,970	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See Notes to Condensed Consolidated Financial Statements
 
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 GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)

 	  	Six months ended
June 30,	 	
 	  	2010	 	 	2009	 	
Cash flows from operating activities:	  				 				
Net income (loss)	  	$	289	  	 	$	(519	) 	
Adjustments to reconcile net income (loss) to net cash from operating activities:	  				 				
Amortization of fixed maturity discounts and premiums	  	 	5	  	 	 	106	  	
Net investment losses (gains)	  	 	209	  	 	 	823	  	
Charges assessed to policyholders	  	 	(233	) 	 	 	(211	) 	
Acquisition costs deferred	  	 	(392	) 	 	 	(368	) 	
Amortization of deferred acquisition costs and intangibles	  	 	363	  	 	 	459	  	
Deferred income taxes	  	 	(173	) 	 	 	(591	) 	
Net increase (decrease) in trading securities, held-for-sale investments and derivative instruments	  	 	119	  	 	 	116	  	
Stock-based compensation expense	  	 	23	  	 	 	15	  	
Change in certain assets and liabilities:	  				 				
Accrued investment income and other assets	  	 	24	  	 	 	30	  	
Insurance reserves	  	 	1,208	  	 	 	1,520	  	
Current tax liabilities	  	 	(211	) 	 	 	197	  	
Other liabilities and other policy-related balances	  	 	(674	) 	 	 	(208	) 	
	  	 	 	 	 	 	 	 	
Net cash from operating activities	  	 	557	  	 	 	1,369	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				
Proceeds from maturities and repayments of investments:	  				 				
Fixed maturity securities	  	 	2,057	  	 	 	1,892	  	
Commercial mortgage loans	  	 	263	  	 	 	381	  	
Restricted commercial mortgage loans related to securitization entities	  	 	27	  	 	 	—  	  	
Proceeds from sales of investments:	  				 				
Fixed maturity and equity securities	  	 	2,393	  	 	 	1,663	  	
Purchases and originations of investments:	  				 				
Fixed maturity and equity securities	  	 	(6,867	) 	 	 	(2,700	) 	
Commercial mortgage loans	  	 	(23	) 	 	 	—  	  	
Other invested assets, net	  	 	1,491	  	 	 	(348	) 	
Policy loans, net	  	 	(64	) 	 	 	(253	) 	
	  	 	 	 	 	 	 	 	
Net cash from investing activities	  	 	(723	) 	 	 	635	  	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				 				
Deposits to universal life and investment contracts	  	 	1,174	  	 	 	1,271	  	
Withdrawals from universal life and investment contracts	  	 	(1,734	) 	 	 	(4,231	) 	
Short-term borrowings and other, net	  	 	(285	) 	 	 	(330	) 	
Repayment and repurchase of long-term borrowings	  	 	—  	  	 	 	(739	) 	
Proceeds from the issuance of long-term borrowings	  	 	660	  	 	 	—  	  	
Redemption of non-recourse funding obligations	  	 	(6	) 	 	 	(12	) 	
Repayment of borrowings related to securitization entities	  	 	(31	) 	 	 	—  	  	
Dividends paid to noncontrolling interests	  	 	(21	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Net cash from financing activities	  	 	(243	) 	 	 	(4,041	) 	
Effect of exchange rate changes on cash and cash equivalents	  	 	(7	) 	 	 	83	  	
	  	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	  	 	(416	) 	 	 	(1,954	) 	
Cash and cash equivalents at beginning of period	  	 	5,002	  	 	 	7,328	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	  	$	4,586	  	 	$	5,374	  	
	  	 	 	 	 	 	 	 	
See Notes to Condensed Consolidated Financial Statements
 
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 GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Formation of Genworth and Basis of Presentation
Genworth Financial, Inc. (“Genworth”) was incorporated in Delaware on October 23, 2003. The accompanying condensed financial statements include on a consolidated basis the accounts of Genworth and our affiliate companies in which we hold a majority voting interest or where we are the primary beneficiary of a variable interest entity, which we refer to as the “Company,” “we,” “us” or “our” unless the context otherwise requires. All intercompany accounts and transactions have been eliminated in consolidation.
We have the following three operating segments:
 
 	•	 	Retirement and Protection. We offer and manage a variety of protection, wealth management and retirement income products. Our primary protection products include: life, long-term care and Medicare supplement insurance. Additionally, we offer other senior supplemental products, as well as care coordination services for our long-term care policyholders. Our wealth management and retirement income products include: a variety of managed account programs and advisor services, financial planning services, fixed and variable deferred and immediate individual annuities and group variable annuities offered through retirement plans.	
 
 	•	 	International. We offer mortgage and lifestyle protection insurance products and related services in multiple markets. We are a leading provider of mortgage insurance products in Canada, Australia, Mexico and multiple European countries. Our products predominantly insure prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. On a limited basis, we also provide mortgage insurance on a structured, or bulk, basis that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk. We are a leading provider of payment protection coverages in multiple European countries, Canada and Mexico. Our lifestyle protection insurance products help consumers meet specified payment obligations should they become unable to pay due to accident, illness, involuntary unemployment, disability or death.	
 
 	•	 	U.S. Mortgage Insurance. In the U.S., we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. We selectively provide mortgage insurance on a structured, or bulk, basis with essentially all of our bulk writings prime-based. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk.	
We also have Corporate and Other activities which include debt financing expenses that are incurred at our holding company level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of non-core businesses and non-strategic products that are managed outside of our operating segments. Our non-strategic products include our institutional and corporate-owned life insurance products. Institutional products consist of funding agreements, funding agreements backing notes (“FABNs”) and guaranteed investment contracts (“GICs”).
The accompanying 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 U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. 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 flows 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
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2009 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.
(2) Accounting Pronouncements
Recently Adopted
Accounting for Transfers of Financial Assets
On January 1, 2010, we adopted new accounting guidance related to accounting for transfers of financial assets. This accounting guidance amends the previous guidance on transfers of financial assets by eliminating the qualifying special-purpose entity concept, providing certain conditions that must be met to qualify for sale accounting, changing the amount of gain or loss recognized on certain transfers and requiring additional disclosures. The adoption of this accounting guidance did not have a material impact on our consolidated financial statements. The elimination of the qualifying special-purpose entity concept requires that these entities be considered for consolidation as a result of the new guidance related to variable interest entities (“VIEs”) as discussed below.
Improvements to Financial Reporting by Enterprises Involved with VIEs
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 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, including previously qualifying special-purpose entities and investment structures. We recorded a transition adjustment for the impact upon adoption to reflect the difference between the assets and liabilities of the newly consolidated entities and the amounts recorded for our interests in these entities prior to adoption. On January 1, 2010, we recorded a net cumulative effect adjustment of $104 million to retained earnings with a partial offset to accumulated other comprehensive income (loss) of $91 million related to the adoption of this new accounting guidance.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The assets and liabilities of the newly consolidated entities were as follows as of January 1, 2010:

(Amounts in millions)	 	Carrying value  (1) 	 	Adjustment for election
of fair value option (2) 	 	 	Amounts
recorded upon
consolidation	 	
Assets	 			 				 				
Restricted commercial mortgage loans	 	$	564	 	$	—  	  	 	$	564	  	
Restricted other invested assets	 	 	409	 	 	(30	) 	 	 	379	  	
Accrued investment income	 	 	2	 	 	—  	  	 	 	2	  	
	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	975	 	 	(30	) 	 	 	945	  	
	 	 	 	 	 	 	 	 	 	 	 	
Liabilities	 			 				 				
Other liabilities	 	 	138	 	 	—  	  	 	 	138	  	
Borrowings related to securitization entities	 	 	644	 	 	(80	) 	 	 	564	  	
	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	782	 	 	(80	) 	 	 	702	  	
	 	 	 	 	 	 	 	 	 	 	 	
Net assets and liabilities of newly consolidated entities	 	$	193	 	$	50	  	 	 	243	  	
	 	 	 	 	 	 	 	 				
Less: amortized cost of fixed maturity securities previously recorded (3)	 			 				 	 	404	  	
	 			 				 	 	 	 	
Cumulative effect adjustment to retained earnings upon adoption, pre-tax	 			 				 	 	(161	) 	
Tax effect	 			 				 	 	57	  	
	 			 				 	 	 	 	
Net cumulative effect adjustment to retained earnings upon adoption	 			 				 	$	(104	) 	

(1)	Carrying value represents the amounts that would have been recorded in the consolidated financial statements on January 1, 2010 had we recorded the assets and liabilities in our financial statements from the date we first met the conditions for consolidation based on the criteria in the new accounting guidance.	
(2)	Amount represents the difference between book value and fair value of the investments and borrowings related to consolidated securitization entities where we have elected fair value option.	
(3)	Fixed maturity securities that were previously recorded had net unrealized investment losses of $91 million included in accumulated other comprehensive income (loss) as of December 31, 2009.	
For commercial mortgage loans, the carrying amounts represent the unpaid principal balance less any reserve. Restricted other invested assets are comprised of trading securities that are recorded at fair value. Trading securities represent asset-backed securities where we elected fair value option. Borrowings related to securitization entities are recorded at unpaid principal except for the borrowings related to entities where we elected fair value option for all assets and liabilities.
For certain entities consolidated upon adoption of the new accounting guidance on January 1, 2010, we elected fair value option to measure all assets and liabilities at current fair value with future changes in fair value being recording in income (loss). We elected fair value option for certain entities as a method to better present the offsetting changes in assets and liabilities related to third-party interests in those entities and eliminated the potential accounting mismatch between the measurement of the assets and derivatives of the entity compared to the borrowings issued by the entity. The entities where we did not elect fair value option did not have the same accounting mismatch since the assets held by the securitization entity and the borrowings of the entity were recorded at cost. See note 7 for additional information related to consolidation of VIEs.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The new accounting guidance related to consolidation of VIEs has been deferred for a reporting entity’s interest in an entity that has all of the attributes of an investment company as long as there is no implicit or explicit obligation to fund losses of the entity. For entities that meet these criteria, the new accounting guidance related to VIE consolidation would not be applicable until further guidance is issued. Accordingly, we did not have any impact upon adoption related to entities that meet the deferral criteria, such as certain limited partnership and fund investments.
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. Certain additional disclosures in this new accounting guidance will be effective for us on December 31, 2010 with certain other additional disclosures that will be effective for us on March 31, 2011. We do not expect the adoption of this new accounting guidance to have a material impact on our consolidated financial statements.
In April 2010, the FASB issued new accounting guidance on how investments held through separate accounts affect an insurer’s consolidation analysis of those investments. 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.
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. The impact upon adoption of this new accounting guidance was approximately $270 million, before taxes and other adjustments, and was recorded as a reduction in retained earnings with a corresponding increase in accumulated other comprehensive income (loss) on July 1, 2010.
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.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
(3) Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented below by the weighted-average basic and diluted shares outstanding for the periods indicated:

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(Amounts in millions, except per share amounts)	  	2010	  	2009	 	 	2010	  	2009	 	
Net income (loss)	  	$	77	  	$	(50	) 	 	$	289	  	$	(519	) 	
Less: net income attributable to noncontrolling interests	  	 	35	  	 	—  	  	 	 	69	  	 	—  	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	$	42	  	$	(50	) 	 	$	220	  	$	(519	) 	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Basic per common share:	  			  				 			  				
Net income (loss)	  	$	0.16	  	$	(0.11	) 	 	$	0.59	  	$	(1.20	) 	
Less: net income attributable to noncontrolling interests	  	 	0.07	  	 	—  	  	 	 	0.14	  	 	—  	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders (1)	  	$	0.09	  	$	(0.11	) 	 	$	0.45	  	$	(1.20	) 	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Diluted per common share:	  			  				 			  				
Net income (loss)	  	$	0.16	  	$	(0.11	) 	 	$	0.59	  	$	(1.20	) 	
Less: net income attributable to noncontrolling interests	  	 	0.07	  	 	—  	  	 	 	0.14	  	 	—  	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders (1)	  	$	0.08	  	$	(0.11	) 	 	$	0.45	  	$	(1.20	) 	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Weighted-average shares used in basic earnings (loss) per common share calculations	  	 	489.1	  	 	433.2	  	 	 	489.0	  	 	433.2	  	
Potentially dilutive securities:	  			  				 			  				
Stock options, restricted stock units and stock appreciation rights	  	 	5.1	  	 	—  	  	 	 	4.9	  	 	—  	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Weighted-average shares used in diluted earnings (loss) per common share calculations ( 2 )	  	 	494.2	  	 	433.2	  	 	 	493.9	  	 	433.2	  	

(1)	May not total due to whole number calculation.	
(2)	Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our net loss for the three and six months ended June 30, 2009, we were required to use basic weighted-average common shares outstanding in the calculation of the 2009 diluted loss per share, as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 1.2 million and 0.6 million, respectively, would have been antidilutive to the calculation. If we had not incurred a net loss for the three and six months ended June 30, 2009, dilutive potential common shares would have been 434.4 million and 433.8 million, respectively.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:

 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(Amounts in millions)	 	    2010    	 	 	    2009    	 	 	2010	 	 	2009	 	
Fixed maturity securities—taxable	 	$	646	  	 	$	604	  	 	$	1,272	  	 	$	1,227	  	
Fixed maturity securities—non-taxable	 	 	16	  	 	 	28	  	 	 	32	  	 	 	58	  	
Commercial mortgage loans	 	 	99	  	 	 	109	  	 	 	203	  	 	 	223	  	
Restricted commercial mortgage loans related to securitization
entities (1)	 	 	10	  	 	 	—  	  	 	 	20	  	 	 	—  	  	
Equity securities	 	 	5	  	 	 	3	  	 	 	7	  	 	 	6	  	
Other invested assets	 	 	39	  	 	 	(7	) 	 	 	37	  	 	 	(106	) 	
Restricted other invested assets related to securitization entities (1)	 	 	—  	  	 	 	—  	  	 	 	1	  	 	 	—  	  	
Policy loans	 	 	28	  	 	 	52	  	 	 	55	  	 	 	96	  	
Cash, cash equivalents and short-term investments	 	 	4	  	 	 	14	  	 	 	9	  	 	 	31	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross investment income before expenses and fees	 	 	847	  	 	 	803	  	 	 	1,636	  	 	 	1,535	  	
Expenses and fees	 	 	(24	) 	 	 	(22	) 	 	 	(48	) 	 	 	(43	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment income	 	$	823	  	 	$	781	  	 	$	1,588	  	 	$	1,492	  	

(1)	See note 7 for additional information related to consolidated securitization entities.	
(b) 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,	 	
(Amounts in millions)	 	    2010    	 	 	    2009    	 	 	2010	 	 	2009	 	
Available-for-sale securities:	 				 				 				 				
Realized gains on sale	 	$	53	  	 	$	21	  	 	$	76	  	 	$	50	  	
Realized losses on sale	 	 	(36	) 	 	 	(48	) 	 	 	(74	) 	 	 	(111	) 	
Impairments:	 				 				 				 				
Total other-than-temporary impairments	 	 	(24	) 	 	 	(476	) 	 	 	(101	) 	 	 	(1,073	) 	
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)	 	 	(27	) 	 	 	324	  	 	 	(30	) 	 	 	324	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net other-than-temporary impairments	 	 	(51	) 	 	 	(152	) 	 	 	(131	) 	 	 	(749	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Trading securities	 	 	(4	) 	 	 	11	  	 	 	2	  	 	 	(1	) 	
Commercial mortgage loans	 	 	(18	) 	 	 	(5	) 	 	 	(22	) 	 	 	(11	) 	
Net gains (losses) related to securitization entities (1)	 	 	(47	) 	 	 	—  	  	 	 	(36	) 	 	 	—  	  	
Derivative instruments (2)	 	 	(38	) 	 	 	114	  	 	 	(46	) 	 	 	(7	) 	
Other	 	 	2	  	 	 	6	  	 	 	22	  	 	 	6	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment gains (losses)	 	$	(139	) 	 	$	(53	) 	 	$	(209	) 	 	$	(823	) 	

(1)	See note 7 for additional information related to consolidated securitization entities.	
(2)	See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The aggregate fair value of securities sold at a loss during the three months ended June 30, 2010 and 2009 was $858 million and $367 million, respectively, which was approximately 96% and 89%, 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 $1,416 million and $737 million, respectively, which was approximately 95% and 87%, respectively, of book value.
The following represents the activity for credit losses recognized in net income (loss) on debt securities where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments was included in other comprehensive income (loss) (“OCI”) as of the periods indicated:

 	  	As of or for the
three months ended
June 30,	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	
Cumulative credit loss beginning balance	  	$	1,025	  	 	$	—  	  	
Impact upon adoption of new accounting guidance	  	 	—  	  	 	 	1,204	  	
Additions:	  				 				
Other-than-temporary impairments not previously recognized	  	 	11	  	 	 	56	  	
Increases related to other-than-temporary impairments previously recognized	  	 	32	  	 	 	95	  	
Reductions:	  				 				
Securities sold, paid down or disposed	  	 	(90	) 	 	 	(270	) 	
Securities where there is intent to sell	  	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Cumulative credit loss ending balance	  	$	978	  	 	$	1,085	  	

									
 	  	As of or for the
six months ended
June 30,	 	
(Amounts in millions)	  	2010	 	 	2009	 	
Cumulative credit loss beginning balance	  	$	1,059	  	 	$	—  	  	
Impact upon adoption of new accounting guidance	  	 	—  	  	 	 	1,204	  	
Additions:	  				 				
Other-than-temporary impairments not previously recognized	  	 	31	  	 	 	56	  	
Increases related to other-than-temporary impairments previously recognized	  	 	78	  	 	 	95	  	
Reductions:	  				 				
Securities sold, paid down or disposed	  	 	(190	) 	 	 	(270	) 	
Securities where there is intent to sell	  	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Cumulative credit loss ending balance	  	$	978	  	 	$	1,085	  	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on investment securities classified as available-for-sale and other invested assets are reduced by deferred income taxes and adjustments to present value of future profits, deferred acquisition costs and sales inducements 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:

(Amounts in millions)	  	June 30, 2010	 	 	December 31, 2009	 	
Net unrealized gains (losses) on investment securities:	  				 				
Fixed maturity securities	  	$	296	  	 	$	(2,245	) 	
Equity securities	  	 	7	  	 	 	20	  	
Other invested assets	  	 	(27	) 	 	 	(29	) 	
	  	 	 	 	 	 	 	 	
Subtotal	  	 	276	  	 	 	(2,254	) 	
Adjustments to present value of future profits, deferred acquisition costs and sales inducements	  	 	(162	) 	 	 	138	  	
Income taxes, net	  	 	(37	) 	 	 	757	  	
	  	 	 	 	 	 	 	 	
Net unrealized investment gains (losses)	  	 	77	  	 	 	(1,359	) 	
Less: net unrealized investment gains (losses) attributable to noncontrolling interests	  	 	48	  	 	 	39	  	
	  	 	 	 	 	 	 	 	
Net unrealized investment gains (losses) attributable to Genworth
Financial, Inc.	  	$	29	  	 	$	(1,398	) 	
	  	 	 	 	 	 	 	 	
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,	 	
(Amounts in millions)	  	2010	 	 	2009	 	
Beginning balance	  	$	(860	) 	 	$	(4,095	) 	
Cumulative effect of change in accounting	  	 	—  	  	 	 	(349	) 	
Unrealized gains (losses) arising during the period:	  				 				
Unrealized gains (losses) on investment securities	  	 	1,498	  	 	 	2,261	  	
Adjustment to deferred acquisition costs	  	 	(80	) 	 	 	(164	) 	
Adjustment to present value of future profits	  	 	(51	) 	 	 	(79	) 	
Adjustment to sales inducements	  	 	(10	) 	 	 	1	  	
Provision for income taxes	  	 	(480	) 	 	 	(714	) 	
	  	 	 	 	 	 	 	 	
Change in unrealized gains (losses) on investment securities	  	 	877	  	 	 	1,305	  	
Reclassification adjustments to net investment (gains) losses, net of taxes of $(11) and $(63)	  	 	22	  	 	 	116	  	
	  	 	 	 	 	 	 	 	
Change in net unrealized investment gains (losses)	  	 	899	  	 	 	1,072	  	
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests	  	 	10	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Ending balance	  	$	29	  	 	$	(3,023	) 	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

 	  	As of or for the
six months ended
June 30,	 	
(Amounts in millions)	  	2010	 	 	2009	 	
Beginning balance	  	$	(1,398	) 	 	$	(4,038	) 	
Cumulative effect of change in accounting	  	 	91	  	 	 	(349	) 	
Unrealized gains (losses) arising during the period:	  				 				
Unrealized gains (losses) on investment securities	  	 	2,261	  	 	 	1,558	  	
Adjustment to deferred acquisition costs	  	 	(193	) 	 	 	(184	) 	
Adjustment to present value of future profits	  	 	(81	) 	 	 	(70	) 	
Adjustment to sales inducements	  	 	(26	) 	 	 	—  	  	
Provision for income taxes	  	 	(700	) 	 	 	(467	) 	
	  	 	 	 	 	 	 	 	
Change in unrealized gains (losses) on investment securities	  	 	1,261	  	 	 	837	  	
Reclassification adjustments to net investment (gains) losses, net of taxes of $(45) and $(284)	  	 	84	  	 	 	527	  	
	  	 	 	 	 	 	 	 	
Change in net unrealized investment gains (losses)	  	 	1,436	  	 	 	1,015	  	
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests	  	 	9	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Ending balance	  	$	29	  	 	$	(3,023	) 	
	  	 	 	 	 	 	 	 	
(d) Fixed Maturity and Equity Securities
As of June 30, 2010, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

(Amounts in millions)	 	Amortized
cost or
cost	 	Gross unrealized gains	 	Gross unrealized losses	 	 	Fair
value	
	 		 	Not other-than-
temporarily
impaired	 	Other-than-
temporarily
impaired	 	Not other-than-
temporarily
impaired	 	 	Other-than-
temporarily
impaired	 	 		
Fixed maturity securities:	 			 			 			 				 				 			
U.S. government, agencies and government-sponsored enterprises	 	$	3,422	 	$	262	 	$	—  	 	$	—  	  	 	$	—  	  	 	$	3,684	
Tax-exempt	 	 	1,407	 	 	39	 	 	—  	 	 	(96	) 	 	 	—  	  	 	 	1,350	
Government—non-U.S.	 	 	2,023	 	 	126	 	 	—  	 	 	(3	) 	 	 	—  	  	 	 	2,146	
U.S. corporate	 	 	22,529	 	 	1,332	 	 	7	 	 	(489	) 	 	 	(1	) 	 	 	23,378	
Corporate—non-U.S.	 	 	12,572	 	 	494	 	 	12	 	 	(279	) 	 	 	—  	  	 	 	12,799	
Residential mortgage-backed	 	 	4,395	 	 	160	 	 	8	 	 	(347	) 	 	 	(261	) 	 	 	3,955	
Commercial mortgage-backed	 	 	4,117	 	 	152	 	 	7	 	 	(488	) 	 	 	(62	) 	 	 	3,726	
Other asset-backed	 	 	2,640	 	 	18	 	 	—  	 	 	(297	) 	 	 	(13	) 	 	 	2,348	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	53,105	 	 	2,583	 	 	34	 	 	(1,999	) 	 	 	(337	) 	 	 	53,386	
Equity securities	 	 	192	 	 	13	 	 	—  	 	 	(6	) 	 	 	—  	  	 	 	199	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total available-for-sale securities	 	$	53,297	 	$	2,596	 	$	34	 	$	(2,005	) 	 	$	(337	) 	 	$	53,585	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
As of December 31, 2009, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

(Amounts in millions)	  	Amortized
cost or
cost	  	Gross unrealized gains	  	Gross unrealized losses	 	 	Fair
value	
	  		  	Not other-than-
temporarily
impaired	  	Other-than-
temporarily
impaired	  	Not other-than-
temporarily
impaired	 	 	Other-than-
temporarily
impaired	 	 		
Fixed maturity securities:	  			  			  			  				 				 			
U.S. government, agencies and government-sponsored enterprises	  	$	2,673	  	$	25	  	$	—  	  	$	(96	) 	 	$	—  	  	 	$	2,602	
Tax-exempt	  	 	1,606	  	 	42	  	 	—  	  	 	(104	) 	 	 	—  	  	 	 	1,544	
Government—non-U.S.	  	 	2,310	  	 	96	  	 	—  	  	 	(22	) 	 	 	—  	  	 	 	2,384	
U.S. corporate	  	 	21,598	  	 	628	  	 	3	  	 	(814	) 	 	 	(3	) 	 	 	21,412	
Corporate—non-U.S.	  	 	12,530	  	 	366	  	 	11	  	 	(356	) 	 	 	—  	  	 	 	12,551	
Residential mortgage-backed	  	 	3,989	  	 	41	  	 	7	  	 	(484	) 	 	 	(326	) 	 	 	3,227	
Commercial mortgage-backed	  	 	4,404	  	 	44	  	 	4	  	 	(738	) 	 	 	(97	) 	 	 	3,617	
Other asset-backed	  	 	2,887	  	 	8	  	 	—  	  	 	(466	) 	 	 	(14	) 	 	 	2,415	
	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	  	 	51,997	  	 	1,250	  	 	25	  	 	(3,080	) 	 	 	(440	) 	 	 	49,752	
Equity securities	  	 	139	  	 	23	  	 	—  	  	 	(3	) 	 	 	—  	  	 	 	159	
	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total available-for-sale securities	  	$	52,136	  	$	1,273	  	$	25	  	$	(3,083	) 	 	$	(440	) 	 	$	49,911	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our 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	
(Dollar amounts in millions)	  	Fair
value	  	Gross
unrealized
losses	 	 	Number of
securities	  	Fair
value	  	Gross
unrealized
losses	 	 	Number of
securities	
Description of Securities	  			  				 		  			  				 		
Fixed maturity securities:	  			  				 		  			  				 		
Tax-exempt	  	$	106	  	$	(3	) 	 	33	  	$	272	  	$	(93	) 	 	93	
Government—non-U.S.	  	 	69	  	 	(1	) 	 	30	  	 	34	  	 	(2	) 	 	6	
U.S. corporate	  	 	1,257	  	 	(47	) 	 	168	  	 	3,596	  	 	(443	) 	 	304	
Corporate—non-U.S.	  	 	926	  	 	(32	) 	 	163	  	 	1,774	  	 	(247	) 	 	161	
Residential mortgage-backed	  	 	291	  	 	(5	) 	 	76	  	 	1,097	  	 	(603	) 	 	461	
Commercial mortgage-backed	  	 	79	  	 	(4	) 	 	11	  	 	1,282	  	 	(546	) 	 	277	
Other asset-backed	  	 	413	  	 	(1	) 	 	28	  	 	969	  	 	(309	) 	 	147	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Subtotal, fixed maturity securities	  	 	3,141	  	 	(93	) 	 	509	  	 	9,024	  	 	(2,243	) 	 	1,449	
Equity securities	  	 	51	  	 	(5	) 	 	41	  	 	7	  	 	(1	) 	 	8	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	3,192	  	$	(98	) 	 	550	  	$	9,031	  	$	(2,244	) 	 	1,457	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
% Below cost—fixed maturity securities:	  			  				 		  			  				 		
<20% Below cost	  	$	3,089	  	$	(71	) 	 	469	  	$	6,602	  	$	(515	) 	 	763	
20-50% Below cost	  	 	51	  	 	(20	) 	 	22	  	 	2,069	  	 	(1,006	) 	 	406	
>50% Below cost	  	 	1	  	 	(2	) 	 	18	  	 	353	  	 	(722	) 	 	280	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total fixed maturity securities	  	 	3,141	  	 	(93	) 	 	509	  	 	9,024	  	 	(2,243	) 	 	1,449	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
% Below cost—equity securities:	  			  				 		  			  				 		
<20% Below cost	  	 	46	  	 	(2	) 	 	40	  	 	7	  	 	(1	) 	 	8	
20-50% Below cost	  	 	5	  	 	(3	) 	 	1	  	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total equity securities	  	 	51	  	 	(5	) 	 	41	  	 	7	  	 	(1	) 	 	8	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	3,192	  	$	(98	) 	 	550	  	$	9,031	  	$	(2,244	) 	 	1,457	

Investment grade	  	$	2,564	  	$	(81	) 	 	422	  	$	7,203	  	$	(1,386	) 	 	959	
Below investment grade	  	 	628	  	 	(17	) 	 	128	  	 	1,828	  	 	(858	) 	 	498	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	3,192	  	$	(98	) 	 	550	  	$	9,031	  	$	(2,244	) 	 	1,457	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
The investment securities in an unrealized loss position as of June 30, 2010 consisted of 2,007 securities and accounted for unrealized losses of $2,342 million. Of these unrealized losses of $2,342 million, 63% were investment grade (rated “AAA” through “BBB-”) and 25% were less than 20% below cost. The securities less than 20% below cost were primarily attributable to credit spreads that have widened since acquisition for certain mortgage-backed and asset-backed securities and corporate securities in the finance and insurance sector. Included in these unrealized losses as of June 30, 2010 was $337 million of unrealized losses on other-than-
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
temporarily impaired securities. Of the total unrealized losses on other-than-temporarily impaired securities, $332 million have been in an unrealized loss position for more than 12 months.
Of the unrealized losses of $2,342 million, $1,468 million were related to structured securities and $552 million were related to corporate securities in the finance and insurance sector. Of the remaining gross unrealized losses of $322 million, $99 million were related to tax-exempt and government—non-U.S. securities and $223 million were primarily related to other corporate securities that were spread evenly across all other sectors with no individual sector exceeding $40 million.
Of the $1,468 million unrealized losses in structured securities, 41% were in residential mortgage-backed securities and 37% were in commercial mortgage-backed securities with the remainder in other asset-backed securities. Approximately 54% of the total unrealized losses in structured securities were on securities that have retained investment grade ratings. Most of these securities have been in an unrealized loss position for 12 months or more. Given ongoing concern about the housing market and unemployment, the fair value of these securities has declined due to credit spreads that have widened since acquisition. We examined the performance of the underlying collateral and developed our estimate of cash flows expected to be collected. In doing so, we identified certain securities where the non-credit portion of other-than-temporary impairments was recorded in OCI. Based on this evaluation, we determined that the unrealized losses on our mortgage-backed and asset-backed securities represented temporary impairments as of June 30, 2010.
Of the $552 million unrealized losses in the finance and insurance sector, most have been in an unrealized loss position for 12 months or more. Most of these securities have retained a credit rating of investment grade. A portion of the unrealized losses included securities where an other-than-temporary impairment was recorded in OCI. Given the current market conditions, including current financial industry events and uncertainty around global economic conditions, the fair value of these securities has declined due to credit spreads that have widened since acquisition. 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. A subset of the securities issued by banks and other financial institutions represent investments in financial hybrid securities on which a debt impairment model was employed. Most of these securities retain a credit rating of investment grade. The majority of these securities were issued by foreign financial institutions. The fair value of these securities has been impacted by credit spreads that have widened since acquisition and reflect uncertainty surrounding the extent and duration of government involvement, potential capital restructuring of these institutions, and continued but diminishing risk that income payments may be deferred. The remaining unrealized losses in our U.S. and non-U.S. corporate securities were evenly distributed across all other major industry types that comprise our corporate bond holdings.
Of the investment securities in an unrealized loss position for 12 months or more as of June 30, 2010, 686 securities were 20% or more below cost, of which 357 securities were also below investment grade (rated “BB+” and below) and accounted for unrealized losses of $747 million. These securities were primarily structured securities or securities issued by corporations in the finance and insurance sector. Included in this amount are other-than-temporarily impaired securities where the non-credit loss of $260 million was recorded in OCI.
While certain securities included in the preceding table were considered other-than-temporarily impaired, we expect to recover the new amortized cost based on our estimate of cash flows to be collected. We do not intend to sell and it is not more likely than not that we will be required to sell these securities prior to recovering our amortized cost.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
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 of asset-backed and mortgage-backed securities and potential future write-downs within our portfolio of mortgage-backed and asset-backed securities. 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.
The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of December 31, 2009:

 	  	Less than 12 months	  	12 months or more	
(Dollar amounts in millions)	  	Fair
value	  	Gross
unrealized
losses	 	 	Number of
securities	  	Fair
value	  	Gross
unrealized
losses	 	 	Number of
securities	
Description of Securities	  			  				 		  			  				 		
Fixed maturity securities:	  			  				 		  			  				 		
U.S. government, agencies and government-sponsored enterprises	  	$	1,759	  	$	(95	) 	 	81	  	$	6	  	$	(1	) 	 	2	
Tax-exempt	  	 	152	  	 	(6	) 	 	48	  	 	346	  	 	(98	) 	 	113	
Government—non-U.S.	  	 	341	  	 	(3	) 	 	60	  	 	105	  	 	(19	) 	 	35	
U.S. corporate	  	 	2,823	  	 	(81	) 	 	317	  	 	5,660	  	 	(736	) 	 	510	
Corporate—non-U.S.	  	 	1,721	  	 	(55	) 	 	221	  	 	2,245	  	 	(301	) 	 	258	
Residential mortgage-backed	  	 	941	  	 	(252	) 	 	256	  	 	1,012	  	 	(558	) 	 	348	
Commercial mortgage-backed	  	 	714	  	 	(64	) 	 	81	  	 	1,720	  	 	(771	) 	 	345	
Other asset-backed	  	 	329	  	 	(6	) 	 	43	  	 	1,727	  	 	(474	) 	 	183	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Subtotal, fixed maturity securities	  	 	8,780	  	 	(562	) 	 	1,107	  	 	12,821	  	 	(2,958	) 	 	1,794	
Equity securities	  	 	2	  	 	(1	) 	 	3	  	 	12	  	 	(2	) 	 	9	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	8,782	  	$	(563	) 	 	1,110	  	$	12,833	  	$	(2,960	) 	 	1,803	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
% Below cost—fixed maturity securities:	  			  				 		  			  				 		
<20% Below cost	  	$	8,437	  	$	(245	) 	 	920	  	$	9,699	  	$	(762	) 	 	1,055	
20-50% Below cost	  	 	267	  	 	(137	) 	 	91	  	 	2,637	  	 	(1,246	) 	 	455	
>50% Below cost	  	 	76	  	 	(180	) 	 	96	  	 	485	  	 	(950	) 	 	284	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total fixed maturity securities	  	 	8,780	  	 	(562	) 	 	1,107	  	 	12,821	  	 	(2,958	) 	 	1,794	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
% Below cost—equity securities:	  			  				 		  			  				 		
<20% Below cost	  	 	2	  	 	(1	) 	 	3	  	 	11	  	 	(1	) 	 	5	
>50% Below cost	  	 	—  	  	 	—  	  	 	—  	  	 	1	  	 	(1	) 	 	4	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total equity securities	  	 	2	  	 	(1	) 	 	3	  	 	12	  	 	(2	) 	 	9	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	8,782	  	$	(563	) 	 	1,110	  	$	12,833	  	$	(2,960	) 	 	1,803	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Investment grade	  	$	8,391	  	$	(320	) 	 	891	  	$	10,897	  	$	(2,122	) 	 	1,390	
Below investment grade	  	 	391	  	 	(243	) 	 	219	  	 	1,936	  	 	(838	) 	 	413	
	  	 	 	  	 	 	 	 	 	  	 	 	  	 	 	 	 	 	
Total for securities in an unrealized loss position	  	$	8,782	  	$	(563	) 	 	1,110	  	$	12,833	  	$	(2,960	) 	 	1,803	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
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.

(Amounts in millions)	  	Amortized
cost or
cost	  	Fair
value	
Due one year or less	  	$	2,776	  	$	2,801	
Due after one year through five years	  	 	11,367	  	 	11,696	
Due after five years through ten years	  	 	8,494	  	 	8,877	
Due after ten years	  	 	19,316	  	 	19,983	
	  	 	 	  	 	 	
Subtotal	  	 	41,953	  	 	43,357	
Residential mortgage-backed	  	 	4,395	  	 	3,955	
Commercial mortgage-backed	  	 	4,117	  	 	3,726	
Other asset-backed	  	 	2,640	  	 	2,348	
	  	 	 	  	 	 	
Total	  	$	53,105	  	$	53,386	
	  	 	 	  	 	 	
As of June 30, 2010, $5,015 million of our investments (excluding mortgage-backed and asset-backed securities) were subject to certain call provisions.
As of June 30, 2010, securities issued by finance and insurance, utilities and energy, and consumer—non-cyclical industry groups represented approximately 24%, 22% and 12% of our domestic and foreign corporate fixed maturity securities portfolio, respectively. No other industry group comprised more than 10% of our investment portfolio. This portfolio is widely diversified among various geographic regions in the U.S. and internationally, and is not dependent on the economic stability of one particular region.
As of June 30, 2010, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.
(e) Commercial Mortgage Loans
Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of prepayments, amortization and allowance for loan losses.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the periods indicated:

 	  	June 30, 2010	 	 	December 31, 2009	 	
(Amounts in millions)	  	Carrying
value	 	 	% of
total	 	 	Carrying
value	 	 	% of
total	 	
Property Type	  				 			 				 			
Retail	  	$	2,047	  	 	28	% 	 	$	2,115	  	 	28	% 	
Office	  	 	1,971	  	 	27	  	 	 	2,025	  	 	27	  	
Industrial	  	 	1,903	  	 	26	  	 	 	1,979	  	 	26	  	
Apartments	  	 	812	  	 	11	  	 	 	832	  	 	11	  	
Mixed use/other	  	 	540	  	 	8	  	 	 	590	  	 	8	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total principal balance	  	 	7,273	  	 	100	% 	 	 	7,541	  	 	100	% 	
	  				 	 	 	 				 	 	 	
Unamortized balance of loan origination fees and costs	  	 	5	  	 			 	 	6	  	 			
Allowance for losses (1)	  	 	(70	) 	 			 	 	(48	) 	 			
	  	 	 	 	 			 	 	 	 	 			
Total (2)	  	$	7,208	  	 			 	$	7,499	  	 			

(1)	Included $13 million related to held-for-sale commercial mortgage loans as of June 30, 2010.	
(2)	Included held-for-sale mortgage loans of $37 million and $17 million as of June 30, 2010 and December 31, 2009, respectively. The held-for-sale mortgage loans as of December 31, 2009 represented interests in reverse mortgage loans. In the first quarter of 2010, we began reporting held-for-sale reverse mortgages in other invested assets.	

 	  	June 30, 2010	 	 	December 31, 2009	 	
(Amounts in millions)	  	Carrying
value	 	 	% of
total	 	 	Carrying
value	 	 	% of
total	 	
Geographic Region	  				 			 				 			
Pacific	  	$	1,937	  	 	27	% 	 	$	2,005	  	 	27	% 	
South Atlantic	  	 	1,660	  	 	23	  	 	 	1,711	  	 	23	  	
Middle Atlantic	  	 	974	  	 	13	  	 	 	1,005	  	 	13	  	
East North Central	  	 	701	  	 	10	  	 	 	728	  	 	10	  	
Mountain	  	 	624	  	 	8	  	 	 	650	  	 	9	  	
New England	  	 	491	  	 	7	  	 	 	492	  	 	6	  	
West North Central	  	 	378	  	 	5	  	 	 	389	  	 	5	  	
West South Central	  	 	314	  	 	4	  	 	 	331	  	 	4	  	
East South Central	  	 	194	  	 	3	  	 	 	230	  	 	3	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total principal balance	  	 	7,273	  	 	100	% 	 	 	7,541	  	 	100	% 	
	  				 	 	 	 				 	 	 	
Unamortized balance of loan origination fees and costs	  	 	5	  	 			 	 	6	  	 			
Allowance for losses (1)	  	 	(70	) 	 			 	 	(48	) 	 			
	  	 	 	 	 			 	 	 	 	 			
Total (2)	  	$	7,208	  	 			 	$	7,499	  	 			

(1)	Included $13 million related to held-for-sale commercial mortgage loans as of June 30, 2010.	
(2)	Included held-for-sale mortgage loans of $37 million and $17 million as of June 30, 2010 and December 31, 2009, respectively. The held-for-sale mortgage loans as of December 31, 2009 represented interests in reverse mortgage loans. In the first quarter of 2010, we began reporting held-for-sale reverse mortgages in other invested assets.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
“Impaired” loans are defined by U.S. GAAP as loans for which it is probable that the lender will be unable to collect all amounts due according to original contractual terms of the loan agreement.
Under these principles, we may have two types of “impaired” loans: loans requiring specific allowances for losses ($5 million for the six months ended June 30, 2010 and $21 million for the year ended December 31, 2009) and loans expected to be fully recoverable because the carrying amount has been reduced previously through charge-offs or deferral of income recognition (none for the six months ended June 30, 2010 and for the year ended December 31, 2009).
Average investment in specifically impaired loans was $3 million and $10 million as of June 30, 2010 and December 31, 2009, respectively, and there was no interest income recognized on these loans while they were considered impaired.
The following table presents the activity in the allowance for losses during the periods indicated:

(Amounts in millions)	  	Three months ended
June 30, 2010	  	Six months ended
June  30, 2010	
Beginning balance	  	$	52	  	$	48	
Provision (1)	  	 	18	  	 	22	
Release	  	 	—  	  	 	—  	
	  	 	 	  	 	 	
Ending balance	  	$	70	  	$	70	

 	(1)	Included $13 million related to held-for-sale commercial mortgage loans.	
(f) Restricted Commercial Mortgage Loans Related To Securitization Entities
The following tables set forth additional information regarding our restricted commercial mortgage loans related to securitization entities as of the date indicated:

 	  	June 30, 2010	 	
(Amounts in millions)	  	Carrying
value	 	 	% of
total	 	
Property Type	  				 			
Retail	  	$	195	  	 	37	% 	
Industrial	  	 	131	  	 	24	  	
Office	  	 	122	  	 	23	  	
Apartments	  	 	66	  	 	12	  	
Mixed use/other	  	 	23	  	 	4	  	
	  	 	 	 	 	 	 	
Total principal balance	  	 	537	  	 	100	% 	
	  				 	 	 	
Allowance for losses	  	 	(2	) 	 			
	  	 	 	 	 			
Total 	  	$	535	  	 			

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

 	  	June 30, 2010	 	
(Amounts in millions)	  	Carrying
value	 	 	% of
total	 	
Geographic Region	  				 			
South Atlantic	  	$	197	  	 	37	% 	
Pacific	  	 	95	  	 	18	  	
Middle Atlantic	  	 	72	  	 	13	  	
East North Central	  	 	57	  	 	11	  	
Mountain	  	 	36	  	 	7	  	
East South Central	  	 	33	  	 	6	  	
West North Central	  	 	33	  	 	6	  	
West South Central	  	 	13	  	 	2	  	
New England	  	 	1	  	 	—  	  	
	  	 	 	 	 	 	 	
Total principal balance	  	 	537	  	 	100	% 	
	  				 	 	 	
Allowance for losses	  	 	(2	) 	 			
	  	 	 	 	 			
Total	  	$	535	  	 			
	  	 	 	 	 			
See note 7 for additional information related to consolidated securitization entities.
(g) Restricted Other Invested Assets Related To Securitization Entities
We have consolidated securitization entities that hold certain investments that are recorded as restricted other invested assets related to securitization entities. The consolidated securitization entities hold certain investments as trading securities whereby the changes in fair value are recorded in current period income (loss). The trading securities are comprised of asset-backed securities, including residual interest in certain policy loan securitization entities and highly rated bonds that are primarily backed by credit card receivables. See note 7 for additional information related to consolidated securitization entities.
(5) Derivative Instruments
Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange rates and other asset and liability prices. We use derivative instruments to mitigate or reduce certain of these risks. We have established policies for managing each of these risks, including prohibitions on derivatives market-making and other speculative derivatives activities. These policies require the use of derivative instruments in concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and are denoted as “derivatives not designated as hedges” in the following disclosures. For derivatives that meet the accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted as “derivatives designated as hedges,” which include both cash flow and fair value hedges.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table sets forth our positions in derivative instruments as of the dates indicated:

 	  	Derivative assets	 	 	Derivative liabilities	
 	  	Balance
sheet
classification	 	Fair value	 	 	Balance
sheet
classification	 	Fair value	
(Amounts in millions)	  		 	June 30,
2010	 	December 31,
2009	 	 		 	June 30,
2010	 	December 31,
2009	
Derivatives designated as hedges	  		 			 				 		 			 			
Cash flow hedges:	  		 			 				 		 			 			
Interest rate swaps	  	Other invested
assets	 	$	540	 	$	72	  	 	Other
liabilities	 	$	9	 	$	114	
Inflation indexed swaps	  	Other invested
assets	 	 	1	 	 	—  	  	 	Other
liabilities	 	 	22	 	 	21	
Foreign currency swaps	  	Other invested
assets	 	 	140	 	 	101	  	 	Other
liabilities	 	 	—  	 	 	—  	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total cash flow hedges	  		 	 	681	 	 	173	  	 		 	 	31	 	 	135	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Fair value hedges:	  		 			 				 		 			 			
Interest rate swaps	  	Other invested
assets	 	 	124	 	 	132	  	 	Other
liabilities	 	 	11	 	 	15	
Foreign currency swaps	  	Other invested
assets	 	 	20	 	 	24	  	 	Other
liabilities	 	 	—  	 	 	—  	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total fair value hedges	  		 	 	144	 	 	156	  	 		 	 	11	 	 	15	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total derivatives designated as hedges	  		 	 	825	 	 	329	  	 		 	 	42	 	 	150	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Derivatives not designated as hedges	  		 			 				 		 			 			
Interest rate swaps	  	Other invested
assets	 	 	509	 	 	505	  	 	Other
liabilities	 	 	41	 	 	59	
Interest rate swaps related to
securitization entities (1)	  	Restricted
other invested
assets	 	 	—  	 	 	—  	  	 	Other
liabilities	 	 	23	 	 	—  	
Interest rate swaptions	  	Other invested
assets	 	 	4	 	 	54	  	 	Other
liabilities	 	 	—  	 	 	67	
Credit default swaps	  	Other invested
assets	 	 	2	 	 	11	  	 	Other
liabilities	 	 	27	 	 	3	
Credit default swaps related to
securitization entities (1)	  	Restricted
other invested
assets	 	 	—  	 	 	—  	  	 	Other
liabilities	 	 	159	 	 	—  	
Equity index options	  	Other invested
assets	 	 	97	 	 	39	  	 	Other
liabilities	 	 	—  	 	 	2	
Financial futures	  	Other invested
assets	 	 	—  	 	 	—  	  	 	Other
liabilities	 	 	—  	 	 	—  	
Other foreign currency contracts	  	Other invested
assets	 	 	6	 	 	8	  	 	Other
liabilities	 	 	—  	 	 	—  	
Reinsurance embedded derivatives (2 )	  	Other assets	 	 	2	 	 	—  	  	 	Other
liabilities	 	 	—  	 	 	—  	
GMWB embedded derivatives	  	Reinsurance
recoverable  (3 )	 	 	9	 	 	(5	) 	 	Policyholder
account
balances (4 )	 	 	447	 	 	175	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total derivatives not designated as hedges	  		 	 	629	 	 	612	  	 		 	 	697	 	 	306	
	  		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total derivatives	  		 	$	1,454	 	$	941	  	 		 	$	739	 	$	456	

(1)	See note 7 for additional information related to consolidated securitization entities.	
(2)	Represents embedded derivatives associated with certain reinsurance agreements.	
(3)	Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.	
(4)	Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The fair value of derivative positions presented above was not offset by the respective collateral amounts retained or provided under these agreements. The amounts recognized for derivative counterparty collateral retained by us was recorded in other invested assets with a corresponding amount recorded in other liabilities to represent our obligation to return the collateral retained by us.
The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:

(Notional in millions)	  	Measurement	  	December 31, 2009	  	Additions	  	Maturities/
terminations	 	 	June 30, 2010	
Derivatives designated as hedges	  		  			  			  				 			
Cash flow hedges:	  		  			  			  				 			
Interest rate swaps	  	Notional	  	$	9,479	  	$	1,382	  	$	(206	) 	 	$	10,655	
Inflation indexed swaps	  	Notional	  	 	376	  	 	157	  	 	(6	) 	 	 	527	
Foreign currency swaps	  	Notional	  	 	491	  	 	—  	  	 	—  	  	 	 	491	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Total cash flow hedges	  		  	 	10,346	  	 	1,539	  	 	(212	) 	 	 	11,673	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Fair value hedges:	  		  			  			  				 			
Interest rate swaps	  	Notional	  	 	2,366	  	 	—  	  	 	(139	) 	 	 	2,227	
Foreign currency swaps	  	Notional	  	 	85	  	 	—  	  	 	—  	  	 	 	85	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Total fair value hedges	  		  	 	2,451	  	 	—  	  	 	(139	) 	 	 	2,312	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Total derivatives designated as hedges	  		  	 	12,797	  	 	1,539	  	 	(351	) 	 	 	13,985	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Derivatives not designated as hedges	  		  			  			  				 			
Interest rate swaps	  	Notional	  	 	6,474	  	 	2,345	  	 	(577	) 	 	 	8,242	
Interest rate swaps related to securitization entities	  	Notional	  	 	—  	  	 	138	  	 	(3	) 	 	 	135	
Interest rate swaptions	  	Notional	  	 	5,100	  	 	200	  	 	(5,100	) 	 	 	200	
Credit default swaps	  	Notional	  	 	1,090	  	 	50	  	 	—  	  	 	 	1,140	
Credit default swaps related to securitization entities	  	Notional	  	 	—  	  	 	322	  	 	(5	) 	 	 	317	
Equity index options	  	Notional	  	 	912	  	 	397	  	 	(614	) 	 	 	695	
Financial futures	  	Notional	  	 	5,822	  	 	3,696	  	 	(5,019	) 	 	 	4,499	
Other foreign currency contracts	  	Notional	  	 	521	  	 	73	  	 	—  	  	 	 	594	
Reinsurance embedded derivatives	  	Notional	  	 	—  	  	 	47	  	 	—  	  	 	 	47	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Total derivatives not designated as hedges	  		  	 	19,919	  	 	7,268	  	 	(11,318	) 	 	 	15,869	
	  		  	 	 	  	 	 	  	 	 	 	 	 	 	
Total derivatives	  		  	$	32,716	  	$	8,807	  	$	(11,669	) 	 	$	29,854	

												
(Number of policies)	  	Measurement	  	December 31, 2009	  	Additions	  	Terminations	 	 	June 30, 2010	
Derivatives not designated as hedges	  		  		  		  			 		
GMWB embedded derivatives	  	Policies	  	47,543	  	2,244	  	(1,445	) 	 	48,342	
Approximately $1.1 billion of notional value above is related to derivatives with counterparties that can be terminated at the option of the derivative counterparty and represented a net fair value asset of $148 million as of June 30, 2010.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Cash Flow Hedges
Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these instruments are recorded as a component of OCI. We designate and account for the following as cash flow hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) pay U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure on liabilities denominated in foreign currencies; (v) forward starting interest rate swaps to hedge against changes in interest rates associated with future fixed-rate bond purchases and/or interest income; and (vi) other instruments to hedge the cash flows of various forecasted transactions.
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the three months ended June 30, 2010:

(Amounts in millions)	 	Gain (loss)
recognized in OCI	 	 	Gain (loss)
reclassified into
net income (loss)
from OCI  	 	 	Classification of gain
(loss) reclassified into
net income (loss)	 	Gain (loss)
recognized in
net income (loss)  (1) 	 	Classification of gain
(loss) recognized in
net income (loss)	
Interest rate swaps hedging assets	 	$	599	  	 	$	4	  	 	Net investment
income	 	$	15	 	Net investment
gains (losses)	
Interest rate swaps hedging liabilities	 	 	(3	) 	 	 	1	  	 	Interest expense	 	 	—  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	6	  	 	 	(2	) 	 	Interest expense	 	 	—  	 	Net investment
gains (losses)	
	 	 	 	 	 	 	 	 	 		 	 	 	 		
Total	 	$	602	  	 	$	3	  	 		 	$	15	 		

(1)	Represents ineffective portion of cash flow hedges, as there were no amounts excluded from the measurement of effectiveness.	
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the three months ended June 30, 2009:

(Amounts in millions)	 	Gain (loss)
recognized in OCI	 	 	Gain (loss)
reclassified into
net income (loss)
from OCI  	 	 	Classification of gain
(loss) reclassified into
net income (loss)	 	Gain (loss)
recognized in
net income (loss)  (1) 	 	 	Classification of gain
(loss) recognized in
net income (loss)	
Interest rate swaps hedging assets	 	$	(177	) 	 	$	3	  	 	Net investment
income	 	$	(4	) 	 	Net investment
gains (losses)	
Interest rate swaps hedging assets	 	 	—  	  	 	 	2	  	 	Net investment
gains (losses)	 	 	—  	  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	(1	) 	 	 	(5	) 	 	Interest expense	 	 	—  	  	 	Net investment
gains (losses)	
	 	 	 	 	 	 	 	 	 		 	 	 	 	 		
Total	 	$	(178	) 	 	$	—  	  	 		 	$	(4	) 	 		

(1)	Represents ineffective portion of cash flow hedges, as there were no amounts excluded from the measurement of effectiveness.	
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the six months ended June 30, 2010:

(Amounts in millions)	 	Gain (loss)
recognized in OCI	 	 	Gain (loss)
reclassified into
net income (loss)
from OCI  	 	 	Classification of gain
(loss) reclassified into
net income (loss)	 	Gain (loss)
recognized in
net income (loss)  (1) 	 	Classification of gain
(loss) recognized in
net income (loss)	
Interest rate swaps hedging assets	 	$	563	  	 	$	8	  	 	Net investment
income	 	$	12	 	Net investment
gains (losses)	
Interest rate swaps hedging assets	 	 	—  	  	 	 	1	  	 	Net investment
gains (losses)	 	 	—  	 	Net investment
gains (losses)	
Interest rate swaps hedging liabilities	 	 	(3	) 	 	 	1	  	 	Interest expense	 	 	—  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	7	  	 	 	(4	) 	 	Interest expense	 	 	—  	 	Net investment
gains (losses)	
	 	 	 	 	 	 	 	 	 		 	 	 	 		
Total	 	$	567	  	 	$	6	  	 		 	$	12	 		

(1)	Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.	
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the six months ended June 30, 2009:

(Amounts in millions)	 	Gain (loss)
recognized in OCI	 	 	Gain (loss)
reclassified into
net income (loss)
from OCI  	 	 	Classification of gain
(loss) reclassified into
net income (loss)	 	Gain (loss)
recognized in
net income (loss)  (1) 	 	 	Classification of gain
(loss) recognized in
net income (loss)	
Interest rate swaps hedging assets	 	$	(322	) 	 	$	8	  	 	Net investment
income	 	$	(10	) 	 	Net investment
gains (losses)	
Interest rate swaps hedging assets	 	 	—  	  	 	 	5	  	 	Net investment
gains (losses)	 	 	—  	  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	(13	) 	 	 	(8	) 	 	Interest expense	 	 	—  	  	 	Net investment
gains (losses)	
	 	 	 	 	 	 	 	 	 		 	 	 	 	 		
Total	 	$	(335	) 	 	$	5	  	 		 	$	(10	) 	 		

(1)	Represents ineffective portion of cash flow hedges, as there were no amounts excluded from the measurement of effectiveness.	
The total of derivatives designated as cash flow hedges of $1.2 billion, net of taxes, recorded in stockholders’ equity as of June 30, 2010 is expected to be reclassified to future net income (loss), concurrently with and primarily offsetting changes in interest expense and interest income on floating-rate instruments and interest income on future fixed-rate bond purchases. Of this amount, $8 million, net of taxes, is expected to be reclassified to net income (loss) in the next 12 months. Actual amounts may vary from this amount as a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are expected to occur by 2045. No amounts were reclassified to net income (loss) during the six months ended June 30, 2010 in connection with forecasted transactions that were no longer considered probable of occurring.
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Fair Value Hedges
Certain derivative instruments are designated as fair value hedges. The changes in fair value of these instruments are recorded in net income (loss). In addition, changes in the fair value attributable to the hedged portion of the underlying instrument are reported in net income (loss). We designate and account for the following as fair value hedges when they have met the effectiveness requirements: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) interest rate swaps to convert fixed rate liabilities into floating rate liabilities; (iii) cross currency swaps to convert non-U.S. dollar fixed rate liabilities to floating rate U.S. dollar liabilities; and (iv) other instruments to hedge various fair value exposures of investments.
The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the three months ended June 30, 2010:

 	 	Derivative instrument	 	Hedged item	
(Amounts in millions)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in
net income (loss)	 	Other impacts
to net
income (loss)	 	 	Classification
of other
impacts to
net income (loss)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in net
income (loss)	
Interest rate swaps hedging assets	 	$	1	  	 	Net investment
gains (losses)	 	$	(3	) 	 	Net investment
income	 	$	(1	) 	 	Net investment
gains (losses)	
Interest rate swaps hedging liabilities	 	 	(6	) 	 	Net investment
gains (losses)	 	 	25	  	 	Interest credited	 	 	6	  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	(2	) 	 	Net investment
gains (losses)	 	 	1	  	 	Interest credited	 	 	2	  	 	Net investment
gains (losses)	
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
Total	 	$	(7	) 	 		 	$	23	  	 		 	$	7	  	 		
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the three months ended June 30, 2009:

 	 	Derivative instrument	 	Hedged item	
(Amounts in millions)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in
net income (loss)	 	Other impacts
to net
income (loss)	 	 	Classification
of other
impacts to
net income (loss)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in net
income (loss)	
Interest rate swaps hedging assets	 	$	4	  	 	Net investment
gains (losses)	 	$	(4	) 	 	Net investment
income	 	$	(6	) 	 	Net investment
gains (losses)	
Interest rate swaps hedging liabilities	 	 	(50	) 	 	Net investment
gains (losses)	 	 	23	  	 	Interest credited	 	 	51	  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	(2	) 	 	Net investment
gains (losses)	 	 	—  	  	 	Interest credited	 	 	1	  	 	Net investment
gains (losses)	
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
Total	 	$	(48	) 	 		 	$	19	  	 		 	$	46	  	 		

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the six months ended June 30, 2010:

 	 	Derivative instrument	 	Hedged item	
(Amounts in millions)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in
net income (loss)	 	Other impacts
to net
income (loss)	 	 	Classification
of other
impacts to
net income (loss)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in net
income (loss)	
Interest rate swaps hedging assets	 	$	2	  	 	Net investment
gains (losses)	 	$	(6	) 	 	Net investment
income	 	$	(2	) 	 	Net investment
gains (losses)	
Interest rate swaps hedging liabilities	 	 	(7	)	 	Net investment
gains (losses)	 	 	50	  	 	Interest credited	 	 	7	  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	(4	) 	 	Net investment
gains (losses)	 	 	2	 	 	Interest credited	 	 	4	  	 	Net investment
gains (losses)	
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
Total	 	$	(9	) 	 		 	$	46	  	 		 	$	9	  	 		
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the six months ended June 30, 2009:

 	 	Derivative instrument	 	Hedged item	
(Amounts in millions)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in
net income (loss)	 	Other impacts
to net
income (loss)	 	 	Classification
of other
impacts to
net income (loss)	 	Gain (loss)
recognized in
net income
(loss)	 	 	Classification
of gain (loss)
recognized in net
income (loss)	
Interest rate swaps hedging assets	 	$	6	  	 	Net investment
gains (losses)	 	$	(8	) 	 	Net investment
income	 	$	(10	) 	 	Net investment
gains (losses)	
Interest rate swaps hedging liabilities	 	 	(59	) 	 	Net investment
gains (losses)	 	 	42	  	 	Interest credited	 	 	62	  	 	Net investment
gains (losses)	
Foreign currency
swaps	 	 	(13	) 	 	Net investment
gains (losses)	 	 	1	  	 	Interest credited	 	 	11	  	 	Net investment
gains (losses)	
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
Total	 	$	(66	) 	 		 	$	35	  	 		 	$	63	  	 		
	 	 	 	 	 		 	 	 	 	 		 	 	 	 	 		
The difference between the gain (loss) recognized for the derivative instruments and the hedged items presented above represents the net ineffectiveness of the fair value hedging relationships. The other impacts presented above represent the income (loss) effects of the derivative instruments that are presented in the same location as the income (loss) activity from the hedged items. There were no amounts excluded from the measurement of effectiveness.
Derivatives Not Designated As Hedges
We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps, swaptions and financial futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) credit default swaps to enhance yield and reproduce characteristics of investments with similar terms and credit risk; (iii) equity index options, interest rate swaps and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits; (iv) interest rate swaps where the hedging relationship does not qualify for hedge accounting; (v) credit default swaps to mitigate loss exposure to certain credit risk; and (vi) foreign currency forward contracts to mitigate certain currency risk. Additionally, we provide GMWBs on certain
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
products that are required to be bifurcated as embedded derivatives and have reinsurance agreements with certain features that are required to be bifurcated as embedded derivatives.
We also have derivatives related to securitization entities where we were required to consolidate the related securitization entity as a result of our involvement in the structure. The counterparties for these derivatives typically only have recourse to the securitization entity. The interest rate swaps used for these entities are typically used to effectively convert the interest payments on the assets of the securitization entity to the same basis as the interest rate on the borrowings issued by the securitization entity. Credit default swaps are utilized in certain securitization entities to enhance the yield payable on the borrowings issued by the securitization entity and also include a settlement feature that allows the securitization entity to provide the par value of assets in the securitization entity for the amount of any losses incurred under the credit default swap. See note 7 for additional information related to consolidated securitization entities.
The following table provides the pre-tax gain (loss) recognized in net income (loss) for the effects of derivatives not designated as hedges for the periods indicated:

 	  	Three months ended June 30,	 	 	Classification of gain (loss) recognized
in net income (loss)	
(Amounts in millions)	  	2010	 	 	2009	 	 		
Interest rate swaps	  	$	63	  	 	$	164	  	 	Net investment gains (losses)	
Interest rate swaps related to securitization entities (1)	  	 	(9	) 	 	 	—  	  	 	Net investment gains (losses)	
Interest rate swaptions	  	 	35	  	 	 	(338	) 	 	Net investment gains (losses)	
Credit default swaps	  	 	(32	) 	 	 	35	  	 	Net investment gains (losses)	
Credit default swaps related to securitization entities (1)	  	 	(46	) 	 	 	—  	  	 	Net investment gains (losses)	
Equity index options	  	 	50	  	 	 	(71	) 	 	Net investment gains (losses)	
Financial futures	  	 	105	  	 	 	(163	) 	 	Net investment gains (losses)	
Inflation indexed swaps	  	 	—  	  	 	 	4	  	 	Net investment gains (losses)	
Other foreign currency contracts	  	 	2	  	 	 	8	  	 	Net investment gains (losses)	
Reinsurance embedded derivatives	  	 	2	  	 	 	—  	  	 	Net investment gains (losses)	
GMWB embedded derivatives	  	 	(278	) 	 	 	479	  	 	Net investment gains (losses)	
	  	 	 	 	 	 	 	 	 		
Total derivatives not designated as hedges	  	$	(108	) 	 	$	118	  	 		

(1)	See note 7 for additional information related to consolidated securitization entities.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table provides the pre-tax gain (loss) recognized in net income (loss) for the effects of derivatives not designated as hedges for the periods indicated:

 	  	Six months ended June 30,	 	 	Classification of gain (loss) recognized
in net income (loss)	
(Amounts in millions)	  	2010	 	 	2009	 	 		
Interest rate swaps	  	$	57	  	 	$	246	  	 	Net investment gains (losses)	
Interest rate swaps related to securitization entities (1)	  	 	(12	) 	 	 	—  	  	 	Net investment gains (losses)	
Interest rate swaptions	  	 	57	  	 	 	(579	) 	 	Net investment gains (losses)	
Credit default swaps	  	 	(27	) 	 	 	21	  	 	Net investment gains (losses)	
Credit default swaps related to securitization entities (1)	  	 	(41	) 	 	 	—  	  	 	Net investment gains (losses)	
Equity index options	  	 	23	  	 	 	(55	) 	 	Net investment gains (losses)	
Financial futures	  	 	72	  	 	 	(84	) 	 	Net investment gains (losses)	
Inflation indexed swaps	  	 	—  	  	 	 	(4	) 	 	Net investment gains (losses)	
Foreign currency swaps	  	 	—  	  	 	 	6	  	 	Net investment gains (losses)	
Other foreign currency contracts	  	 	(1	) 	 	 	10	  	 	Net investment gains (losses)	
Reinsurance embedded derivatives	  	 	2	  	 	 	—  	  	 	Net investment gains (losses)	
GMWB embedded derivatives	  	 	(242	) 	 	 	440	  	 	Net investment gains (losses)	
	  	 	 	 	 	 	 	 	 		
Total derivatives not designated as hedges	  	$	(112	) 	 	$	1	  	 		

(1)	See note 7 for additional information related to consolidated securitization entities.	
Derivative Counterparty Credit Risk
As of June 30, 2010 and December 31, 2009, net fair value assets by counterparty totaled $1.3 billion and $739 million, respectively. As of June 30, 2010 and December 31, 2009, net fair value liabilities by counterparty totaled $192 million and $74 million, respectively. As of June 30, 2010 and December 31, 2009, we retained collateral of $1.1 billion and $647 million, respectively, related to these agreements, including over collateralization of $6 million and $10 million, respectively, from certain counterparties. As of June 30, 2010 and December 31, 2009, we posted $12 million and $121 million, respectively, of collateral to derivative counterparties, including over collateralization of $3 million and $46 million, respectively. For derivatives related to securitization entities, there are no arrangements that require either party to provide collateral and the recourse of the derivative counterparty is typically limited to the assets held by the securitization entity and there is no recourse to any entity other than the securitization entity.
Except for derivatives related to securitization entities, all of our master swap agreements contain credit downgrade provisions that allow either party to assign or terminate derivative transactions if the other party’s long-term unsecured debt rating or financial strength rating is below the limit defined in the applicable agreement. If the downgrade provisions had been triggered as of June 30, 2010 and December 31, 2009, we could have been allowed to claim up to $292 million and $102 million, respectively, from counterparties and required to disburse up to $1 million in both periods. This represented the net fair value of gains and losses by counterparty, less available collateral held, and did not include any fair value gains or losses for derivatives related to securitization entities.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Credit Derivatives—Sell Protection
We sell protection under single name credit default swaps and credit default swap index tranches in combination with purchasing securities to replicate characteristics of similar investments based on the credit quality and term of the credit default swap. Credit default triggers for both indexed reference entities and single name reference entities follow the Credit Derivatives Physical Settlement Matrix published by the International Swaps and Derivatives Association. Under these terms, credit default triggers are defined as bankruptcy, failure to pay or restructuring, if applicable. Our maximum exposure to credit loss equals the notional value for credit default swaps and the par value of debt instruments with embedded credit derivatives. In the event of default for credit default swaps, we are typically required to pay the protection holder the full notional value less a recovery rate determined at auction. For debt instruments with embedded credit derivatives, the security’s principal is typically reduced by the net amount of default for any referenced entity defaults.
In addition to the credit derivatives discussed above, we also have credit derivative instruments related to securitization entities that we were required to consolidate in 2010. These derivatives represent a customized index of reference entities with specified attachment points for certain derivatives. The credit default triggers are similar to those described above. In the event of default, the securitization entity will provide the counterparty with the par value of assets held in the securitization entity for the amount of incurred loss on the credit default swap. The maximum exposure to loss for the securitization entity is the notional value of the derivatives. Certain losses on these credit default swaps would be absorbed by the third-party noteholders of the securitization entity and the remaining losses on the credit default swaps would be absorbed by our portion of the notes issued by the securitization entity. See note 9 for information on the third-party borrowings related to consolidated securitization entities.
The following table sets forth our credit default swaps where we sell protection on single name reference entities and the fair values as of the dates indicated:

 	  	June 30, 2010	  	December 31, 2009	
(Amounts in millions)	  	Notional
value	  	Assets	  	Liabilities	  	Notional
value	  	Assets	  	Liabilities	
Reference entity credit rating and maturity:	  			  			  			  			  			  			
AAA	  			  			  			  			  			  			
Matures after one year through five years	  	$	5	  	$	—  	  	$	—  	  	$	6	  	$	—  	  	$	—  	
AA	  			  			  			  			  			  			
Matures after one year through five years	  	 	11	  	 	—  	  	 	—  	  	 	5	  	 	—  	  	 	—  	
A	  			  			  			  			  			  			
Matures after one year through five years	  	 	32	  	 	—  	  	 	—  	  	 	32	  	 	1	  	 	—  	
Matures after five years through ten years	  	 	10	  	 	—  	  	 	—  	  	 	10	  	 	—  	  	 	—  	
BBB	  			  			  			  			  			  			
Matures after one year through five years	  	 	68	  	 	1	  	 	—  	  	 	73	  	 	1	  	 	—  	
Matures after five years through ten years	  	 	29	  	 	—  	  	 	1	  	 	29	  	 	—  	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total credit default swaps on single name reference entities	  	$	155	  	$	1	  	$	1	  	$	155	  	$	2	  	$	—  	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table sets forth our credit default swaps where we sell protection on credit default swap index tranches and the fair values as of the dates indicated:

 	 	June 30, 2010	 	December 31, 2009	
(Amounts in millions)	 	Notional
value	 	Assets	 	Liabilities	 	Notional
value	 	Assets	 	Liabilities	
Index tranche attachment/detachment point and maturity:	 			 			 			 			 			 			
9% – 12% matures after one year through five years   (1)	 	$	300	 	$	—  	 	$	13	 	$	50	 	$	—  	 	$	—  	
9% – 12% matures after five years through ten years   (2)	 	 	—  	 	 	—  	 	 	—  	 	 	250	 	 	1	 	 	1	
10% – 15% matures after five years through ten years   (3)	 	 	250	 	 	—  	 	 	6	 	 	250	 	 	—  	 	 	2	
12% – 22% matures after five years through ten years   (4)	 	 	248	 	 	—  	 	 	6	 	 	248	 	 	4	 	 	—  	
15% – 30% matures after five years through ten years   (5)	 	 	127	 	 	—  	 	 	1	 	 	127	 	 	2	 	 	—  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total credit default swap index tranches	 	 	925	 	 	—  	 	 	26	 	 	925	 	 	7	 	 	3	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Customized credit default swap index tranches related to securitization entities:	 			 			 			 			 			 			
Portion backing third-party borrowings maturing 2017   (6)	 	 	17	 	 	—  	 	 	9	 	 	—  	 	 	—  	 	 	—  	
Portion backing our interest maturing 2017 (7)	 	 	300	 	 	—  	 	 	150	 	 	—  	 	 	—  	 	 	—  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total customized credit default swap index tranches related to securitization entities	 	 	317	 	 	—  	 	 	159	 	 	—  	 	 	—  	 	 	—  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total credit default swaps on index tranches	 	$	1,242	 	$	—  	 	$	185	 	$	925	 	$	7	 	$	3	

(1)	The current attachment/detachment as of June 30, 2010 and December 31, 2009 was 9% – 12%.	
(2)	The current attachment/detachment as of June 30, 2010 and December 31, 2009 was 9% – 12%.	
(3)	The current attachment/detachment as of June 30, 2010 and December 31, 2009 was 10% – 15%.	
(4)	The current attachment/detachment as of June 30, 2010 and December 31, 2009 was 12% – 22%.	
(5)	The current attachment/detachment as of June 30, 2010 and December 31, 2009 was 14.8% – 30.3%.	
(6)	Original notional value was $39 million.	
(7)	Original notional value was $300 million.	
The following table sets forth our holding of available-for-sale fixed maturity securities that include embedded credit derivatives and the fair values as of the dates indicated:

 	  	June 30, 2010	  	December 31, 2009	
(Amounts in millions)	  	Par
value	  	Amortized
cost or
cost	  	Fair
value	  	Par
value	  	Amortized
cost or
cost	  	Fair
value	
Credit rating:	  			  			  			  			  			  			
AA	  			  			  			  			  			  			
Matures after five years through ten years	  	$	100	  	$	100	  	$	96	  	$	100	  	$	100	  	$	96	
BBB	  			  			  			  			  			  			
Matures after five years through ten years (1)	  	 	—  	  	 	—  	  	 	—  	  	 	100	  	 	100	  	 	76	
BB	  			  			  			  			  			  			
Matures after five years through ten years (1)	  	 	—  	  	 	—  	  	 	—  	  	 	200	  	 	228	  	 	148	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total available-for-sale fixed maturity securities that include embedded credit derivatives	  	$	100	  	$	100	  	$	96	  	$	400	  	$	428	  	$	320	

(1)	The amounts in 2009 related to certain VIEs that were consolidated on January 1, 2010. See note 7 for additional information related to consolidated securitization entities.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
(6) Fair Value of Financial Instruments
Assets and liabilities that are reflected in the accompanying consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash and cash equivalents, investment securities, separate accounts, securities held as collateral and derivative instruments. Other financial assets and liabilities—those not carried at fair value—are discussed below. Apart from certain of our borrowings and certain marketable securities, few of the instruments discussed below are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.
The basis on which we estimate fair value is as follows:
Commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates.
Restricted commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates.
Other invested assets. Based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the related instrument. Primarily represents short-term investments, limited partnerships accounted for under the cost method and bank loans.
Short-term borrowings. Based on carrying value which approximates fair value since the borrowings are based on variable interest rates that are reset monthly.
Long-term borrowings. Based on market quotes or comparable market transactions.
Non-recourse funding obligations. Based on the then current coupon, revalued based on the London Interbank Offered Rate (“LIBOR”) set and current spread assumption based on commercially available data. The model is a floating rate coupon model using the spread assumption to derive the valuation.
Borrowings related to securitization entities. Based on market quotes or comparable market transactions.
Investment contracts. Based on expected future cash flows, discounted at current market rates for annuity contracts or institutional products.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following represents the fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:

(Amounts in millions)	  	June 30, 2010	  	December 31, 2009	
	  	Notional
amount	 	 	Carrying
amount	  	Fair
value	  	Notional
amount	 	 	Carrying
amount	  	Fair
value	
Assets:	  				 			  			  				 			  			
Commercial mortgage loans	  	$	            	(1)  	 	$	7,208	  	$	7,211	  	$	 	(1)  	 	$	7,499	  	$	7,213	
Restricted commercial mortgage loans (2)	  	 	            	(1)  	 	 	535	  	 	554	  	 	    	(1)  	 	 	—  	  	 	—  	
Other invested assets	  	 	            	(1)  	 	 	328	  	 	332	  	 	    	(1)  	 	 	1,766	  	 	1,769	
Liabilities:	  				 			  			  				 			  			
Short-term borrowings (3)	  	 	            	(1)  	 	 	730	  	 	730	  	 	    	(1)  	 	 	930	  	 	930	
Long-term borrowings (3)	  	 	            	(1)  	 	 	4,331	  	 	4,127	  	 	    	(1)  	 	 	3,641	  	 	3,291	
Non-recourse funding obligations (3)	  	 	            	(1)  	 	 	3,437	  	 	1,468	  	 	    	(1)  	 	 	3,443	  	 	1,674	
Borrowings related to securitization
entities (2), (3)	  	 	            	(1)  	 	 	474	  	 	497	  	 	    	(1)  	 	 	—  	  	 	—  	
Investment contracts	  	 	            	(1)  	 	 	21,287	  	 	22,048	  	 	    	(1)  	 	 	21,515	  	 	21,743	
Performance guarantees, principally letters of credit	  	 	77	  	 	 	—  	  	 	—  	  	 	117	  	 	 	—  	  	 	—  	
Other firm commitments:	  				 			  			  				 			  			
Commitments to fund limited partnerships	  	 	143	  	 	 	—  	  	 	—  	  	 	194	  	 	 	—  	  	 	—  	
Ordinary course of business lending commitments	  	 	5	  	 	 	—  	  	 	—  	  	 	—  	  	 	 	—  	  	 	—  	

(1)	These financial instruments do not have notional amounts.	
(2)	See note 7 for additional information related to consolidated securitization entities.	
(3)	See note 9 for additional information related to borrowings.	
Recurring Fair Value Measurements
We have fixed maturity, equity and trading securities, derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, 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, equity and trading securities
The valuations of fixed maturity, equity and trading 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.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
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 the 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 broker quotes, we discuss the valuation methodology utilized by the third party but cannot typically obtain sufficient evidence to determine the valuation does not include significant unobservable inputs. Accordingly, we typically classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.
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.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(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.

(Amounts in millions)	  	Total	  	Level 1	  	Level 2	  	Level 3	
U.S. government, agencies and government-sponsored enterprises:	  			  			  			  			
Pricing services	  	$	3,667	  	$	—  	  	$	3,667	  	$	—  	
Internal models	  	 	17	  	 	—  	  	 	8	  	 	9	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total U.S. government, agencies and government-sponsored enterprises	  	 	3,684	  	 	—  	  	 	3,675	  	 	9	
	  	 	 	  	 	 	  	 	 	  	 	 	
Tax-exempt:	  			  			  			  			
Pricing services	  	 	1,350	  	 	—  	  	 	1,350	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total tax-exempt	  	 	1,350	  	 	—  	  	 	1,350	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Government—non-U.S.:	  			  			  			  			
Pricing services	  	 	2,116	  	 	—  	  	 	2,116	  	 	—  	
Internal models	  	 	30	  	 	—  	  	 	12	  	 	18	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total government—non-U.S.	  	 	2,146	  	 	—  	  	 	2,128	  	 	18	
	  	 	 	  	 	 	  	 	 	  	 	 	
U.S. corporate:	  			  			  			  			
Pricing services	  	 	19,988	  	 	—  	  	 	19,988	  	 	—  	
Broker quotes	  	 	300	  	 	—  	  	 	—  	  	 	300	
Internal models	  	 	3,090	  	 	—  	  	 	1,870	  	 	1,220	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total U.S. corporate	  	 	23,378	  	 	—  	  	 	21,858	  	 	1,520	
	  	 	 	  	 	 	  	 	 	  	 	 	
Corporate—non-U.S.:	  			  			  			  			
Pricing services	  	 	10,793	  	 	—  	  	 	10,696	  	 	97	
Broker quotes	  	 	136	  	 	—  	  	 	—  	  	 	136	
Internal models	  	 	1,870	  	 	—  	  	 	1,383	  	 	487	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total corporate—non-U.S.	  	 	12,799	  	 	—  	  	 	12,079	  	 	720	
	  	 	 	  	 	 	  	 	 	  	 	 	
Residential mortgage-backed:	  			  			  			  			
Pricing services	  	 	3,893	  	 	—  	  	 	3,893	  	 	—  	
Broker quotes	  	 	35	  	 	—  	  	 	—  	  	 	35	
Internal models	  	 	27	  	 	—  	  	 	—  	  	 	27	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total residential mortgage-backed	  	 	3,955	  	 	—  	  	 	3,893	  	 	62	
	  	 	 	  	 	 	  	 	 	  	 	 	
Commercial mortgage-backed:	  			  			  			  			
Pricing services	  	 	3,662	  	 	—  	  	 	3,662	  	 	—  	
Broker quotes	  	 	20	  	 	—  	  	 	—  	  	 	20	
Internal models	  	 	44	  	 	—  	  	 	5	  	 	39	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total commercial mortgage-backed	  	 	3,726	  	 	—  	  	 	3,667	  	 	59	
	  	 	 	  	 	 	  	 	 	  	 	 	
Other asset-backed:	  			  			  			  			
Pricing services	  	 	1,978	  	 	—  	  	 	1,978	  	 	—  	
Broker quotes	  	 	156	  	 	—  	  	 	—  	  	 	156	
Internal models	  	 	214	  	 	—  	  	 	9	  	 	205	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total other asset-backed	  	 	2,348	  	 	—  	  	 	1,987	  	 	361	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total fixed maturity securities	  	$	53,386	  	$	—  	  	$	50,637	  	$	2,749	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table summarizes the primary sources considered when determining fair value of equity securities as of June 30, 2010.

(Amounts in millions)	  	Total	  	Level 1	  	Level 2	  	Level 3	
Pricing services	  	$	190	  	$	20	  	$	170	  	$	—  	
Broker quotes	  	 	6	  	 	—  	  	 	—  	  	 	6	
Internal models	  	 	3	  	 	—  	  	 	—  	  	 	3	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total equity securities	  	$	199	  	$	20	  	$	170	  	$	9	
	  	 	 	  	 	 	  	 	 	  	 	 	
The following table summarizes the primary sources considered when determining fair value of trading securities as of June 30, 2010.

(Amounts in millions)	  	Total	  	Level 1	  	Level 2	  	Level 3	
Pricing services	  	$	85	  	$	—  	  	$	85	  	$	—  	
Broker quotes	  	 	136	  	 	—  	  	 	—  	  	 	136	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total trading securities	  	$	221	  	$	—  	  	$	85	  	$	136	
	  	 	 	  	 	 	  	 	 	  	 	 	
Restricted other invested assets related to securitization entities
We have trading securities related to securitization entities that are classified as restricted other invested assets and are carried at fair value. The trading securities represent asset-backed securities. The valuation for trading securities is determined using a market approach and/or an income approach depending on the availability of information. For certain highly rated asset-backed securities, there is observable market information for transactions of the same or similar instruments and is provided to us by a third-party pricing service and is classified as Level 2. For certain securities that are not actively traded, we determine fair value after considering third-party broker provided prices or discounted expected cash flows using current yields for similar securities and classify these valuations as Level 3.
Securities lending and derivative counterparty collateral
The fair value of securities held as collateral is primarily based on Level 2 inputs from market information for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices obtained by third-party pricing services.
Separate account assets
The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.
Derivatives
In determining the fair value of derivatives, we consider the counterparty collateral arrangements and rights of set-off when determining whether any incremental adjustment should be made for both the counterparty’s and our non-performance risk. As a result of these counterparty arrangements, we determined no adjustment for our non-performance risk was required to our derivative liabilities.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Interest rate swaps. The valuation of interest rate swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain swaps, there are features that provide an option to the counterparty to terminate the swap at specified dates and would be considered a significant unobservable input and results in the fair value measurement of the derivative being classified as Level 3.
Interest rate swaps related to securitization entities. The valuation of interest rate swaps related to securitization entities is determined using an income approach. The primary input into the valuation represent the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2.
Inflation indexed swaps. The valuation of inflation indexed swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and consumer price index, which are generally considered observable inputs, and results in the derivative being classified as Level 2.
Interest rate swaptions. The valuation of interest rate swaptions is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, which is generally considered an observable input, forward interest rate volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate volatility input, the derivative is classified as Level 3.
Foreign currency swaps. The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered an observable input, and results in the derivative being classified as Level 2.
Credit default swaps. We have both single name credit default swaps and index tranche credit default swaps. For single name credit default swaps, we utilize an income approach to determine fair value based on using current market information for the credit spreads of the reference entity, which is considered observable inputs based on the reference entities of our derivatives and results in these derivatives being classified as Level 2. For index tranche credit default swaps, we utilize an income approach that utilizes current market information related to credit spreads and expected defaults and losses associated with the reference entities that comprise the respective index associated with each derivative. There are significant unobservable inputs associated with the timing and amount of losses from the reference entities as well as the timing or amount of losses, if any, that will be absorbed by our tranche. Accordingly, the index tranche credit default swaps are classified as Level 3.
Credit default swaps related to securitization entities. Credit default swaps related to securitization entities represent customized index tranche credit default swaps and are valued using a similar methodology as described above for index tranche credit default swaps. We determine fair value of these credit default swaps after considering both the valuation methodology described above as well as the valuation provided by the derivative counterparty. In addition to the valuation methodology and inputs described for index tranche credit default swaps, these customized credit default swaps contain a feature that permits the securitization entity to provide the par value of underlying assets in the securitization entity to settle any losses under the credit default swap. The valuation of this settlement feature is dependent upon the valuation of the underlying assets and the timing and amount of any expected loss on the credit default swap, which is considered a significant unobservable input. Accordingly, these customized index tranche credit default swaps related to securitization entities are classified as Level 3.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Equity index options. We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rate volatility and time value component associated with the optionality in the derivative, which are considered significant unobservable inputs in most instances. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3.
Financial futures. The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the margins on these contracts on a daily basis.
Other foreign currency contracts. We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate and foreign currency exchange rate volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate and foreign currency exchange rate volatility input, the derivative is classified as Level 3.
Reinsurance embedded derivatives
We have certain reinsurance agreements that result in a reinsurance counterparty holding assets for our benefit where this feature is considered an embedded derivative requiring bifurcation. As a result, we measure the embedded derivatives at fair value with changes in fair value being recorded in income. Fair value is determined by comparing the fair value and cost basis of the underlying assets. The underlying assets are primarily comprised of highly rated investments and result in the fair value of the embedded derivatives being classified as Level 2.
GMWB embedded derivatives
We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. In addition to these inputs, we also consider risk and expense margins when determining the projected cash flows that would be determined by another market participant. While the risk and expense margins are considered in determining fair value, these inputs do not have a significant impact on the valuation.
For GMWB liabilities, non-performance risk is integrated into the discount rate. The discount rate utilized in our valuation was based on the swap curve, which included the credit risk of an instrument rated “AA” and incorporated the non-performance risk of our GMWB liabilities. In recent periods, the swap curve has been lower than the U.S. Treasury curve for certain points on the curve. For the points where the swap curve is lower than the U.S. Treasury curve, we utilize the U.S. Treasury curve as our discount rate. As of June 30, 2010 and December 31, 2009, the impact of non-performance risk on our GMWB valuation was not material.
To determine whether the use of the swap curve was the appropriate discount rate to reflect the non-performance risk of the GMWB liabilities, we evaluate the non-performance risk in our liabilities based on a hypothetical exit market transaction as there is no exit market for these types of liabilities. A hypothetical exit
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
market can be viewed as a hypothetical transfer of the liability to another similarly rated insurance company which would closely resemble a reinsurance transaction. Another hypothetical exit market transaction can be viewed as a hypothetical transaction from the perspective of the GMWB policyholder. After considering all relevant factors in assessing whether any additional adjustment to the discount rate for non-performance risk was necessary, including assumptions we expect market participants would utilize in a hypothetical exit market transaction, we determined that no incremental adjustment to the discount rate was necessary for our GMWB liabilities that are recorded at fair value. We believe that a hypothetical exit market participant would use a similar discount rate to value the liabilities and would not incorporate changes in non-performance risk in the discount rate other than the implied credit spread incorporated in the swap curve.
For equity index volatility, we determine the projected equity market volatility using both historical volatility and projected near-term equity market volatility with more significance being placed on projected and recent historical data.
Equity index and fund correlations are determined based on historical price observations for the fund and equity index.
For policyholder assumptions, we use our expected lapse, mortality and utilization assumptions and update these assumptions for our actual experience, as necessary. For our lapse assumption, we adjust our base lapse assumption by policy based on a combination of the policyholder’s current account value and GMWB benefit.
We classify the GMWB valuation as Level 3 based on having significant unobservable inputs. We evaluate the inputs and methodologies used to determine fair value based on how we expect a market participant would determine exit value. As stated above, there is no exit market or market participants for the GMWB embedded derivatives. Accordingly, we evaluate our inputs and resulting fair value based on a hypothetical exit market and hypothetical market participants. A hypothetical exit market could be viewed as a transaction that would closely resemble reinsurance. While reinsurance transactions for this type of product are not an observable input, we consider this type of hypothetical exit market when evaluating our inputs and determining that our inputs are consistent with that of a hypothetical market participant.
Borrowings related to securitization entities
We record certain borrowings related to securitization entities at fair value. The fair value of these borrowings is determined using either a market approach or income approach, depending on the instrument and availability of market information. Given the unique characteristics of the securitization entities that issued these borrowings as well as the lack of comparable instruments, we determine fair value considering the valuation of the underlying assets held by the securitization entities and any derivatives, as well as any unique characteristics of the borrowings that may impact the valuation. After considering all relevant inputs, we determine fair value of the borrowings using the net valuation of the underlying assets and derivatives that are backing the borrowings. Accordingly, these instruments are classified as Level 3.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following tables set forth our assets and liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:

 	  	June 30, 2010	
(Amounts in millions)	  	Total	  	Level 1	  	Level 2	  	Level 3	
Assets	  			  			  			  			
Investments:	  			  			  			  			
Fixed maturity securities:	  			  			  			  			
U.S. government, agencies and government-sponsored enterprises	  	$	3,684	  	$	—  	  	$	3,675	  	$	9	
Tax-exempt	  	 	1,350	  	 	—  	  	 	1,350	  	 	—  	
Government—non-U.S.	  	 	2,146	  	 	—  	  	 	2,128	  	 	18	
U.S. corporate	  	 	23,378	  	 	—  	  	 	21,858	  	 	1,520	
Corporate—non-U.S.	  	 	12,799	  	 	—  	  	 	12,079	  	 	720	
Residential mortgage-backed	  	 	3,955	  	 	—  	  	 	3,893	  	 	62	
Commercial mortgage-backed	  	 	3,726	  	 	—  	  	 	3,667	  	 	59	
Other asset-backed	  	 	2,348	  	 	—  	  	 	1,987	  	 	361	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total fixed maturity securities	  	 	53,386	  	 	—  	  	 	50,637	  	 	2,749	
	  	 	 	  	 	 	  	 	 	  	 	 	
Equity securities	  	 	199	  	 	20	  	 	170	  	 	9	
	  	 	 	  	 	 	  	 	 	  	 	 	
Other invested assets:	  			  			  			  			
Trading securities	  	 	221	  	 	—  	  	 	85	  	 	136	
Derivative assets:	  			  			  			  			
Interest rate swaps	  	 	1,173	  	 	—  	  	 	1,164	  	 	9	
Inflation indexed swaps	  	 	1	  	 	—  	  	 	1	  	 	—  	
Foreign currency swaps	  	 	160	  	 	—  	  	 	160	  	 	—  	
Interest rate swaptions	  	 	4	  	 	—  	  	 	—  	  	 	4	
Credit default swaps	  	 	2	  	 	—  	  	 	2	  	 	—  	
Equity index options	  	 	97	  	 	—  	  	 	—  	  	 	97	
Other foreign currency contracts	  	 	6	  	 	—  	  	 	5	  	 	1	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total derivative assets	  	 	1,443	  	 	—  	  	 	1,332	  	 	111	
	  	 	 	  	 	 	  	 	 	  	 	 	
Securities lending collateral	  	 	680	  	 	—  	  	 	680	  	 	—  	
Derivatives counterparty collateral	  	 	100	  	 	—  	  	 	100	  	 	—  	
Restricted other invested assets related to securitization entities	  	 	373	  	 	—  	  	 	199	  	 	174	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total other invested assets	  	 	2,817	  	 	—  	  	 	2,396	  	 	421	
	  	 	 	  	 	 	  	 	 	  	 	 	
Other assets (1)	  	 	2	  	 	—  	  	 	2	  	 	—  	
Reinsurance recoverable (2)	  	 	9	  	 	—  	  	 	—  	  	 	9	
Separate account assets	  	 	10,284	  	 	10,284	  	 	—  	  	 	—  	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total assets	  	$	66,697	  	$	10,304	  	$	53,205	  	$	3,188	
	  	 	 	  	 	 	  	 	 	  	 	 	
Liabilities	  			  			  			  			
Policyholder account balances (3)	  	$	447	  	$	—  	  	$	—  	  	$	447	
Derivative liabilities:	  			  			  			  			
Interest rate swaps	  	 	61	  	 	—  	  	 	61	  	 	—  	
Interest rate swaps related to securitization entities	  	 	23	  	 	—  	  	 	23	  	 	—  	
Inflation indexed swaps	  	 	22	  	 	—  	  	 	22	  	 	—  	
Credit default swaps	  	 	27	  	 	—  	  	 	1	  	 	26	
Credit default swaps related to securitization entities	  	 	159	  	 	—  	  	 	—  	  	 	159	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total derivative liabilities	  	 	292	  	 	—  	  	 	107	  	 	185	
Borrowings related to securitization entities	  	 	51	  	 	—  	  	 	—  	  	 	51	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total liabilities	  	$	790	  	$	—  	  	$	107	  	$	683	

(1)	Represents embedded derivatives associated with certain reinsurance agreements.	
(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.	
(3)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

 	  	December 31, 2009	 	
(Amounts in millions)	  	Total	 	 	Level 1	  	Level 2	  	Level 3	 	
Assets	  				 			  			  				
Investments:	  				 			  			  				
Fixed maturity securities:	  				 			  			  				
U.S. government, agencies and government-sponsored enterprises	  	$	2,602	  	 	$	—  	  	$	2,586	  	$	16	  	
Tax-exempt	  	 	1,544	  	 	 	—  	  	 	1,542	  	 	2	  	
Government—non-U.S.	  	 	2,384	  	 	 	—  	  	 	2,377	  	 	7	  	
U.S. corporate	  	 	21,412	  	 	 	—  	  	 	20,339	  	 	1,073	  	
Corporate—non-U.S.	  	 	12,551	  	 	 	—  	  	 	12,047	  	 	504	  	
Residential mortgage-backed	  	 	3,227	  	 	 	—  	  	 	1,746	  	 	1,481	  	
Commercial mortgage-backed	  	 	3,617	  	 	 	—  	  	 	59	  	 	3,558	  	
Other asset-backed	  	 	2,415	  	 	 	—  	  	 	996	  	 	1,419	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Total fixed maturity securities	  	 	49,752	  	 	 	—  	  	 	41,692	  	 	8,060	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Equity securities	  	 	159	  	 	 	42	  	 	108	  	 	9	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Other invested assets:	  				 			  			  				
Trading securities	  	 	174	  	 	 	—  	  	 	29	  	 	145	  	
Derivative assets:	  				 			  			  				
Interest rate swaps	  	 	709	  	 	 	—  	  	 	706	  	 	3	  	
Foreign currency swaps	  	 	125	  	 	 	—  	  	 	125	  	 	—  	  	
Interest rate swaptions	  	 	54	  	 	 	—  	  	 	—  	  	 	54	  	
Credit default swaps	  	 	11	  	 	 	—  	  	 	5	  	 	6	  	
Equity index options	  	 	39	  	 	 	—  	  	 	—  	  	 	39	  	
Other foreign currency contracts	  	 	8	  	 	 	—  	  	 	—  	  	 	8	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Total derivative assets	  	 	946	  	 	 	—  	  	 	836	  	 	110	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Securities lending collateral	  	 	853	  	 	 	—  	  	 	853	  	 	—  	  	
Derivatives counterparty collateral	  	 	148	  	 	 	—  	  	 	148	  	 	—  	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Total other invested assets	  	 	2,121	  	 	 	—  	  	 	1,866	  	 	255	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Reinsurance recoverable (1)	  	 	(5	) 	 	 	—  	  	 	—  	  	 	(5	) 	
Separate account assets	  	 	11,002	  	 	 	11,002	  	 	—  	  	 	—  	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Total assets	  	$	63,029	  	 	$	11,044	  	$	43,666	  	$	8,319	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Liabilities	  				 			  			  				
Policyholder account balances (2)	  	$	175	  	 	$	—  	  	$	—  	  	$	175	  	
Derivative liabilities:	  				 			  			  				
Interest rate swaps	  	 	188	  	 	 	—  	  	 	186	  	 	2	  	
Inflation indexed swaps	  	 	21	  	 	 	—  	  	 	21	  	 	—  	  	
Interest rate swaptions	  	 	67	  	 	 	—  	  	 	—  	  	 	67	  	
Credit default swap	  	 	3	  	 	 	—  	  	 	3	  	 	—  	  	
Equity index options	  	 	2	  	 	 	—  	  	 	—  	  	 	2	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Total derivative liabilities	  	 	281	  	 	 	—  	  	 	210	  	 	71	  	
	  	 	 	 	 	 	 	  	 	 	  	 	 	 	
Total liabilities	  	$	456	  	 	$	—  	  	$	210	  	$	246	  	

(1)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.	
(2)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(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:

 	 	Beginning
balance
as of
April 1,
2010	 	 	Total realized and
unrealized gains
(losses)	 	Purchases,
sales,
issuances
and
settlements,
net	 	 	Transfer
in Level  3   (1) 	 	Transfer
out of
Level 3	 	 	Ending
balance
as of
June 30,
2010	 	Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held	 	
(Amounts in millions)	 			 	Included in
net income
(loss)	 	 	Included
in OCI	 			 		 			 		 			
Fixed maturity securities:	 				 				 			 				 			 				 			 				
U.S. government, agencies and government- sponsored enterprises	 	$	8	  	 	$	—  	  	 	$	—  	 	$	(1	) 	 	$	6	 	$	(4	) 	 	$	9	 	$	—  	  	
Tax-exempt	 	 	2	  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	(2	)	 	 	—  	 	 	—  	  	
Government—non-U.S.	 	 	1	  	 	 	—  	  	 	 	1	 	 	—  	  	 	 	16	 	 	—  	  	 	 	18	 	 	—  	  	
U.S. corporate	 	 	906	  	 	 	11	 	 	 	19	 	 	(29	) 	 	 	653	 	 	(40	) 	 	 	1,520	 	 	4	  	
Corporate—non-U.S.	 	 	508	  	 	 	—  	  	 	 	7	 	 	2	  	 	 	294	 	 	(91	) 	 	 	720	 	 	—  	  	
Residential mortgage- backed	 	 	171	  	 	 	—  	  	 	 	—  	 	 	(26	) 	 	 	1	 	 	(84	) 	 	 	62	 	 	—  	  	
Commercial mortgage- backed	 	 	47	  	 	 	—  	  	 	 	10	 	 	(1	) 	 	 	11	 	 	(8	) 	 	 	59	 	 	—  	  	
Other asset-backed	 	 	409	  	 	 	(8	) 	 	 	2	 	 	(14	) 	 	 	—  	 	 	(28	) 	 	 	361	 	 	(8	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	2,052	  	 	 	3	  	 	 	39	 	 	(69	) 	 	 	981	 	 	(257	) 	 	 	2,749	 	 	(4	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity securities	 	 	67	  	 	 	—  	  	 	 	1	 	 	1	  	 	 	—  	 	 	(60	)	 	 	9	 	 	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other invested assets:	 				 				 			 				 			 				 			 				
Trading securities	 	 	142	  	 	 	(7	) 	 	 	—  	 	 	1	  	 	 	—  	 	 	—  	  	 	 	136	 	 	(7	) 	
Derivative assets:	 				 				 			 				 			 				 			 				
Interest rate swaps	 	 	4	  	 	 	5	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	9	 	 	5	  	
Interest rate swaptions	 	 	14	  	 	 	24	  	 	 	—  	 	 	(34	) 	 	 	—  	 	 	—  	  	 	 	4	 	 	24	  	
Credit default swaps	 	 	7	  	 	 	(7	) 	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	(7	) 	
Equity index options	 	 	34	  	 	 	46	  	 	 	—  	 	 	17	  	 	 	—  	 	 	—  	  	 	 	97	 	 	46	  	
Other foreign currency contracts	 	 	4	  	 	 	(3	) 	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	1	 	 	(3	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivative assets	 	 	63	  	 	 	65	  	 	 	—  	 	 	(17	) 	 	 	—  	 	 	—  	  	 	 	111	 	 	65	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other invested assets	 	 	205	  	 	 	58	  	 	 	—  	 	 	(16	) 	 	 	—  	 	 	—  	  	 	 	247	 	 	58	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted other invested assets related to securitization entities  (2)	 	 	174	  	 	 	(2	) 	 	 	2	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	174	 	 	(2	) 	
Reinsurance recoverable (3)	 	 	(6	) 	 	 	15	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	9	 	 	15	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 assets	 	$	2,492	  	 	$	74	  	 	$	42	 	$	(84	) 	 	$	981	 	$	(317	) 	 	$	3,188	 	$	67	  	

(1)	The transfer into Level 3 was primarily related to private fixed U.S. corporate and corporate—non U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations.	
(2)	Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.	
(3)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.	
 
45

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

 	 	Beginning
balance
as of
April 1,
2009	 	Total realized and
unrealized gains
(losses)	 	 	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
(loss)
attributable
to assets
still held	 	
(Amounts in millions)	 		 	Included in
net income
(loss)	 	 	Included
in OCI	 	 			 		 			 		 			
Fixed maturity securities:	 			 				 				 				 			 				 			 				
U.S. government, agencies and government-sponsored entities	 	$	19	 	$	—  	  	 	$	(37	) 	 	$	4	  	 	$	389	 	$	(18	) 	 	$	357	 	$	—  	  	
Tax exempt	 	 	5	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	2	 	 	(5	) 	 	 	2	 	 	—  	  	
Government—non-U.S.	 	 	35	 	 	—  	  	 	 	2	  	 	 	3	  	 	 	—  	 	 	(18	) 	 	 	22	 	 	—  	  	
U.S. corporate	 	 	1,658	 	 	(14	) 	 	 	140	  	 	 	(70	) 	 	 	240	 	 	(546	) 	 	 	1,408	 	 	6	  	
Corporate—non-U.S.	 	 	1,136	 	 	(10	) 	 	 	25	  	 	 	(23	) 	 	 	204	 	 	(565	) 	 	 	767	 	 	1	  	
Residential mortgage-backed	 	 	2,602	 	 	(106	) 	 	 	66	  	 	 	(44	) 	 	 	4	 	 	(899	) 	 	 	1,623	 	 	(88	) 	
Commercial mortgage-backed	 	 	3,647	 	 	(10	) 	 	 	7	  	 	 	(27	) 	 	 	27	 	 	(516	) 	 	 	3,128	 	 	(11	) 	
Other asset-backed	 	 	1,901	 	 	(8	) 	 	 	137	  	 	 	(98	) 	 	 	8	 	 	(877	) 	 	 	1,063	 	 	(4	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	11,003	 	 	(148	) 	 	 	340	  	 	 	(255	) 	 	 	874	 	 	(3,444	) 	 	 	8,370	 	 	(96	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity securities	 	 	61	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	61	 	 	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other invested assets:	 			 				 				 				 			 				 			 				
Trading securities	 	 	156	 	 	15	  	 	 	—  	  	 	 	(5	) 	 	 	—  	 	 	(33	) 	 	 	133	 	 	13	  	
Derivative assets	 	 	706	 	 	(256	) 	 	 	—  	  	 	 	(164	) 	 	 	—  	 	 	—  	  	 	 	286	 	 	(237	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other invested assets	 	 	862	 	 	(241	) 	 	 	—  	  	 	 	(169	) 	 	 	—  	 	 	(33	) 	 	 	419	 	 	(224	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance recoverable	 	 	18	 	 	(16	) 	 	 	—  	  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	2	 	 	(16	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 assets	 	$	11,944	 	$	(405	) 	 	$	340	  	 	$	(424	) 	 	$	874	 	$	(3,477	) 	 	$	8,852	 	$	(336	) 	

46

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(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:

 	 	Beginning
balance
as of
January 1,
2010	 	 	Total realized and
unrealized gains
(losses)	 	Purchases,
sales,
issuances
and
settlements,
net	 	 	Transfer
in Level 3  (1) 	 	Transfer
out of
Level 3	 	 	Ending
balance
as of
June 30,
2010	 	Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held	 	
(Amounts in millions)	 			 	Included in
net income
(loss)	 	 	Included
in OCI	 			 		 			 		 			
Fixed maturity securities:	 				 				 			 				 			 				 			 				
U.S. government, agencies and government-sponsored enterprises	 	$	16	  	 	$	—  	  	 	$	—  	 	$	(2	) 	 	$	9	 	$	(14	) 	 	$	9	 	$	—  	  	
Tax-exempt	 	 	2	  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	(2	) 	 	 	—  	 	 	—  	  	
Government—non-U.S.	 	 	7	  	 	 	—  	  	 	 	1	 	 	—  	  	 	 	16	 	 	(6	) 	 	 	18	 	 	—  	  	
U.S. corporate	 	 	1,073	  	 	 	11	 	 	 	34	 	 	31	  	 	 	678	 	 	(307	) 	 	 	1,520	 	 	8	  	
Corporate—non-U.S.	 	 	504	  	 	 	1	  	 	 	8	 	 	11	  	 	 	353	 	 	(157	) 	 	 	720	 	 	1	  	
Residential mortgage- backed	 	 	1,481	  	 	 	—  	  	 	 	3	 	 	80	  	 	 	1	 	 	(1,503	) 	 	 	62	 	 	—  	  	
Commercial mortgage- backed	 	 	3,558	  	 	 	1	  	 	 	14	 	 	(63	) 	 	 	11	 	 	(3,462	) 	 	 	59	 	 	—  	  	
Other asset-backed	 	 	1,419	  	 	 	(24	) 	 	 	23	 	 	(18	) 	 	 	10	 	 	(1,049	) 	 	 	361	 	 	(24	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	8,060	  	 	 	(11	) 	 	 	83	 	 	39	  	 	 	1,078	 	 	(6,500	) 	 	 	2,749	 	 	(15	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity securities	 	 	9	  	 	 	—  	  	 	 	—  	 	 	8	  	 	 	52	 	 	(60	)	 	 	9	 	 	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other invested assets:	 				 				 			 				 			 				 			 				
Trading securities	 	 	145	  	 	 	1	  	 	 	—  	 	 	(10	) 	 	 	—  	 	 	—  	  	 	 	136	 	 	1	  	
Derivative assets:	 				 				 			 				 			 				 			 				
Interest rate swaps	 	 	3	  	 	 	6	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	9	 	 	6	  	
Interest rate swaptions	 	 	54	  	 	 	15	  	 	 	—  	 	 	(65	) 	 	 	—  	 	 	—  	  	 	 	4	 	 	15	  	
Credit default swaps	 	 	6	  	 	 	(6	) 	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	(6	) 	
Equity index options	 	 	39	  	 	 	22	  	 	 	—  	 	 	36	  	 	 	—  	 	 	—  	  	 	 	97	 	 	22	  	
Other foreign currency contracts	 	 	8	  	 	 	(7	) 	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	1	 	 	(7	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivative assets	 	 	110	  	 	 	30	  	 	 	—  	 	 	(29	) 	 	 	—  	 	 	—  	  	 	 	111	 	 	30	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other invested assets	 	 	255	  	 	 	31	  	 	 	—  	 	 	(39	) 	 	 	—  	 	 	—  	  	 	 	247	 	 	31	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted other invested assets related to securitization
entities  (2)	 	 	—  	  	 	 	(2	) 	 	 	2	 	 	—  	  	 	 	174	 	 	—  	  	 	 	174	 	 	(2	) 	
Reinsurance recoverable (3)	 	 	(5	) 	 	 	14	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	  	 	 	9	 	 	14	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 assets	 	$	8,319	  	 	$	32	  	 	$	85	 	$	8	  	 	$	1,304	 	$	(6,560	) 	 	$	3,188	 	$	28	  	

(1)	The transfer out of Level 3 was primarily related to residential and commercial mortgage-backed and other asset-backed securities and resulted from a change in the observability of inputs used to determine fair value.	
(2)	Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.	
(3)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.	
 
47

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Our assessment of whether or not there were significant unobservable inputs was based on our observations of the mortgage-backed and asset-based securities markets obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from third-party pricing sources to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.
While we observed some increased trading activity for certain mortgage-backed and asset-backed securities during 2009, primarily as a result of government programs, we did not observe a broad-based improvement in market conditions to result in the classification of several mortgage-backed and asset-backed securities as Level 2. During the six months ended June 30, 2010, primary market issuance and secondary market activity for commercial and non-agency residential mortgage-backed and other asset-backed securities increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in our conclusion that there is sufficient trading activity in similar instruments to support classifying certain mortgage-backed and asset-backed securities as Level 2 as of June 30, 2010. Accordingly, our assessment resulted in a transfer out of Level 3 of $1,503 million, $3,462 million and $1,049 million, respectively, during the six months ended June 30, 2010 related to residential mortgage-backed, commercial mortgage-backed and other asset-backed securities.

 	 	Beginning
balance
as of
January 1,
2009	 	Total realized and
unrealized gains
(losses)	 	 	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
(loss)
attributable
to assets
still held	 	
(Amounts in millions)	 		 	Included in
net income
(loss)	 	 	Included
in OCI	 	 			 		 			 		 			
Fixed maturity securities:	 			 				 				 				 			 				 			 				
U.S. government, agencies and government- sponsored entities	 	$	25	 	$	—  	  	 	$	(38	) 	 	$	13	  	 	$	389	 	$	(32	) 	 	$	357	 	$	—  	  	
Tax exempt	 	 	—  	 	 	—  	  	 	 	—  	  	 	 	5	  	 	 	2	 	 	(5	) 	 	 	2	 	 	—  	  	
Government—non-U.S.	 	 	31	 	 	—  	  	 	 	—  	  	 	 	9	  	 	 	—  	 	 	(18	) 	 	 	22	 	 	—  	  	
U.S. corporate	 	 	2,734	 	 	(16	) 	 	 	111	  	 	 	(111	) 	 	 	377	 	 	(1,687	) 	 	 	1,408	 	 	5	  	
Corporate—non-U.S.	 	 	1,560	 	 	(33	) 	 	 	142	  	 	 	11	  	 	 	404	 	 	(1,317	) 	 	 	767	 	 	(27	) 	
Residential mortgage-backed	 	 	1,957	 	 	(331	) 	 	 	164	  	 	 	(154	) 	 	 	885	 	 	(898	) 	 	 	1,623	 	 	(313	) 	
Commercial mortgage-backed	 	 	3,219	 	 	(39	) 	 	 	43	  	 	 	(106	) 	 	 	532	 	 	(521	) 	 	 	3,128	 	 	(39	) 	
Other asset-backed	 	 	1,034	 	 	(22	) 	 	 	180	  	 	 	(232	) 	 	 	981	 	 	(878	) 	 	 	1,063	 	 	(18	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	10,560	 	 	(441	) 	 	 	602	  	 	 	(565	) 	 	 	3,570	 	 	(5,356	) 	 	 	8,370	 	 	(392	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity securities	 	 	60	 	 	—  	  	 	 	—  	  	 	 	1	  	 	 	—  	 	 	—  	  	 	 	61	 	 	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other invested assets:	 			 				 				 				 			 				 			 				
Trading securities	 	 	125	 	 	1	  	 	 	—  	  	 	 	(15	) 	 	 	54	 	 	(32	) 	 	 	133	 	 	—  	  	
Derivative assets	 	 	933	 	 	(494	) 	 	 	—  	  	 	 	(175	) 	 	 	22	 	 	—  	  	 	 	286	 	 	(474	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other invested assets	 	 	1,058	 	 	(493	) 	 	 	—  	  	 	 	(190	) 	 	 	76	 	 	(32	) 	 	 	419	 	 	(474	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance recoverable	 	 	18	 	 	(17	) 	 	 	—  	  	 	 	1	  	 	 	—  	 	 	—  	  	 	 	2	 	 	(17	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 assets	 	$	11,696	 	$	(951	) 	 	$	602	  	 	$	(753	) 	 	$	3,646	 	$	(5,388	) 	 	$	8,852	 	$	(883	) 	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur.
The following tables present additional information about liabilities 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:

 	 	Beginning
balance
as of
April 1,
2010	 	Total realized and
unrealized (gains)
losses	 	Purchases,
sales,
issuances
and
settlements,
net	 	 	Transfer
in Level 3	 	Transfer
out of
Level 3	 	Ending
balance
as of
June 30,
2010	 	Total (gains)
losses
included in
net (income)
loss
attributable
to liabilities
still held	 	
(Amounts in millions)	 		 	Included in
net (income)
loss	 	 	Included
in OCI	 			 		 		 		 			
Policyholder account
balances   (1 )	 	$	145	 	$	294	  	 	$	—  	 	$	8	  	 	$	—  	 	$	—  	 	$	447	 	$	294	  	
Derivative liabilities:	 			 				 			 				 			 			 			 				
Interest rate swaptions	 	 	18	 	 	(10	) 	 	 	—  	 	 	(8	) 	 	 	—  	 	 	—  	 	 	—  	 	 	(10	) 	
Credit default swaps	 	 	1	 	 	25	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	 	 	26	 	 	25	  	
Credit default swaps related to securitization
entities (2)	 	 	118	 	 	46	  	 	 	—  	 	 	(5	) 	 	 	—  	 	 	—  	 	 	159	 	 	46	  	
Equity index options	 	 	4	 	 	(3	) 	 	 	—  	 	 	(1	) 	 	 	—  	 	 	—  	 	 	—  	 	 	(3	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivative liabilities	 	 	141	 	 	58	  	 	 	—  	 	 	(14	) 	 	 	—  	 	 	—  	 	 	185	 	 	58	  	
Borrowings related to securitization entities (2)	 	 	58	 	 	(7	) 	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	 	 	51	 	 	(6	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 liabilities	 	$	344	 	$	345	  	 	$	—  	 	$	(6	) 	 	$	—  	 	$	—  	 	$	683	 	$	346	  	

( 1 )	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.	
(2)	Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.	

 	 	Beginning
balance
as of
April 1,
2009	 	Total realized and
unrealized (gains)
losses	 	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)
loss
attributable
to liabilities
still held	 	
(Amounts in millions)	 		 	Included in
net (income)
loss	 	 	Included
in OCI	 			 		 		 		 			
Policyholder account balances	 	$	923	 	$	(495	) 	 	$	—  	 	$	7	  	 	$	—  	 	$	—  	 	$	435	 	$	(490	) 	
Other liabilities ( 1 )	 	 	73	 	 	137	  	 	 	—  	 	 	(49	) 	 	 	—  	 	 	—  	 	 	161	 	 	105	  	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 liabilities	 	$	996	 	$	(358	) 	 	$	—  	 	$	(42	) 	 	$	—  	 	$	—  	 	$	596	 	$	(385	) 	

(1 )	Represents derivative liabilities.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following tables present additional information about liabilities 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:

 	 	Beginning
balance
as of
January 1,
2010	 	Total realized and
unrealized (gains)
losses	 	Purchases,
sales,
issuances
and
settlements,
net	 	 	Transfer
in Level 3	 	Transfer
out of
Level 3	 	Ending
balance
as of
June 30,
2010	 	Total (gains)
losses
included in
net (income)
loss
attributable
to liabilities
still held	 	
(Amounts in millions)	 		 	Included in
net (income)
loss	 	 	Included
in OCI	 			 		 		 		 			
Policyholder account
balances   (1 )	 	$	175	 	$	255	  	 	$	—  	 	$	17	 	 	$	—  	 	$	—  	 	$	447	 	$	255	  	
Derivative liabilities:	 			 				 			 				 			 			 			 				
Interest rate swaps	 	 	2	 	 	(2	) 	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	 	 	—  	 	 	(2	) 	
Interest rate swaptions	 	 	67	 	 	(42	) 	 	 	—  	 	 	(25	) 	 	 	—  	 	 	—  	 	 	—  	 	 	(42	) 	
Credit default swaps	 	 	—  	 	 	26	  	 	 	—  	 	 	—  	  	 	 	—  	 	 	—  	 	 	26	 	 	26	  	
Credit default swaps related to securitization
entities (2)	 	 	—  	 	 	41	  	 	 	—  	 	 	(3	)	 	 	121	 	 	—  	 	 	159	 	 	41	  	
Equity index options	 	 	2	 	 	(1	) 	 	 	—  	 	 	(1	) 	 	 	—  	 	 	—  	 	 	—  	 	 	(1	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivative liabilities	 	 	71	 	 	22	  	 	 	—  	 	 	(29	) 	 	 	121	 	 	—  	 	 	185	 	 	22	  	
Borrowings related to securitization entities (2)	 	 	—  	 	 	(8	) 	 	 	—  	 	 	—  	  	 	 	59	 	 	—  	 	 	51	 	 	(8	) 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Level 3 liabilities	 	$	246	 	$	269	  	 	$	—  	 	$	(12	) 	 	$	180	 	$	—  	 	$	683	 	$	269	  	

( 1 )	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.	
(2)	Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.	

 	  	Beginning
balance
as of
January 1,
2009	  	Total realized and
unrealized (gains)
losses	  	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)
loss
attributable
to liabilities
still held	 	
(Amounts in millions)	  		  	Included in
net (income)
loss	 	 	Included
in OCI	  			 		  		  		  			
Policyholder account balances	  	$	878	  	$	(456	) 	 	$	—  	  	$	13	  	 	$	—  	  	$	—  	  	$	435	  	$	(445	) 	
Other liabilities ( 1 )	  	 	68	  	 	142	  	 	 	—  	  	 	(49	) 	 	 	—  	  	 	—  	  	 	161	  	 	110	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	 	 	 	  	 	 	  	 	 	  	 	 	 	
Total Level 3 liabilities	  	$	946	  	$	(314	) 	 	$	—  	  	$	(36	) 	 	$	—  	  	$	—  	  	$	596	  	$	(335	) 	

(1 )	Represents derivative liabilities.	
Realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either net investment gains (losses) within the consolidated statements of income or OCI within stockholders’ equity based on the appropriate accounting treatment for the instrument.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
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 primarily consists of purchases and sales of fixed maturity, equity and trading securities and purchases and settlements of derivative instruments.
Purchases, sales, issuances and settlements, net, presented for policyholder account balances represent the issuances and settlements of embedded derivatives associated with our GMWB liabilities where: issuances are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance and settlements are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net (income) loss” in the tables presented above.
The amount presented for unrealized gains (losses) for assets and liabilities still held as of the reporting date primarily represents impairments related to available-for-sale securities, accretion on certain fixed maturity securities, changes in fair value of trading securities and certain derivatives and changes in fair value of embedded derivatives associated with our GMWB liabilities that existed as of the reporting date, which were recorded in net investment gains (losses).
Non-Recurring Fair Value Measurements
We hold investments in bank loans that are recorded at the lower of cost or fair value and are recorded in other invested assets. As of June 30, 2010, $3 million of bank loans were recorded at fair value, based on market observable information and classified as Level 2, which was lower than their respective cost; therefore, we recorded $1 million of fair value loss adjustments for the three and six months ended June 30, 2010. In addition, we held an investment in one commercial mortgage loan that was recorded at the lower of cost or fair value. As of June 30, 2010, $37 million of commercial mortgage loans were recorded at fair value, based on the expected transaction price and classified as Level 2. Therefore, we recorded $13 million of fair value adjustments for the three and six months ended June 30, 2010.
(7) Variable Interest and Securitization Entities
VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. We evaluate VIEs to determine whether we are the primary beneficiary and are required to consolidate the assets and liabilities of the entity. The determination of the primary beneficiary for a VIE can be complex and requires management judgment regarding the expected results of the entity and who directs the activities of the entity that most significantly impact the economic results of the VIE. Our primary involvement related to VIEs includes:
 
 	•	 	asset securitization transactions,	
 
 	•	 	certain investments and	
 
 	•	 	certain mortgage insurance policies.	
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
(a) Asset Securitizations
We have used former affiliates and third-party entities to facilitate asset securitizations. Disclosure requirements related to off-balance sheet arrangements encompass a broader array of arrangements than those at risk for consolidation. These arrangements include transactions with term securitization entities, as well as transactions with conduits that are sponsored by third parties.
The following table summarizes the total securitized assets as of the dates indicated:

(Amounts in millions)	  	June 30,
2010	  	December 31,
2009	
Receivables secured by:	  			  			
Commercial mortgage loans	  	$	—  	  	$	574	
Fixed maturity securities	  	 	80	  	 	123	
Other assets	  	 	168	  	 	236	
	  	 	 	  	 	 	
Total securitized assets not required to be consolidated	  	 	248	  	 	933	
	  	 	 	  	 	 	
Total securitized assets required to be consolidated	  	 	612	  	 	—  	
	  	 	 	  	 	 	
Total securitized assets	  	$	860	  	$	933	
	  	 	 	  	 	 	
Financial support for certain securitization entities was provided under credit support agreements, in which we provided limited recourse for a maximum of $117 million of credit losses as of June 30, 2010. These agreements will remain in place throughout the life of the related entities. Included in this amount was $40 million for the limited recourse related to one of our commercial mortgage loan entities that was required to be consolidated with assets of $125 million as of June 30, 2010. There were no amounts recorded for these limited recourse liabilities as of June 30, 2010 and December 31, 2009.
(b) Securitization and Variable Interest Entities Not Required To Be Consolidated
We are involved in certain securitization and VIEs where we are not required to consolidate the securitization entity.
Asset securitizations. We transferred assets to securitization entities that would be considered VIEs but we were not required to consolidate the securitization entities. These securitization entities were designed to have significant limitations on the types of assets owned and the types and extent of permitted activities and decision making rights. We evaluated our involvement in the entities’ design and our decision making ability regarding the assets held by the securitization entity and determined we would generally not be the party with power to direct the activities that significantly impact the economic performance of the entity.
In certain instances, we determined we were the party with power but did not have a variable interest in the entity. Our interest in the entities included servicer fees and excess interest, where our benefit from our excess interest holding is subordinated to third-party holdings. Based on the composition of the assets in the securitization entity, there were no reasonable scenarios that would result in our interest receiving any significant benefit for the entity. As a result, our interest would not be considered a variable interest in the entity as a result of meeting certain requirements in the accounting guidance.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Amounts recognized in our consolidated financial statements related to our involvement with entities used to facilitate asset securitization transactions where the securitization entity was not required to be consolidated as of the dates indicated:

 	  	June 30, 2010	  	December 31, 2009	
(Amounts in millions)	  	Cost	  	Fair
value	  	Cost	  	Fair
value	
Retained interests—assets	  	$	1	  	$	2	  	$	79	  	$	44	
	  	 	 	  	 	 	  	 	 	  	 	 	
Total	  	$	1	  	$	2	  	$	79	  	$	44	
	  	 	 	  	 	 	  	 	 	  	 	 	
The decrease in the amounts presented above were primarily a result of having to consolidate certain securitization entities as discussed above.
In certain securitization transactions, we retained an interest in transferred assets. Those interests take various forms and may be subject to credit, prepayment and interest rate risks. When we securitized receivables, we determined the fair value based on discounted cash flow models that incorporate, among other things, assumptions including credit losses, prepayment speeds and discount rates. These assumptions were based on our experience, market trends and anticipated performance related to the particular assets securitized. Our retained interests are reflected as fixed maturity securities available-for-sale.
Following a securitization transaction, we retained the responsibility for servicing the receivables, and as such, were entitled to receive an ongoing fee based on the outstanding principal balances of the receivables. There were no servicing assets nor liabilities recorded as the benefits of servicing the assets were adequate to compensate an independent servicer for its servicing responsibilities.
There has been no new asset securitization activity in 2010 or 2009.
Investments. We hold investments in certain structures that are considered VIEs. Our investments represent beneficial interests that are primarily in the form of structured securities. Our involvement in these structures typically represent a passive investment in the returns generated by the VIE and typically do not result in having significant influence over the economic performance of the VIE. See note 4 for additional information related to our investments, which includes information related to structured securities, such as asset-backed and mortgage-backed securities. Our maximum exposure to loss represents our cost basis in the investments.
Mortgage insurance. We also provide mortgage insurance on certain residential mortgage loans originated and securitized by third parties using VIEs to issue mortgage-backed securities. While we provide mortgage insurance on the underlying loans, we do not typically have any ongoing involvement with the VIE other than our mortgage insurance coverage and do not act in a servicing or decision making capacity for the underlying loans held by the VIE.
(c) Securitization and Variable Interest Entities Required To Be Consolidated
As a result of adopting new accounting guidance for VIE consolidation on January 1, 2010, we were required to consolidate certain VIEs. Our involvement with VIEs that were required to be consolidated related to asset securitization transactions and certain investments, both of which are described in more detail below. Prior to being required to consolidate these entities, our interest in these entities was recorded in our consolidated financial statements as fixed maturity securities available-for-sale.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Asset securitizations. For VIEs related to asset securitization transactions, we were required to consolidate three securitization entities as a result of our involvement in the entities’ design or having certain decision making ability regarding the assets held by the securitization entity. These securitization entities were designed to have significant limitations on the types of assets owned and the types and extent of permitted activities and decision making rights. The three securitization entities that were required to be consolidated are comprised of two securitization entities backed by commercial mortgage loans and one backed by residual interests in certain policy loan securitization entities.
For one of our commercial mortgage loan securitization entities with assets of $125 million as of June 30, 2010, our economic interest represents the excess interest received on the loans compared to the interest paid on the entity’s obligation. We also act as the servicer for the underlying mortgage loans and have the ability to direct certain activities in accordance with the agreements related to the securitization entity.
For the other commercial mortgage loan securitization entity with assets of $417 million as of June 30, 2010, our economic interest represents the excess interest of the commercial mortgage loans and the subordinated notes of the securitization entity. The commercial mortgage loans are serviced by a third-party servicer and special servicer. However, we have the right to replace the special servicer without cause at any time. This right is recognized under accounting guidance as resulting in our effective control of the activities directed by the special servicer.
Our economic interest in the policy loan securitization entity represents the excess interest received from the residual interest in certain policy loan securitization entities and the floating rate obligation issued by the securitization entity. The securitization entity also contains an interest rate swap to mitigate the difference between the effective fixed receipt on the assets and the floating rate obligation issued by the securitization entity. Since there are no significant ongoing activities in the securitization entity, we evaluated the design of the entity upon inception when we transferred the residual interests in the securitization entity. Prior to 2010, we fully impaired our investment in this securitization entity as a result of not expecting any future economic benefits from our investment under any reasonable scenario. However, there are certain remote interest rate and mortality scenarios that would result in our residual interest receiving significant economic benefits in relation to benefits received by the securitization entity. In accordance with the relevant accounting guidance, the use of probability is not permitted when determining whether we would have the ability to receive significant benefits from the securitization entity.
Investments. For VIEs related to certain investments, we were required to consolidate three securitization entities as a result of having certain decision making rights related to instruments held by the entities. These securitization entities were designed as synthetic collateralized debt obligations whereby the entities purchased highly rated asset-backed securities and entered into credit default swaps to generate income that would be passed to the noteholders of the entities. The entities also have the ability to settle any losses incurred on the credit default swap by providing the derivative counterparty asset-backed securities with a par amount equal to the loss incurred on the credit default swap. We hold the majority of the notes issued by the securitization entity and also have certain decision making rights related to the instruments held by the entity. Previously, we were not required to consolidate the securitization entity as a result of other noteholders absorbing the majority of expected losses from the entity.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following table shows the activity presented in our consolidated statement of income related to the consolidated securitization entities for the periods indicated:

(Amounts in millions)	  	Three months ended
June 30, 2010	 	 	Six months ended
June 30, 2010	 	
Revenues:	  				 				
Net investment income:	  				 				
Restricted commercial mortgage loans	  	$	9	  	 	$	19	  	
Restricted other invested assets	  	 	—  	  	 	 	1	  	
	  	 	 	 	 	 	 	 	
Total net investment income	  	 	9	  	 	 	20	  	
	  	 	 	 	 	 	 	 	
Net investment gains (losses):	  				 				
Trading securities	  	 	2	  	 	 	9	  	
Derivatives	  	 	(55	) 	 	 	(53	) 	
Commercial mortgage loans	  	 	(1	) 	 	 	(1	) 	
Borrowings related to securitization entities recorded at fair value	  	 	7	  	 	 	9	  	
	  	 	 	 	 	 	 	 	
Total net investment gains (losses)	  	 	(47	) 	 	 	(36	) 	
	  	 	 	 	 	 	 	 	
Total revenues	  	 	(38	) 	 	 	(16	) 	
	  	 	 	 	 	 	 	 	
Expenses:	  				 				
Interest expense	  	 	7	  	 	 	15	  	
	  	 	 	 	 	 	 	 	
Total expenses	  	 	7	  	 	 	15	  	
	  	 	 	 	 	 	 	 	
Loss before income taxes	  	 	(45	) 	 	 	(31	) 	
Benefit for income taxes	  	 	(16	) 	 	 	(11	) 	
	  	 	 	 	 	 	 	 	
Net loss	  	$	(29	) 	 	$	(20	) 	
	  	 	 	 	 	 	 	 	
The following table shows the assets and liabilities that were recorded for the consolidated securitization entities as of the date indicated:

(Amounts in millions)	  	June 30, 2010	
Assets	  			
Investments:	  			
Restricted commercial mortgage loans	  	$	535	
Restricted other invested assets:	  			
Trading securities	  	 	373	
Other	  	 	1	
	  	 	 	
Total restricted other invested assets	  	 	374	
	  	 	 	
Total investments	  	 	909	
Cash and cash equivalents	  	 	2	
Accrued investment income	  	 	1	
	  	 	 	
Total assets	  	$	912	
	  	 	 	
Liabilities	  			
Other liabilities:	  			
Derivative liabilities	  	$	182	
Other liabilities	  	 	1	
	  	 	 	
Total other liabilities	  	 	183	
Borrowings related to securitization entities	  	 	525	
	  	 	 	
Total liabilities	  	$	708	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The assets and other instruments held by the securitization entities are restricted and can only be used to fulfill the obligations of the securitization entity. Additionally, the obligations of the securitization entities do not have any recourse to the general credit of any other consolidated subsidiaries, except $40 million of limited recourse related to a consolidated commercial mortgage loan securitization entity.
(8) Commitments and Contingencies
(a) Litigation
We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, payment of contingent or other sales commissions, bidding practices in connection with our management and administration of a third party’s municipal guaranteed investment contract business, claims payments and procedures, cancellation or rescission of coverage, product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of Real Estate Settlement Procedures Act of 1974 or related state anti-inducement laws, and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. We are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition or results of operations. At this time, it is not feasible to predict, nor to determine the ultimate outcomes of all pending investigations and legal proceedings, nor to provide reasonable ranges of potential losses.
(b) Commitments
As of June 30, 2010, we were committed to fund $143 million in limited partnership investments and $5 million in U.S. commercial mortgage loan investments.
(9) Borrowings and Other Financings
Revolving Credit Facilities
We have two five-year revolving credit facilities that mature in May 2012 and August 2012. These facilities bear variable interest rates based on one-month LIBOR plus a margin. Each of these facilities originally had $1.0 billion available for borrowings. Lehman Commercial Paper Inc. (“LCP”) had committed $70 million under the August 2012 credit facility and Lehman Brothers Bank, FSB (“Lehman FSB”) had committed $70 million under the May 2012 credit facility. On October 5, 2008, LCP filed for protection under Chapter 11 of the Federal
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. LCP was unable to fulfill its commitments under the August 2012 credit facility and Lehman FSB declined to fulfill its commitment under the May 2012 credit facility. On April 1, 2010, a consent and waiver agreement was entered into which releases the Lehman Brothers-related entities from their commitments under the facilities and reduces the remaining commitments by those respective amounts. Therefore, as of June 30, 2010, we had access to $1.9 billion under these facilities.
In June 2010, we repaid $100 million of outstanding borrowings under each of our five-year revolving credit facilities using the net proceeds from our senior notes offering that was completed in June 2010.
As of June 30, 2010, we had borrowings of $730 million under these facilities, and we utilized $54 million under these facilities primarily for the issuance of letters of credit for the benefit of one of our lifestyle protection insurance subsidiaries. As of December 31, 2009, we had borrowings of $930 million under these facilities, and we utilized $407 million under these facilities for the issuance of letters of credit for the benefit of one of our life insurance subsidiaries.
Long-Term Senior Notes
In June 2010, we issued senior notes having an aggregate principal amount of $400 million, with an interest rate equal to 7.700% per year payable semi-annually, and maturing in June 2020 (“2020 Notes”). The 2020 Notes are our direct, unsecured obligations and will rank equally with all of our existing and future unsecured and unsubordinated obligations. We have the option to redeem all or a portion of the 2020 Notes at any time with proper notice to the note holders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread. The net proceeds of $397 million from the issuance of the 2020 Notes were used to repay $100 million of outstanding borrowings under each of our five-year revolving credit facilities and the remainder of the proceeds were used for general corporate purposes.
In June 2010, our majority-owned subsidiary, Genworth MI Canada Inc. (“Genworth Canada”), issued CDN$275 million of 5.68% senior notes due 2020. The net proceeds of the offering will be used to fund transactions among Genworth Canada and its Canadian wholly-owned subsidiaries. Genworth Canada is expected to use any proceeds it receives from such transactions for general corporate and investment purposes, and/or to fund a distribution to, or a repurchase of common shares from, Genworth Canada’s shareholders.
Non-Recourse Funding Obligations
As of June 30, 2010, we had $3.4 billion of fixed and floating rate non-recourse funding obligations outstanding backing additional statutory reserves. As of June 30, 2010 and December 31, 2009, the weighted-average interest rates on our non-recourse funding obligations were 1.51% and 1.49%, respectively.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
Borrowings Related To Securitization Entities
Borrowings related to securitization entities were as follows as of June 30, 2010:

(Amounts in millions)	  	Principal
amount	 	 	Carrying
value	
GFCM LLC, due 2035, 5.2541%	  	$	236	  	 	$	236	
GFCM LLC, due 2035, 5.7426%	  	 	113	  	 	 	113	
Genworth Special Purpose Two, LLC, due 2023, 6.0175%	  	 	125	  	 	 	125	
Marvel Finance 2007-1 LLC, due 2017 ( 1 )	  	 	5	  	 	 	1	
Marvel Finance 2007-4 LLC, due 2017 ( 1 )	  	 	12	  	 	 	5	
Genworth Special Purpose Five, LLC, due 2040 ( 1 )	  	 	NA	  (2)  	 	 	45	
	  	 	 	 	 	 	 	
Total	  	$	491	  	 	$	525	

(1)	Accrual of interest based on three-month LIBOR that resets every three months plus a fixed margin.	
(2)	Principal amount not applicable. Notional balance is $117 million.	
These borrowings are required to be paid down as principal is collected on the restricted investments held by the securitization entities and accordingly the repayment of these borrowings follows the maturity or prepayment, as permitted, of the restricted investments. See note 7 for additional information on consolidated securitization entities.
(10) Income Taxes
The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:

 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	 	    2010    	 	 	    2009    	 	 	    2010    	 	 	    2009    	 	
Statutory U.S. federal income tax rate	 	35.0	% 	 	35.0	% 	 	35.0	% 	 	35.0	% 	
Increase (reduction) in rate resulting from:	 			 			 			 			
State income tax, net of federal income tax effect	 	—  	  	 	(5.1	) 	 	(2.1	) 	 	0.2	  	
Benefit on tax favored investments	 	(8.0	) 	 	(3.1	) 	 	(7.1	) 	 	3.8	  	
Effect of foreign operations	 	(33.7	) 	 	(18.6	) 	 	(21.3	) 	 	3.3	  	
Non-deductible expenses	 	2.2	  	 	0.7	  	 	0.5	  	 	(0.5	) 	
Interest on uncertain tax positions	 	(2.4	) 	 	(2.7	) 	 	(2.3	) 	 	(0.3	) 	
Tax benefits related to separation from our former parent	 	—  	  	 	—  	  	 	(55.8	) 	 	—  	  	
Other, net	 	—  	  	 	1.2	  	 	1.8	  	 	—  	  	
	 	 	 	 	 	 	 	 	 	 	 	 	
Effective rate	 	(6.9	)% 	 	7.4	% 	 	(51.3	)% 	 	41.5	% 	
	 	 	 	 	 	 	 	 	 	 	 	 	
The effective tax rate decreased significantly from the prior year due to uncertain tax benefits related to separation from our former parent, favorable impact of newly enacted Australian tax legislation, lower taxed foreign income and tax favored investments.
In connection with our 2004 separation from our former parent, General Electric (“GE”), we made certain joint tax elections and realized certain tax benefits. During the first quarter of 2010, the Internal Revenue Service (“IRS”) completed an examination of GE’s 2004 tax return, including these tax impacts. Therefore, $106 million
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
of previously uncertain tax benefits related to separation became certain and we recognized those in the first quarter of 2010. Additionally, we recorded $20 million as additional paid-in capital related to our 2004 separation.
(11) Segment Information
We conduct our operations in three operating business segments: (1) Retirement and Protection, which includes our life insurance, long-term care insurance, wealth management products and services and retirement income products; (2) International, which includes international mortgage and lifestyle protection insurance; and (3) U.S. Mortgage Insurance, which includes mortgage-related products and services that facilitate homeownership by enabling borrowers to buy homes with low-down-payment mortgages.
We also have Corporate and Other activities which include interest and other debt financing expenses, other corporate income and expenses not allocated to the segments, the results of non-core businesses and non-strategic products that are managed outside of our operating segments, and eliminations of inter-segment transactions.
We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income (loss) and assets. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of “net operating income (loss) available to Genworth Financial, Inc.’s common stockholders.” We define net operating income (loss) available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding net income attributable to noncontrolling interests, after-tax net investment gains (losses) and other adjustments and infrequent or unusual non-operating items. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A significant component of our net investment gains (losses) is the result of impairments, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) are often subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Infrequent or unusual non-operating items are also excluded from net operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends. While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that net operating income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate net operating income (loss) available to Genworth Financial, Inc.’s common stockholders, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. However, net operating income (loss) available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of net operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.
There were no infrequent or unusual non-operating items excluded from net operating income (loss) available to Genworth Financial, Inc.’s common stockholders during the periods presented other than a $106 million tax benefit related to separation from our former parent recorded in the first quarter of 2010.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
The following is a summary of revenues for our segments and Corporate and Other activities for the periods indicated:

 	  	Three months ended
June 30,	  	Six months ended
June 30,	
(Amounts in millions)	  	    2010    	 	 	    2009    	  	2010	 	 	2009	
Revenues:	  				 			  				 			
Retirement and Protection	  	$	1,643	  	 	$	1,607	  	$	3,236	  	 	$	2,594	
International	  	 	622	  	 	 	639	  	 	1,273	  	 	 	1,229	
U.S. Mortgage Insurance	  	 	181	  	 	 	196	  	 	362	  	 	 	384	
Corporate and Other	  	 	(36	) 	 	 	41	  	 	(40	) 	 	 	10	
	  	 	 	 	 	 	 	  	 	 	 	 	 	 	
Total revenues	  	$	2,410	  	 	$	2,483	  	$	4,831	  	 	$	4,217	
	  	 	 	 	 	 	 	  	 	 	 	 	 	 	
The following is a summary of net operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities and a reconciliation of net operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities to net income (loss) for the periods indicated:

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	  2010  	 	 	  2009  	 	
Retirement and Protection	  	$	114	  	 	$	123	  	 	$	236	  	 	$	161	  	
International	  	 	105	  	 	 	87	  	 	 	196	  	 	 	188	  	
U.S. Mortgage Insurance	  	 	(40	) 	 	 	(134	) 	 	 	(76	) 	 	 	(269	) 	
Corporate and Other	  	 	(61	) 	 	 	(67	) 	 	 	(124	) 	 	 	(57	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net operating income available to Genworth Financial, Inc.’s common stockholders	  	 	118	  	 	 	9	  	 	 	232	  	 	 	23	  	
Net investment gains (losses), net of taxes and other adjustments	  	 	(76	) 	 	 	(59	) 	 	 	(118	) 	 	 	(542	) 	
Net tax benefit related to separation from our former parent	  	 	—  	  	 	 	—  	  	 	 	106	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	 	42	  	 	 	(50	) 	 	 	220	  	 	 	(519	) 	
Add: net income attributable to noncontrolling interests	  	 	35	  	 	 	—  	  	 	 	69	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	  	$	77	  	 	$	(50	) 	 	$	289	  	 	$	(519	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following is a summary of total assets for our segments and Corporate and Other activities as of the dates indicated:

(Amounts in millions)	  	June 30,
2010	  	December 31,
2009	
Assets:	  			  			
Retirement and Protection	  	$	85,087	  	$	81,497	
International	  	 	11,444	  	 	12,143	
U.S. Mortgage Insurance	  	 	3,564	  	 	4,247	
Corporate and Other	  	 	10,257	  	 	10,300	
	  	 	 	  	 	 	
Total assets	  	$	110,352	  	$	108,187	

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 
(12) Noncontrolling Interests
In July 2009, Genworth Canada, our indirect subsidiary, completed the initial public offering (the “Offering”) of its common shares. Of the 49.7 million common shares of Genworth Canada that were sold in the Offering, 5.1 million common shares were sold by Genworth Canada and 44.6 million common shares were sold by Brookfield Life Assurance Company Limited, our indirect wholly-owned subsidiary. Following completion of the Offering, we beneficially own 57.5% of the common shares of Genworth Canada.
In the six months ended June 30, 2010, dividends of $21 million were paid to the noncontrolling interests.
 
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 Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein.
Cautionary note regarding forward-looking statements
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including the following:
 
 	•	 	Risks relating to our businesses , including downturns and volatility in equity and credit markets, downgrades in our financial strength or credit ratings, interest rate fluctuations and levels, adverse capital and credit market conditions, the valuation of fixed maturity, equity and trading securities, defaults, downgrade or other events impacting the value of our fixed maturity securities portfolio, defaults on our commercial mortgage loans or investments in commercial mortgage-backed securities, goodwill impairments, the soundness of other financial institutions, inability to access our credit facilities, an adverse change in risk-based capital and other regulatory requirements, insufficiency of reserves, legal constraints on dividend distributions by our subsidiaries, competition, availability, affordability and adequacy of reinsurance, default by counterparties, loss of key distribution partners, regulatory restrictions on our operations and changes in applicable laws and regulations, legal or regulatory investigations or actions, the failure or any compromise of the security of our computer systems and the occurrence of natural or man-made disasters or a pandemic;	
 
 	•	 	Risks relating to our Retirement and Protection segment , including changes in morbidity and mortality, accelerated amortization of deferred acquisition costs and present value of future profits, reputational risks as a result of rate increases on certain in-force long-term care insurance products, medical advances, such as genetic research and diagnostic imaging, and related legislation, unexpected changes in persistency rates, ability to continue to implement actions to mitigate the impact of statutory reserve requirements and the failure of demand for long-term care insurance to increase;	
 
 	•	 	Risks relating to our International segment , including political and economic instability, foreign exchange rate fluctuations, unexpected changes in unemployment rates, unexpected increases in mortgage insurance default rates or severity of defaults, the significant portion of high loan-to-value insured international mortgage loans which generally result in more and larger claims than lower loan-to-value loans, competition with government-owned and government-sponsored enterprises offering mortgage insurance and changes in regulations;	
 
 	•	 	Risks relating to our U.S. Mortgage Insurance segment , including increases in mortgage insurance default rates or severity of defaults, uncertain results of continued investigations of insured U.S. mortgage loans, possible rescissions of coverage and the results of objections to our rescissions, the extent to which loan modifications and other similar programs may provide benefits to us, unexpected changes in unemployment rates, further deterioration in economic conditions or a further decline in home prices, changes to the role or structure of Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), competition with government-owned and government-sponsored enterprises offering mortgage insurance (including the Federal Housing Administration (“FHA”)), changes in regulations that affect our U.S. mortgage insurance business, the influence of Fannie Mae, Freddie Mac and a small number of large mortgage lenders and investors, decreases in the volume of high loan-to-value mortgage originations or increases in mortgage insurance cancellations, increases in the use of alternatives to private mortgage insurance and reductions by	
 
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 	lenders in the level of coverage they select, the impact of the use of reinsurance with reinsurance companies affiliated with mortgage lending customers, legal actions under Real Estate Settlement Procedures Act of 1974 (“RESPA”) and potential liabilities in connection with our U.S. contract underwriting services;	
 
 	•	 	Other risks , including the possibility that in certain circumstances we will be obligated to make payments to General Electric Company (“GE”) under the tax matters agreement with GE even if our corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control and provisions of the certificate of incorporation and bylaws and the tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests; and	
 
 	•	 	Risks relating to our common stock , including the suspension of dividends and stock price fluctuation.	
For additional information regarding the risks identified above, see “Item 1A. Risk Factors” in our 2009 Annual Report on Form 10-K. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Overview
Our business
We are a leading financial security company dedicated to providing insurance, wealth management, investment and financial solutions to more than 15 million customers, with a presence in more than 25 countries. We have three operating segments: Retirement and Protection, International and U.S. Mortgage Insurance.
 
 	•	 	Retirement and Protection. We offer and manage a variety of protection, wealth management and retirement income products. Our primary protection products include: life, long-term care and Medicare supplement insurance. Additionally, we offer other senior supplemental products, as well as care coordination services for our long-term care policyholders. Our wealth management and retirement income products include: a variety of managed account programs and advisor services, financial planning services, fixed and variable deferred and immediate individual annuities and group variable annuities offered through retirement plans. For the three months ended June 30, 2010, our Retirement and Protection segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were $81 million and $114 million, respectively. For the six months ended June 30, 2010, our Retirement and Protection segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were $165 million and $236 million, respectively.	
 
 	•	 	International. We offer mortgage and lifestyle protection insurance products and related services in multiple markets. We are a leading provider of mortgage insurance products in Canada, Australia, Mexico and multiple European countries. Our products predominantly insure prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. On a limited basis, we also provide mortgage insurance on a structured, or bulk, basis that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk. We are a leading provider of payment protection coverages in multiple European countries, Canada and Mexico. Our lifestyle protection insurance products help consumers meet specified payment obligations should they become unable to pay due to accident, illness, involuntary unemployment, disability or death. For the three months ended June 30, 2010, our International segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were $107 million and $105 million, respectively. For the six months ended June 30, 2010, our International segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were $202 million and $196 million, respectively.	
 
 	•	 	U.S. Mortgage Insurance. In the U.S., we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans, also known as flow mortgage	
 
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 	insurance. We selectively provide mortgage insurance on a structured, or bulk, basis with essentially all of our bulk writings prime-based. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk. For the three months ended June 30, 2010, our U.S. Mortgage Insurance segment’s net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were $43 million and $40 million, respectively. For the six months ended June 30, 2010, our U.S. Mortgage Insurance segment’s net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were both $76 million.	
We also have Corporate and Other activities which include debt financing expenses that are incurred at our holding company level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of non-core businesses and non-strategic products that are managed outside of our operating segments. Our non-strategic products include our institutional and corporate-owned life insurance products. Institutional products consist of funding agreements, funding agreements backing notes (“FABNs”) and guaranteed investment contracts (“GICs”). For the three months ended June 30, 2010, our Corporate and Other activities’ net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were $103 million and $61 million, respectively. For the six months ended June 30, 2010, our Corporate and Other activities’ net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were $71 million and $124 million, respectively.
Business trends and conditions
Our business is, and we expect will continue to be, influenced by a number of industry-wide and product-specific trends and conditions. The following discussion of business trends and conditions should be read together with the trends discussed in our 2009 Annual Report on Form 10-K, which described additional business trends and conditions.
General conditions and trends affecting our businesses
Financial and economic environment. As a financial security company, the stability of both the financial markets and global economies in which we operate impacts our sales, revenue growth and profitability trends of our businesses. Global financial markets improved during the first quarter of 2010 from the volatility experienced in 2009, with solid performance, lower volatility in equity markets, narrowing spreads and better credit performance in many sectors of the debt markets. However, in the second quarter of 2010, we saw a decline in equity markets and widening spreads primarily as a result of the perceived contagion risk related to the European sovereign debt crisis. In 2010, Canadian and Australian economies and housing markets improved. Despite continued stress in the U.S. housing market and variations in performance by sub-market, there were continued signs of stabilization. Europe remained a slow growth environment.
Slow economic growth, coupled with uncertain financial market conditions, influenced, and may continue to influence, investment and spending decisions by both consumers and businesses as they adjust their consumption, debt and risk profiles in response to these conditions. As a result, our sales, revenues and profitability trends of certain insurance and investment products were adversely impacted during the first half of 2009. Since then, these trends have improved as investor confidence in the markets and the outlook for some consumers and businesses strengthened. Other factors such as government spending, monetary policies, regulatory initiatives, the volatility and strength of the capital markets, anticipated tax policy changes and the impact of U.S. healthcare and financial regulation reform can continue to affect economic and business outlooks and consumer behaviors moving forward.
In response to market conditions, we adjusted our investment and asset-liability management strategies to reduce risk during strained economic and financial market conditions. In addition, we refined our product and
 
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distribution management strategies to best fit with our strengths, profitability targets and risk tolerance. These and other company actions were made to enhance our competitive position as well as our capital flexibility and liquidity. See “—Trends and conditions affecting our segments” below for a discussion regarding the impacts the financial markets and global economies have on our businesses.
Since late 2008, the U.S. government, Federal Reserve and other legislative and regulatory bodies have taken a variety of other actions to stabilize the capital markets and provide needed liquidity to promote economic growth. These include various mortgage restructuring programs implemented or under consideration by the government-sponsored enterprises (“GSEs”), lenders, servicers and the U.S. government. Outside of the U.S., various governments took actions to stimulate economies, stabilize financial systems and improve market liquidity. In general, these actions have positively affected these countries and their markets; however, there can be no assurance as to the future level of impact of any of these actions on the economic and financial markets, including levels of volatility. A delayed economic recovery period or global recessionary setback could materially and adversely affect our business, financial condition and results of operations.
Volatility in credit and investment markets . Market conditions showed continued signs of improvement in the first quarter of 2010 resulting in greater investor confidence and positive, though inconsistent, equity and credit market performance. Continued strong demand for fixed-income products resulted in credit spread compression. However, during the first quarter of 2010, there was higher volatility in select sovereign bonds and related securities as concerns grew over the refinancing needs of Greece and certain other European countries. In the second quarter of 2010, the market moved away from riskier assets. This was generally a response to increased concerns regarding macro-economic risks in Europe and a slowing in the pace of recovery of the U.S. economy. During the second quarter of 2010, Treasury yields declined substantially as equity volatility increased and high yield bond spreads widened as the market demand grew for higher-quality assets. Nonetheless, investor liquidity was strong during the quarter and most investment grade bond issues were met with good demand. Investor appetite for asset-backed securities remained strong given limited supply, stable credit performance and structural protections embedded in the larger transactions brought to market. Although financial sector performance improved during the first half of 2010, high levels of unemployment and continued global economic uncertainty still weigh on certain markets.
While the marketplace is still experiencing declines in the performance of collateral underlying certain structured securities, corporate impairments continued their downward trend and were at moderate levels during the first half of 2010. We recorded net other-than-temporary impairments of $51 million and $131 million, respectively, during the three and six months ended June 30, 2010 which were lower than prior year levels and we expect losses to moderate further. Additionally, in the first half of 2010, losses related to limited partnerships decreased $116 million as compared to the first half of 2009 with limited partnership gains in the second quarter of 2010. Although economic conditions may continue to negatively impact certain investment valuations, the underlying collateral associated with assets that have not been impaired continues to perform.
Looking ahead, we believe that the current credit environment provides us with opportunities to invest across a variety of asset classes to meet our yield requirements, as well as to continue our diversification and efforts to minimize risk within the investment portfolio. See “—Investments and Derivative Instruments” for additional information on our investment portfolio.
Trends and conditions affecting our segments
Retirement and Protection
Life insurance . Results of our life insurance business are impacted by sales, mortality, persistency, investment yields and statutory reserve requirements. Additionally, sales of our products and persistency of our insurance in-force are dependent on competitive product features and pricing, distribution and customer service.
 
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The increase in life insurance sales we experienced during the second half of 2009 continued into the first half of 2010, in large part the result of strong adoption of our new term universal life insurance product. As anticipated, sales of our traditional term life insurance product have declined given the introduction late in 2009 of our new term universal life insurance product that was designed to replace our traditional term life insurance product. Our new term universal life insurance product is more capital efficient and we believe offers a similar or better value proposition to the consumer as our traditional term life insurance product, and is competitively priced for the main street and emerging affluent markets. We have experienced strong initial adoption of the product; however, the growth rate will ultimately depend upon the intensity and level of future distributor (existing brokerage general agents (“BGAs”) and other distributors) and consumer adoption. In our universal life insurance products, sales for the first half of 2010 were relatively stable given product changes made in 2009 to our new universal life insurance product that resulted in a more capital efficient product that is priced to achieve targeted returns. New premium sales may decline, remain flat or increase depending upon the ongoing distributor and consumer adoption and usage, as well as overall market conditions.
Throughout 2009, we experienced favorable mortality results in our term life insurance products as compared to priced mortality. In 2010, mortality remained favorable although less so than in 2009. Additionally, we have experienced lower persistency as compared to pricing for 10-year term life insurance policies written in 1999 and 2000 as they reach their post-level rate period. Given the relatively high volume of 10-year term life policies written in 2000, we expect this trend to continue and then moderate as these policies have now reached their post-level rate period.
Regulations XXX and AXXX require insurers to establish additional statutory reserves for term life insurance policies with long-term premium guarantees and certain universal life insurance policies with secondary guarantees, which increase the capital required to write these products beyond economic requirements. The solutions for the increased reserve requirements on some of our in-force books of business have become more limited and expensive; however, we have committed funding sources for approximately 95% of our anticipated peak level reserves required under Regulations XXX and AXXX so we believe unfunded reserve exposure is minimal. Additionally, we have made product modifications and introduced new products designed to reduce capital requirements and limit financing costs associated with existing products and thereby improve the profitability of new business. The new term universal life insurance product, discussed above, offers death benefit guarantee premiums that are competitive with traditional term insurance premiums for comparable durations and provides greater consumer flexibility typically associated with universal life coverage. We have also introduced product modifications to our universal life insurance products which provide shorter guarantee periods thereby reducing capital requirements.
Long-term care insurance. Results of our long-term care insurance business are influenced by morbidity, persistency, investment yields, new product sales, expenses and reinsurance.
In recent years, industry-wide first-year annualized premiums of individual long-term care insurance have either declined or grown moderately. While our overall sales in 2009 were adversely impacted primarily by the general economic conditions and lower sales through our independent distribution and career force channels, in the second half of 2009 and continuing into the first half of 2010, we experienced improvements in our long-term care insurance sales. Recent improvements are due in part to the breadth of our distribution, and we have made progress on multiple growth initiatives with an emphasis on distribution effectiveness and broadening our offerings, including additional group long-term care insurance participation and linked-benefits products.
In the first half of 2009, termination rates increased on the new and old blocks of business resulting in lower benefits and other changes in policy reserves that contributed positively to results of operations. However, during the second half of 2009 and continuing into the first half of 2010, termination rates have decreased to levels experienced historically resulting in higher benefits and other changes in policy reserves that contributed to lower results of operations. We have also experienced higher claims in older issued policies in recent periods which have negatively impacted our results of operations.
 
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We continue pursuing multiple growth initiatives, investing in case management, maintaining tight expense management, actively exploring alternative reinsurance strategies, executing effective investment strategies and considering other actions to improve profitability of the overall block, and in particular our older blocks of business, including potential future rate increases. In addition, changes in regulations or government programs, including certain aspects of healthcare reform, such as the Community Living Assistance Services and Supports (“CLASS”) Act, could impact our long-term care insurance business positively or negatively. As such, we continue to actively monitor regulatory developments.
Wealth management. Results of our wealth management business are impacted by demand for asset management products and related support services, investment performance and equity market conditions. The decline and volatility in the equity markets that began in 2008 negatively impacted the asset management industry overall, as well as our assets under management, net flows, the performance of certain mutual funds we offer and associated fee income. The recovery of equity and fixed income markets began in the second quarter of 2009 and continued throughout 2009 and into the first quarter of 2010, although we saw a reversal of this trend late in the second quarter of 2010.
The market improvement over the second half of 2009 and first quarter of 2010, in addition to our introduction of new investment strategies, expansion of products and services we offer to our advisors and an increase in the number of advisors that do business with us collectively contributed to our higher sales, net flows and assets under management in the last three quarters of 2009 and the first half of 2010. Market declines and volatility in the second quarter of 2010 reduced sales and net flows over prior periods although net flows remained positive. Despite the market volatility, the business generated positive net flows since April 2009. Depending upon the direction of equity markets in the future, we could see a correlated impact on sales, net flows and assets under management.
Retirement income. Results of our retirement income business are affected by investment performance, interest rate levels, slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, policyholder lapses, new product sales and relative competitiveness of our offerings. Our competitive position within many of our distribution channels and our ability to grow this business depends on many factors, including product features and company ratings. Product features include current and minimum crediting rates on our spread-based products, surrender charges and guaranteed benefit features in variable annuity products which provide guaranteed death or living benefits to the consumer.
Recent product changes and sales of annuity products reflect a more targeted growth strategy in order to achieve appropriate risk adjusted returns. We have scaled back certain product features and targeted certain market segments to reduce risk in our annuity products. In this connection, we have targeted distributors and producers and chosen sales personnel that align with this more focused strategy. Beginning in the second half of 2009, we expanded our distribution relationships with new financial institutions, independent financial planners and BGAs and we expect to continue to expand these distribution relationships and introduce new product offerings.
In fixed annuities, sales may fluctuate as interest rates change and as we offer these products using a disciplined approach to meet targeted returns. We have introduced new deferred annuity products in the BGA channel and we have re-priced immediate annuities to maintain spreads and targeted returns. In 2009, spreads on fixed annuity products declined in connection with lower short-term rates and from holding higher cash balances to manage through challenging market conditions. Through the first half of 2010, we have reinvested a significant portion of the excess cash and are achieving improvements in spread-related income as a result of higher yields.
In variable annuities, the improvement in the equity markets during the second half of 2009 and the first quarter of 2010 favorably impacted our results. However, the decline and volatility in the equity markets during the second quarter of 2010 adversely impacted our results. In the future, equity market performance and volatility could result in additional gains or losses in our variable annuity products and associated hedging program which
 
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would impact our results. In addition, we continue to offer variable annuity products with living benefit features as described above. However, in response to the risk in equity markets, certain product features have been scaled back to reduce adverse selection risk and volatility while costs to the consumer have been increased. These product changes are similar to actions taken by many, but not all, of our competitors. We believe the benefits offered by these products remain attractive to consumers within our targeted markets.
International
International mortgage insurance. Results of our international mortgage insurance business are affected by changes in regulatory environments, employment and other economic and housing market trends, including interest rate trends, home price appreciation, mortgage origination volume, levels of mortgage delinquencies and movements in foreign currency exchange rates.
Throughout 2009, we observed increased stability in international housing markets, particularly in Canada and Australia, as lower mortgage rates, improved housing affordability, certain government programs and improved consumer confidence resulted in increased home sales activity. As a result, home prices increased in these markets during 2009. In the first half of 2010, home price growth slowed in Canada and Australia. Additionally, while unemployment increased during the first half of 2009, we observed a modest decline in unemployment rates in these two markets during the second half of 2009 and we have seen this trend continue or strengthen in the first half of 2010. In certain of our European mortgage insurance markets, we have observed early signs of stabilization as unemployment growth and declines in home prices have moderated.
Canada and Australia comprise approximately 97% of our international mortgage insurance risk in-force with an estimated average effective loan-to-value ratio of 61% as of June 30, 2010. We expect that these established markets will continue to be key drivers of revenues and earnings in our international mortgage insurance business. Our entry and growth in developing international markets will remain disciplined and selective.
In Canada, the Bank of Canada increased the overnight rate by 25 basis points in the second quarter of 2010, and has implemented another 25 basis points increase in July 2010. In Australia, as a sign of the relative health and stability of that economy, the Reserve Bank of Australia increased the cash rate by 150 basis points between September 30, 2009 and June 30, 2010. It is anticipated that both the Bank of Canada and the Reserve Bank of Australia may increase rates modestly in the second half of 2010.
In Canada, we experienced higher than anticipated levels of flow new insurance written in the first half of 2010 driven by a larger mortgage market. A low interest rate environment in the first half of 2010 with rates forecasted to increase in the second half of the year and improved consumer confidence contributed to this increase. Additionally, implementation of the harmonized sales tax in July 2010 in British Columbia and Ontario, which had the potential to increase the cost of purchasing a home for certain buyers, contributed to higher levels of mortgage originations in 2010. We believe these factors accelerated purchase decisions into the first half of the year and may result in lower levels of mortgage originations and an associated decrease in our flow new insurance written in the second half of 2010.
In Australia, as a result of low interest rates during the first nine months of 2009 and specific government programs, there was an increase in mortgage originations by first-time home buyers and an associated increase in our flow new insurance written. The Australian government extended its enhanced first-time home buyer program benefits through the end of 2009, although at reduced levels, and eliminated these enhanced benefits altogether effective January 1, 2010. As a result of lower levels of government support to first-time home buyers and increased interest rates beginning in the fourth quarter of 2009, there has been a decrease in mortgage originations and an associated decrease in our flow new insurance written in the first half of 2010. As some liquidity returned to the securitization market in Australia, we insured additional bulk transactions in the first half of 2010. We expect to continue to write modest levels of bulk new insurance written throughout 2010.
 
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During 2009, we significantly expanded our focus on, and the resources devoted to, loss mitigation initiatives, including programs that actively partner with our lenders to find solutions that cure delinquencies through actions such as loan modifications and keep borrowers in their homes. These programs benefit all parties as borrowers are able to remain in their homes, lenders maintain their relationship with the borrower and an earning asset, and we mitigate claim payments under the terms of our mortgage insurance policies. Additionally, in cases where no solution is found to cure the delinquency and keep the borrower in their home, we are actively partnering with our lenders to optimize the transition process and mitigate claim payments. As a result of our expanded focus, there was an increase in the number of loans subject to our loss mitigation initiatives, which we believe had a favorable impact on our results of operations. We have also seen improvements in our total losses as economies continue to improve, home prices continue to increase and unemployment levels decline. With ongoing improvement in the Canadian and Australian economies and housing markets, as well as the success we experienced with our loss mitigation initiatives outlined above, we expect our loss levels to continue to improve from the levels experienced during 2009.
Lifestyle protection insurance. Growth and performance of our lifestyle protection insurance business is dependent in part on economic conditions, including consumer lending levels, unemployment trends, client account penetration and mortality and morbidity trends. Additionally, the types and mix of our products will vary based on regulatory and consumer acceptance of our products.
For the six months ended June 30, 2010, sales decreased primarily as a result of stagnating economies across Europe, which resulted in a decline in consumer lending where most of our insurance coverages attach as banks tightened lending criteria and consumer demand declined. Additionally, our ongoing focus on risk management led us to exit certain relationships or concentration of coverages. We are pursuing various growth initiatives to offset these market conditions; however, depending on the severity and length of these conditions, we could experience additional sales declines.
In contrast to the first half of 2009, when unemployment rates increased rapidly, we have seen a slowdown in the rate of increase or stabilization in unemployment over the past several quarters broadly across Europe with regional variation. Consequently, we experienced a continued decline in new claim registrations on unemployment-related policies, particularly in Ireland and Spain since March 2009 and in Denmark since March 2010. We expect unemployment rates in Europe to increase slowly and peak in the second half of 2010. Increasing claims duration pressure from longer periods of persistent unemployment and accident and sickness claims is beginning to stabilize as a result of re-pricing actions and loss mitigation efforts.
During 2009 and into 2010, significant progress was made in improving profitability through pricing, coverage or distribution contract changes on both new and eligible in-force policies. Collectively, these strategies will improve profitability and help to offset the impact of continued high unemployment as well as relatively low levels of consumer lending.
U.S. Mortgage Insurance
Results of our U.S. mortgage insurance business are affected by unemployment and other economic and housing market trends, including interest rates, home prices, mortgage origination volume and practices and product mix, as well as the levels and aging of mortgage delinquencies including seasonal variations. These economic and housing market trends are in turn continuing to be adversely affected by the ongoing weak domestic economy and related levels of unemployment. However, home prices are beginning to stabilize or improve in many U.S. markets after a significant decline from their peak levels. Overall, we anticipate some additional modest declines in home values in 2010 and we expect unemployment levels may increase modestly by the end of 2010.
A weak housing market, tightened lending standards and the lack of liquidity in some mortgage securitization markets continued to drive a smaller mortgage origination market. However, in this smaller origination market, we have seen an increase in our market share in recent quarters. The mortgage insurance
 
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penetration rate and market size have been driven down by growth in FHA originations, associated with multiple pricing, underwriting and loan size factors, and the negative impact of GSE market fees and loan level pricing which can make private mortgage insurance solutions less competitive with the FHA solution. Going forward, this trend may limit the demand for private mortgage insurance. Alternatively, given potential adjustments in FHA policies and pricing, GSE pricing and housing and financial reform involving the GSEs and government programs, the industry expects to regain market share over time. Specifically, the mortgage insurance industry level of market penetration and eventual market size could be affected by any actions taken by the GSEs, the FHA or the U.S. government impacting housing policy or related reforms. The Housing and Economic Recovery Act of 2008 provides for changes to, among other things, the regulatory authority and oversight of the GSEs and the authority of the FHA including with respect to premium pricing, maximum loan limits and down payment requirements. The FHA is also seeking legislative authority to increase its annual premium rates. Such an increase is expected to increase the private mortgage insurance industry’s market share compared to that of the FHA. In addition, Fannie Mae and Freddie Mac remain the largest purchasers and guarantors of mortgage loans in the United States.
We control the quality of new business through prudent underwriting guidelines, which we modify from time to time when circumstances warrant. For example, we announced in early 2010 the expansion of certain underwriting guidelines. We are also seeing the benefit of the previously announced rate increase of 20% on average for our flow products and a reduction in captive cession which equates to an effective pricing improvement of approximately 15%. We previously exited certain product lines, such as A minus, Alt-A and 100% loan-to-value products. We also continue to monitor our targeted declining market policy, which among various restrictions, limited coverages to loans with 90% loan-to-value and below and to adjust those markets accordingly as areas of the U.S. housing market begin to stabilize or improve. In the first quarter of 2010, we reduced the number of markets subject to our declining market policy to allow coverage of loans up to 95% loan-to-value in additional markets given improving housing market conditions, which may result in increased new business written.
Overall pressure on the housing market has adversely affected the performance of our portfolio, particularly our 2005, 2006 and 2007 book years that we believe peaked in their delinquency development during the first quarter of 2010. While the impact was concentrated in certain states and product types, during 2009, the impact shifted to more traditional products reflecting elevated unemployment levels throughout the country. We have also seen an increase in the number of foreclosure starts and in the rate at which foreclosures progress to claim. As such, we have begun to see an increase in our paid claims as these loans go through foreclosure.
However, as a result of the recent stabilization of home prices and unemployment levels and expanded efforts in the mortgage market to modify loans, we experienced a decrease in delinquencies in the first half of 2010. This decrease reflected a reduction in new delinquencies combined with increased cures from government and lender loan modification programs and other loss mitigation activities. However, aged delinquencies and foreclosures continued increasing through the second quarter of 2010, both of which pressure home prices in certain markets resulting in higher levels of default. If home values continue to decline and credit remains tight, the ability to cure a delinquent loan could be more difficult to achieve.
Our loss mitigation activities, including those relating to workouts, loan modifications, pre-sales, rescissions and targeted settlements, net of reinstatements, have resulted in a reduction of expected losses of approximately $450 million during the six months ended June 30, 2010 compared to $333 million during the six months ended June 30, 2009. Workouts and loan modifications, which related to loans representing 3% of our primary risk in-force as of June 30, 2010, resulted in a reduction of loss exposure of approximately $267 million for the six months ended June 30, 2010 compared to $97 million for the six months ended June 30, 2009. Our workout and loan modification programs with various lender and service customers are designed to help borrowers in default regain current repayment status on their mortgage loans, which ultimately allowed many of these borrowers to remain in their homes. During the six months ended June 30, 2010, we executed loan restructurings and modifications with our lender partners that resulted in reduced monthly mortgage loan repayment amounts either
 
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through reductions of the underlying loans’ interest rates and/or through a lengthening of the loans’ principal amortization period. The loans that are subject to workouts and loan modifications that were completed could be subject to potential re-default by the underlying borrower at some future date. In addition, pre-sales and other non-cure workouts resulted in a reduction of loss exposure of approximately $28 million for the six months ended June 30, 2010 compared to $21 million for the six months ended June 30, 2009. As a result of investigation activities on certain insured delinquent loans, we found significant levels of misrepresentation and non-compliance with certain terms and conditions of our underlying master insurance policies, as well as fraud. These findings separately resulted in rescission actions that reduced our loss exposure at the time of rescission by approximately $155 million for the six months ended June 30, 2010 compared to $215 million for the six months ended June 30, 2009. Benefits from loss mitigation activities are shifting from rescissions to loan modifications where we expect a majority of our benefits to be achieved going forward. During 2010, we reached agreements with a servicer and a counterparty that further reduced our risk in-force exposure. Our investigations process and rescission actions, along with expanded loan modification efforts supported by various related lender and government programs, have benefited our results significantly and these benefits are expected to continue. At the same time, we continue to discuss with lenders any concerns with respect to our rescission practices and risk exposures in books of business. Going forward, however, there is no assurance regarding what specific level of benefits may result from modification, rescission or settlement activity. In addition, there are several programs related to the U.S. housing market being implemented by the U.S. government, GSEs, servicers and various lenders that we expect will mitigate losses on loans we insure. We are actively participating in and supporting these various programs. These programs are expected to limit increases in paid claims and we continue to pursue ways to support mortgage servicers in their efforts to increase the benefits from loss mitigation activities.
We also participate in reinsurance programs in which we share portions of our premiums associated with flow insurance written on loans originated or purchased by lenders with captive insurance entities of these lenders in exchange for an agreed upon level of loss coverage above a specified attachment point. For the six months ended June 30, 2010, we recorded reinsurance recoveries of $89 million where cumulative losses have exceeded the attachment points in captive reinsurance arrangements, primarily related to our 2005, 2006 and 2007 book years. We have exhausted certain captive reinsurance tiers for these book years based on loss development trends. Once the captive reinsurance or trust assets are exhausted, we are responsible for additional losses incurred. We have begun to experience constraints on the recognition of captive benefit recovery due to the amount of funds held in certain captive trusts and the exhaustion of captive loss tiers for certain reinsurers. As of January 1, 2009, we no longer participate in excess loss of captive reinsurance transactions and we will only participate in quota share reinsurance arrangements. The majority of our excess of loss captive reinsurance arrangements are in runoff with no new books of business being added going forward; however, we will continue to benefit from captive reinsurance on our 2005, 2006 and 2007 book years.
Consolidated Results of Operations
The following is a discussion of our consolidated results of operations and should be read in conjunction with “—Business trends and conditions.” For a discussion of our segment results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”
 
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Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
The following table sets forth the consolidated results of operations for the periods indicated:

 	  	Three months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	1,470	  	 	$	1,502	  	 	$	(32	) 	 	(2	)% 	
Net investment income	  	 	823	  	 	 	781	  	 	 	42	  	 	5	% 	
Net investment gains (losses)	  	 	(139	) 	 	 	(53	) 	 	 	(86	) 	 	(162	)% 	
Insurance and investment product fees and other	  	 	256	  	 	 	253	  	 	 	3	  	 	1	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	2,410	  	 	 	2,483	  	 	 	(73	) 	 	(3	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Benefits and other changes in policy reserves	  	 	1,340	  	 	 	1,492	  	 	 	(152	) 	 	(10	)% 	
Interest credited	  	 	211	  	 	 	263	  	 	 	(52	) 	 	(20	)% 	
Acquisition and operating expenses, net of deferrals	  	 	499	  	 	 	456	  	 	 	43	  	 	9	% 	
Amortization of deferred acquisition costs and intangibles	  	 	179	  	 	 	212	  	 	 	(33	) 	 	(16	)% 	
Interest expense	  	 	109	  	 	 	114	  	 	 	(5	) 	 	(4	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	2,338	  	 	 	2,537	  	 	 	(199	) 	 	(8	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Income (loss) before income taxes	  	 	72	  	 	 	(54	) 	 	 	126	  	 	NM	(1)  	
Benefit for income taxes	  	 	(5	) 	 	 	(4	) 	 	 	(1	) 	 	(25	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income (loss)	  	 	77	  	 	 	(50	) 	 	 	127	  	 	NM	(1)  	
Less: net income attributable to noncontrolling interests	  	 	35	  	 	 	—  	  	 	 	35	  	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	$	42	  	 	$	(50	) 	 	$	92	  	 	184	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
Premiums. Premiums consist primarily of premiums earned on insurance products for life, long-term care and Medicare supplement insurance, single premium immediate annuities and structured settlements with life contingencies, lifestyle protection insurance and mortgage insurance.
 
 	•	 	Our Retirement and Protection segment decreased $7 million primarily related to a $9 million decrease in our life insurance business and a $6 million decrease in our retirement income business, partially offset by an $8 million increase in our long-term care insurance business.	
 
 	•	 	Our International segment decreased $13 million as a result of a decrease of $40 million in our lifestyle protection insurance business, partially offset by a $27 million increase in our international mortgage insurance business. The three months ended June 30, 2010 included an increase of $25 million attributable to changes in foreign exchange rates.	
 
 	•	 	Our U.S. Mortgage Insurance segment decreased $11 million.	
Net investment income. Net investment income represents the income earned on our investments.
 
 	•	 	Weighted-average investment yields increased to 4.8% for the three months ended June 30, 2010 from 4.6% for the three months ended June 30, 2009. The increase in weighted-average investment yields was primarily attributable to lower losses on limited partnerships. Net investment income for the three months ended June 30, 2010 included $10 million of gains related to limited partnerships accounted for under the equity method as compared to $33 million of losses in the three months ended June 30, 2009.	
 
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 	Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of January 1, 2010. These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009 and lower yields on floating rate investments.	
 
 	•	 	The three months ended June 30, 2010 included an increase of $11 million attributable to changes in foreign exchange rates in our International segment.	
Net investment gains (losses). Net investment gains (losses) consist of realized gains and losses from the sale or impairment of our investments and unrealized and realized gains and losses from our trading securities and derivative instruments. For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
 
 	•	 	We recorded $51 million of net other-than-temporary impairments for the three months ended June 30, 2010 as compared to $152 million for the three months ended June 30, 2009. Of total impairments, for the three months ended June 30, 2010 and 2009, $43 million and $109 million, respectively, related to structured securities, including $23 million and $66 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. For the three months ended June 30, 2010, we recorded $5 million of impairments related to commercial mortgage loans and $4 million related to limited partnership investments. For the three months ended June 30, 2009, we recorded a $36 million impairment related to a retained interest in securitized assets based on revised assumptions regarding cash flows from the assets underlying this securitization transaction. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year. We also recorded $5 million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the three months ended June 30, 2009.	
 
 	•	 	Net investment losses related to derivatives of $38 million in the second quarter of 2010 were primarily related to $31 million of losses from the change in value of our credit default swaps due to widening credit spreads, $21 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with guaranteed minimum withdrawal benefits (“GMWBs”) and $9 million of losses related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. These losses were partially offset by $15 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $4 million of gains from other non-qualified interest rate swaps, $2 million of gains related to embedded derivatives associated with certain reinsurance agreements and $2 million of gains from foreign currency options and forward contracts. Net investment gains related to derivatives of $114 million in the second quarter of 2009 were primarily related to gains in embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.	
 
 	•	 	We also recorded $47 million of net losses related to securitization entities in the second quarter of 2010 primarily associated with derivatives and $18 million of losses related to commercial mortgage loans from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance. Net gains related to the sale of available-for-sale securities were $17 million in the second quarter of 2010 compared to losses of $27 million in the second quarter of 2009.	
Insurance and investment product fees and other. Insurance and investment product fees and other consist primarily of fees assessed against policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal life insurance policies, advisory and administration service fees assessed on investment contractholder account values, broker/dealer commission revenues and other fees.
 
 	•	 	Our Retirement and Protection segment increased $50 million largely driven by an increase of $23 million in our wealth management business, an increase of $13 million in our life insurance business and an increase of $11 million in our retirement income business.	
 
 	•	 	Corporate and Other activities decreased $44 million.	
 
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Benefits and other changes in policy reserves. Benefits and other changes in policy reserves consist primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance and investment products for life, long-term care and Medicare supplement insurance, structured settlements and single premium immediate annuities with life contingencies, lifestyle protection insurance and claim costs incurred related to mortgage insurance products.
 
 	•	 	Our Retirement and Protection segment increased $66 million primarily attributable to a $33 million increase in our life insurance business, a $23 million increase in our long-term care insurance business and a $10 million increase in our retirement income business.	
 
 	•	 	Our International segment decreased $63 million as a result of a decrease of $44 million in our lifestyle protection insurance business and a decrease of $19 million in our international mortgage insurance business. The three months ended June 30, 2010 included an increase of $10 million attributable to changes in foreign exchange rates.	
 
 	•	 	Our U.S. Mortgage Insurance segment decreased $155 million.	
Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances.
 
 	•	 	Our Retirement and Protection segment decreased $8 million principally related to our retirement income business.	
 
 	•	 	Corporate and Other activities decreased $44 million.	
Acquisition and operating expenses, net of deferrals. Acquisition and operating expenses, net of deferrals, represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment contracts, including commissions, policy issuance expenses and other underwriting and general operating costs. These costs and expenses are net of amounts that are capitalized and deferred, which are primarily costs and expenses that vary with and are primarily related to the sale and issuance of our insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.
 
 	•	 	Our Retirement and Protection segment increased $41 million primarily attributable to a $17 million increase in our wealth management business, a $15 million increase in our long-term care insurance business and an $8 million increase in our life insurance business.	
 
 	•	 	Our International segment increased $8 million related to an $11 million increase in our international mortgage insurance business, partially offset by a $3 million decrease in our lifestyle protection insurance business.	
 
 	•	 	Corporate and Other activities decreased $6 million.	
Amortization of deferred acquisition costs and intangibles. Amortization of deferred acquisition costs and intangibles consists primarily of the amortization of acquisition costs that are capitalized, present value of future profits and capitalized software.
 
 	•	 	Our Retirement and Protection segment decreased $34 million primarily attributable to a $44 million decrease in our retirement income business and a $5 million decrease in our long-term care insurance business, partially offset by a $15 million increase in our life insurance business.	
 
 	•	 	Our International segment was relatively flat as a $7 million increase in our international mortgage insurance business was offset by a $6 million decrease in our lifestyle protection insurance business. The three months ended June 30, 2010 included an increase of $2 million attributable to changes in foreign exchange rates.	
 
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Interest expense. Interest expense represents interest related to our borrowings that are incurred at our holding company level and our non-recourse funding obligations and interest expense related to certain reinsurance arrangements being accounted for as deposits.
 
 	•	 	Our Retirement and Protection segment increased $5 million primarily related to our life insurance business.	
 
 	•	 	Our International segment decreased $14 million related to our lifestyle protection insurance business.	
 
 	•	 	Corporate and Other activities increased $4 million.	
Benefit for income taxes . The effective tax rate decreased to (6.9)% for the three months ended June 30, 2010 from 7.4% for the three months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to the favorable impact of newly enacted Australian tax legislation, tax benefits related to lower taxed foreign income and tax favored investments benefits recognized in the current year and from the effects of interim tax accounting standards in the prior year. The three months ended June 30, 2010 included an increase of $7 million attributable to changes in foreign exchange rates.
Net income attributable to noncontrolling interests . Net income attributable to noncontrolling interests represents the portion of equity in a subsidiary attributable to third parties. The increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The three months ended June 30, 2010 included an increase of $4 million attributable to changes in foreign exchange rates.
Net income (loss) available to Genworth Financial, Inc.’s common stockholders. We reported net income available to Genworth Financial, Inc.’s common stockholders in the current year compared to a net loss available to Genworth Financial, Inc.’s common stockholders in the prior year primarily related to a lower loss in our U.S. mortgage insurance business. For a discussion of our Retirement and Protection, International and U.S. Mortgage Insurance segments and Corporate and Other activities, see the “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.” Included in net income available to Genworth Financial, Inc.’s common stockholders was an increase of $12 million, net of tax, attributable to changes in foreign exchange rates.
 
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Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
The following table sets forth the consolidated results of operations for the periods indicated:

 	  	Six months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	2010	 	 	2009	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	2,940	  	 	$	3,004	  	 	$	(64	) 	 	(2	)% 	
Net investment income	  	 	1,588	  	 	 	1,492	  	 	 	96	  	 	6	% 	
Net investment gains (losses)	  	 	(209	) 	 	 	(823	) 	 	 	614	  	 	75	% 	
Insurance and investment product fees and other	  	 	512	  	 	 	544	  	 	 	(32	) 	 	(6	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	4,831	  	 	 	4,217	  	 	 	614	  	 	15	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Benefits and other changes in policy reserves	  	 	2,655	  	 	 	3,000	  	 	 	(345	) 	 	(12	)% 	
Interest credited	  	 	424	  	 	 	538	  	 	 	(114	) 	 	(21	)% 	
Acquisition and operating expenses, net of deferrals	  	 	974	  	 	 	897	  	 	 	77	  	 	9	% 	
Amortization of deferred acquisition costs and intangibles	  	 	363	  	 	 	459	  	 	 	(96	) 	 	(21	)% 	
Interest expense	  	 	224	  	 	 	210	  	 	 	14	  	 	7	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	4,640	  	 	 	5,104	  	 	 	(464	) 	 	(9	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Income (loss) before income taxes	  	 	191	  	 	 	(887	) 	 	 	1,078	  	 	122	%  	
Benefit for income taxes	  	 	(98	) 	 	 	(368	) 	 	 	270	  	 	73	%  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income (loss)	  	 	289	  	 	 	(519	) 	 	 	808	  	 	156	%  	
Less: net income attributable to noncontrolling interests	  	 	69	  	 	 	—  	  	 	 	69	  	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	$	220	  	 	$	(519	) 	 	$	739	  	 	142	%  	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
Premiums
 
 	•	 	Our Retirement and Protection segment decreased $18 million primarily related to a $23 million decrease in our life insurance business and a $17 million decrease in our retirement income business, partially offset by a $22 million increase in our long-term care insurance business.	
 
 	•	 	Our International segment decreased $5 million as a result of a decrease of $64 million in our lifestyle protection insurance business, partially offset by a $59 million increase in our international mortgage insurance business. The six months ended June 30, 2010 included an increase of $93 million attributable to changes in foreign exchange rates.	
 
 	•	 	Our U.S. Mortgage Insurance segment decreased $39 million.	
Net investment income
 
 	•	 	Weighted-average investment yields increased to 4.6% for the six months ended June 30, 2010 from 4.3% for the six months ended June 30, 2009. The increase in weighted-average investment yields was primarily attributable to lower losses on limited partnerships. Net investment income for the six months ended June 30, 2010 included $116 million of lower losses related to limited partnerships accounted for under the equity method as compared to the six months ended June 30, 2009. Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of	
 
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 	January 1, 2010. These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009 and lower yields on floating rate investments.	
 
 	•	 	The six months ended June 30, 2010 included an increase of $32 million attributable to changes in foreign exchange rates in our International segment.	
Net investment gains (losses). For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
 
 	•	 	We recorded $131 million of net other-than-temporary impairments for the six months ended June 30, 2010 as compared to $749 million for the six months ended June 30, 2009. Of total impairments, for the six months ended June 30, 2010 and 2009, $105 million and $389 million, respectively, related to structured securities, including $59 million and $268 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. Impairments related to corporate securities as a result of bankruptcies, receivership or concerns about the issuer’s ability to continue to make contractual payments or where we have intent to sell were $5 million and $59 million for the six months ended June 30, 2010 and 2009, respectively. We also recorded $6 million and $245 million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the six months ended June 30, 2010 and 2009, respectively. For the six months ended June 30, 2010, we recorded $10 million of impairments related to limited partnership investments and $5 million related to commercial mortgage loans. We recorded a $36 million impairment related to a retained interest in securitized assets based on revised assumptions regarding cash flows from the assets underlying this securitization transaction during the six months ended June 30, 2009. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year.	
 
 	•	 	Net investment losses related to derivatives of $46 million for the six months ended June 30, 2010 were primarily related to $35 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs, $27 million of losses from the change in value of our credit default swaps due to widening credit spreads and $6 million of losses related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. These losses were partially offset by $13 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $7 million of gains from other non-qualified interest rate swaps and $2 million of gains related to embedded derivatives associated with certain reinsurance agreements. Net investment losses related to derivatives of $7 million for the six months ended June 30, 2009 were primarily related to losses from a derivative strategy to mitigate the interest rate risk associated with our statutory capital position which were partially offset by gains in embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.	
 
 	•	 	We also recorded $36 million of net losses related to securitization entities primarily associated with derivatives and $22 million of losses related to commercial mortgage loans from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance during the six months ended June 30, 2010. There was also a net gain of $16 million from the recovery of a counterparty receivable in 2010. Net gains related to the sale of available-for-sale securities were $2 million during the six months ended June 30, 2010 compared to losses of $61 million during the six months ended June 30, 2009.	
Insurance and investment product fees and other
 
 	•	 	Our Retirement and Protection segment increased $85 million largely driven by an increase of $40 million in our wealth management business, an increase of $24 million in our life insurance business and an increase of $19 million in our retirement income business.	
 
 	•	 	Corporate and Other activities decreased $116 million.	
 
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Benefits and other changes in policy reserves
 
 	•	 	Our Retirement and Protection segment increased $98 million primarily attributable to a $69 million increase in our long-term care insurance business and a $39 million increase in our life insurance business, partially offset by a $10 million decrease in our retirement income business.	
 
 	•	 	Our International segment decreased $81 million as a result of a decrease of $59 million in our lifestyle protection insurance business and a decrease of $22 million in our international mortgage insurance business. The six months ended June 30, 2010 included an increase of $35 million attributable to changes in foreign exchange rates.	
 
 	•	 	Our U.S. Mortgage Insurance segment decreased $362 million.	
Interest credited
 
 	•	 	Our Retirement and Protection segment decreased $20 million principally related to our retirement income business.	
 
 	•	 	Corporate and Other activities decreased $94 million.	
Acquisition and operating expenses, net of deferrals
 
 	•	 	Our Retirement and Protection segment increased $68 million primarily attributable to a $31 million increase in our wealth management business, a $21 million increase in our long-term care insurance business, a $12 million increase in our life insurance business and a $4 million increase in our retirement income business.	
 
 	•	 	Our International segment increased $16 million related to an $18 million increase in our international mortgage insurance business, partially offset by a $2 million decrease in our lifestyle protection insurance business. The six months ended June 30, 2010 included an increase of $19 million attributable to changes in foreign exchange rates.	
 
 	•	 	Corporate and Other activities decreased $9 million.	
Amortization of deferred acquisition costs and intangibles
 
 	•	 	Our Retirement and Protection segment decreased $92 million primarily attributable to a $104 million decrease in our retirement income business and a $12 million decrease in our long-term care insurance business, partially offset by a $24 million increase in our life insurance business.	
 
 	•	 	Our International segment was relatively flat as a $14 million decrease in our lifestyle protection insurance business was offset by a $13 million increase in our international mortgage insurance business. The six months ended June 30, 2010 included an increase of $10 million attributable to changes in foreign exchange rates.	
Interest expense. Interest expense increased primarily related to a $12 million increase in Corporate and Other activities.
Benefit for income taxes . The effective tax rate decreased to (51.3)% for the six months ended June 30, 2010 from 41.5% for the six months ended June 30, 2009. This decrease in the effective tax rate was attributable to changes in uncertain tax benefits related to our separation from our former parent, favorable impact of newly enacted Australian tax legislation , lower taxed foreign income and tax favored investments. The six months ended June 30, 2010 included an increase of $19 million attributable to changes in foreign exchange rates.
Net income attributable to noncontrolling interests . The increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The six months ended June 30, 2010 included an increase of $9 million attributable to changes in foreign exchange rates.
 
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Net income (loss) available to Genworth Financial, Inc.’s common stockholders. We reported net income available to Genworth Financial, Inc.’s common stockholders in the current year compared to a net loss available to Genworth Financial, Inc.’s common stockholders in the prior year primarily related to additional tax benefits recognized in the current year, lower net investment losses and a lower loss in our U.S. mortgage insurance business. For a discussion of our Retirement and Protection, International and U.S. Mortgage Insurance segments and Corporate and Other activities, see the “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.” Included in net income available to Genworth Financial, Inc.’s common stockholders was an increase of $32 million, net of tax, attributable to changes in foreign exchange rates.
Reconciliation of net income (loss) to net operating income available to Genworth Financial, Inc.’s common stockholders
Net operating income available to Genworth Financial, Inc.’s common stockholders for the three months ended June 30, 2010 and 2009 was $118 million and $9 million, respectively. Net operating income available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2010 and 2009 was $232 million and $23 million, respectively. We define net operating income available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding net income attributable to noncontrolling interests, after-tax net investment gains (losses) and other adjustments and infrequent or unusual non-operating items. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A significant component of our net investment gains (losses) is the result of impairments, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) are often subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Infrequent or unusual non-operating items are also excluded from net operating income available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends. There were no infrequent or unusual non-operating items excluded from net operating income available to Genworth Financial, Inc.’s common stockholders during the periods presented other than a $106 million tax benefit related to separation from our former parent recorded in the first quarter of 2010.
While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that net operating income available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate net operating income available to Genworth Financial, Inc.’s common stockholders, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. However, net operating income available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of net operating income available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.
 
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The following table includes a reconciliation of net income (loss) to net operating income available to Genworth Financial, Inc.’s common stockholders for the periods indicated:

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(Amounts in millions)	  	  2010  	  	  2009  	 	 	  2010  	 	 	  2009  	 	
Net income (loss)	  	$	77	  	$	(50	) 	 	$	289	  	 	$	(519	) 	
Less: net income attributable to noncontrolling interests	  	 	35	  	 	—  	  	 	 	69	  	 	 	—  	  	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	 	42	  	 	(50	) 	 	 	220	  	 	 	(519	) 	
Adjustments to net income (loss) available to Genworth Financial, Inc.’s common stockholders:	  			  				 				 				
Net investment (gains) losses, net of taxes and other adjustments	  	 	76	  	 	59	  	 	 	118	  	 	 	542	  	
Net tax benefit related to separation from our former parent	  	 	—  	  	 	—  	  	 	 	(106	) 	 	 	—  	  	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	118	  	$	9	  	 	$	232	  	 	$	23	  	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) per share
The following table provides basic and diluted net income (loss) available to Genworth Financial, Inc.’s common stockholder per common share for the periods indicated:

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(Amounts in millions, except per share amounts)	  	2010	  	2009 	 	 	2010	  	2009 	 	
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:	  			  				 			  				
Basic	  	$	0.09	  	$	(0.11	) 	 	$	0.45	  	$	(1.20	) 	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Diluted	  	$	0.08	  	$	(0.11	) 	 	$	0.45	  	$	(1.20	) 	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Weighted-average common shares outstanding:	  			  				 			  				
Basic	  	 	489.1	  	 	433.2	  	 	 	489.0	  	 	433.2	  	
	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Diluted (1)	  	 	494.2	  	 	433.2	  	 	 	493.9	  	 	433.2	  	

(1)	Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our net loss for the three and six months ended June 30, 2009, we were required to use basic weighted-average common shares outstanding in the calculation of the 2009 diluted loss per share, as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 1.2 million and 0.6 million, respectively, would have been antidilutive to the calculation. If we had not incurred a net loss for the three and six months ended June 30, 2009, dilutive potential common shares would have been 434.4 million and 433.8 million, respectively.	
Diluted weighted-average shares outstanding for 2010 reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based compensation.
 
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Results of Operations and Selected Financial and Operating Performance Measures by Segment
Our chief operating decision maker evaluates segment performance and allocates resources on the basis of net operating income available to Genworth Financial, Inc.’s common stockholders. See note 11 in our “—Notes to Condensed Consolidated Financial Statements” for a reconciliation of net operating income available to Genworth Financial, Inc.’s common stockholders of our segments and Corporate and Other activities to net income (loss) available to Genworth Financial, Inc.’s common stockholders.
Management’s discussion and analysis by segment also contains selected operating performance measures including “sales,” “assets under management” and “insurance in-force” or “risk in-force” which are commonly used in the insurance and investment industries as measures of operating performance.
Management regularly monitors and reports the sales metric as a measure of volume of new and renewal business generated in a period. Sales refer to: (1) annualized first-year premiums for term life, long-term care and Medicare supplement insurance; (2) new and additional premiums/deposits for universal life insurance, linked-benefits, spread-based and variable products; (3) gross and net flows, which represent gross flows less redemptions, for our wealth management business; (4) written premiums and deposits, gross of ceded reinsurance and cancellations, and premium equivalents, where we earn a fee for administrative services only business, for lifestyle protection insurance; (5) new insurance written for mortgage insurance, which in each case reflects the amount of business we generated during each period presented; and (6) written premiums, net of cancellations, for our Mexican insurance operations. Sales do not include renewal premiums on policies or contracts written during prior periods. We consider annualized first-year premiums, new premiums/deposits, gross and net flows, written premiums, premium equivalents and new insurance written to be measures of our operating performance because they represent measures of new sales of insurance policies or contracts during a specified period, rather than measures of our revenues or profitability during that period.
Management regularly monitors and reports assets under management for our wealth management business, insurance in-force and risk in-force. Assets under management for our wealth management business represent third-party assets under management that are not consolidated in our financial statements. Insurance in-force for our life, international mortgage and U.S. mortgage insurance businesses is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. Risk in-force for our international and U.S. mortgage insurance businesses is a measure that recognizes that the loss on any particular mortgage loan will be reduced by the net proceeds received upon sale of the underlying property. We consider assets under management for our wealth management business, insurance in-force and risk in-force to be measures of our operating performance because they represent measures of the size of our business at a specific date, rather than measures of our revenues or profitability during that period.
We also include a metric related to loss mitigation activities for our U.S. mortgage insurance business. We define loss mitigation activities as rescissions, cancellations, borrower loan modifications, repayment plans, lender- and borrower-titled pre-sales and other loan workouts and claim mitigation actions. Estimated savings related to rescissions are the reduction in carried loss reserves, net of premium refunds and reinstatement of prior rescissions. Estimated savings related to loan modifications and other cure related loss mitigation actions represent the reduction in carried loss reserves. For non-cure related actions, including pre-sales, the estimated savings represent the difference between the full claim obligation and the actual amount paid. We believe that this metric helps to enhance the understanding of the operating performance of our U.S. mortgage insurance business.
These operating measures enable us to compare our operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.
The following discussions of our segment results of operations should be read in conjunction with the “—Business trends and conditions . ”
 
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Retirement and Protection segment
Segment results of operations
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
The following table sets forth the results of operations relating to our Retirement and Protection segment for the periods indicated:

 	  	Three months ended
June 30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	  	    2010 vs. 2009    	 	
Revenues:	  				 			  				 			
Premiums	  	$	822	  	 	$	829	  	$	(7	) 	 	(1	)% 	
Net investment income	  	 	630	  	 	 	564	  	 	66	  	 	12	% 	
Net investment gains (losses)	  	 	(69	) 	 	 	4	  	 	(73	) 	 	NM	(1)  	
Insurance and investment product fees and other	  	 	260	  	 	 	210	  	 	50	  	 	24	% 	
	  	 	 	 	 	 	 	  	 	 	 	 			
Total revenues	  	 	1,643	  	 	 	1,607	  	 	36	  	 	2	% 	
	  	 	 	 	 	 	 	  	 	 	 	 			
Benefits and expenses:	  				 			  				 			
Benefits and other changes in policy reserves	  	 	961	  	 	 	895	  	 	66	  	 	7	% 	
Interest credited	  	 	176	  	 	 	184	  	 	(8	) 	 	(4	)% 	
Acquisition and operating expenses, net of deferrals	  	 	252	  	 	 	211	  	 	41	  	 	19	% 	
Amortization of deferred acquisition costs and intangibles	  	 	104	  	 	 	138	  	 	(34	) 	 	(25	)% 	
Interest expense	  	 	29	  	 	 	24	  	 	5	  	 	21	% 	
	  	 	 	 	 	 	 	  	 	 	 	 			
Total benefits and expenses	  	 	1,522	  	 	 	1,452	  	 	70	  	 	5	% 	
	  	 	 	 	 	 	 	  	 	 	 	 			
Income before income taxes	  	 	121	  	 	 	155	  	 	(34	) 	 	(22	)% 	
Provision for income taxes	  	 	40	  	 	 	56	  	 	(16	) 	 	(29	)% 	
	  	 	 	 	 	 	 	  	 	 	 	 			
Net income available to Genworth Financial, Inc.’s common stockholders	  	 	81	  	 	 	99	  	 	(18	) 	 	(18	)% 	
Adjustment to net income (loss) available to Genworth Financial, Inc.’s common stockholders:	  				 			  				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	33	  	 	 	24	  	 	9	  	 	38	% 	
	  	 	 	 	 	 	 	  	 	 	 	 			
Net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	114	  	 	$	123	  	$	(9	) 	 	(7	)% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
The following table sets forth net operating income for the businesses included in our Retirement and Protection segment for the periods indicated:

 	  	Three months ended
June 30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	  	    2009    	  	2010 vs. 2009	 	
Net operating income available to Genworth Financial, Inc.’s common stockholders:	  			  			  				 			
Life insurance	  	$	32	  	$	58	  	$	(26	) 	 	(45	)% 	
Long-term care insurance	  	 	47	  	 	42	  	 	5	  	 	12	% 	
Wealth management	  	 	10	  	 	7	  	 	3	  	 	43	% 	
Retirement income	  	 	25	  	 	16	  	 	9	 	 	56	% 	
	  	 	 	  	 	 	  	 	 	 	 			
Total net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	114	  	$	123	  	$	(9	) 	 	(7	)% 	

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Net operating income available to Genworth Financial, Inc.’s common stockholders
 
 	•	 	Our life insurance business decreased $26 million primarily attributable to lower persistency on our term life insurance policies entering the post-level rate period and increased claims as the result of higher mortality in our term life insurance products compared to the prior year.	
 
 	•	 	Our long-term care insurance business increased $5 million as the favorable performance of newer issued policies and higher investment income were partially offset by lower terminations in the current year.	
 
 	•	 	Our wealth management business increased $3 million from higher average assets under management from favorable equity market performance and positive net flows.	
 
 	•	 	Our retirement income business increased $9 million. Our spread-based products increased $24 million primarily from an increase in net investment income. Our fee-based products decreased $15 million mainly attributable to less favorable market performance.	
Revenues
Premiums
 
 	•	 	Our life insurance business decreased $9 million primarily attributable to the introduction of our term universal life insurance product that is designed to replace new sales of our existing term life insurance products with fees associated with deposits of the new product reflected in insurance and investment product fees and other. The decrease was also from higher lapses on policies entering the post-level rate period.	
 
 	•	 	Our long-term care insurance business increased $8 million mainly attributable to growth of the in-force block from new sales, renewal premiums and in-force rate actions.	
 
 	•	 	Our retirement income business decreased $6 million primarily driven by lower life-contingent sales of our spread-based products in the current market environment.	
Net investment income
 
 	•	 	Our life insurance business increased $11 million mainly related to limited partnerships accounted for under the equity method. Net investment income included $3 million of gains related to limited partnerships accounted for under the equity method in the second quarter of 2010 as compared to losses of $9 million in the second quarter of 2009.	
 
 	•	 	Our long-term care insurance business increased $32 million largely as a result of an increase in average invested assets due to growth of our in-force block. Additionally, net investment income in the second quarter of 2010 included $3 million of gains related to limited partnerships accounted for under the equity method as compared to losses of $3 million in the second quarter of 2009.	
 
 	•	 	Our retirement income business increased $23 million primarily attributable to limited partnerships accounted for under the equity method. Net investment income included $4 million of gains related to limited partnerships accounted for under the equity method in the second quarter of 2010 as compared to losses of $17 million in the second quarter of 2009. Net investment income for our spread-based products also benefited from the reinvestment of the high cash balances we were holding during 2009. These increases were partially offset by a decline in average invested assets of our fee-based products.	
Net investment gains (losses). For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
 
 	•	 	Net investment losses in our life insurance business decreased $35 million primarily driven by lower losses from the sale of investment securities related to portfolio repositioning and lower impairments recorded in the current year.	
 
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 	•	 	Our long-term care insurance business had net investment gains in the current year from the sale of investment securities related to portfolio repositioning as compared to net investment losses in the prior year from derivative losses related to our derivative strategy to mitigate interest rate risk associated with our statutory capital position.	
 
 	•	 	Our retirement income business had net investment losses in the current year primarily from losses related to embedded derivatives associated with our variable annuity products with GMWBs as compared to net investment gains related to those embedded derivatives in the prior year. The current year embedded derivative losses were partially offset by lower impairments.	
Insurance and investment product fees and other
 
 	•	 	Our life insurance business increased $13 million primarily from growth of our new term universal life insurance product that is designed to replace sales of our traditional term life insurance products.	
 
 	•	 	Our wealth management business increased $23 million primarily attributable to higher average assets under management from favorable market performance and positive net flows as gross flows exceeded redemptions.	
 
 	•	 	Our retirement income business increased $11 million mainly due to higher average account values of our fee-based products from market improvement in the second half of 2009 and the first quarter of 2010.	
Benefits and expenses
Benefits and other changes in policy reserves
 
 	•	 	Our life insurance business increased $33 million principally related to increased claims associated with higher mortality in our term life insurance products compared to the prior year and aging of the in-force block.	
 
 	•	 	Our long-term care insurance business increased $23 million primarily as a result of the aging and growth of the in-force block and lower terminations in the current year.	
 
 	•	 	Our retirement income business increased $10 million largely attributable to our fee-based products related to our guaranteed minimum benefit liabilities for our variable annuity contracts driven by unfavorable market impacts during the current year as compared to the prior year, partially offset by a decrease in guaranteed minimum death benefit claims.	
Interest credited. Interest credited decreased $8 million primarily related to our retirement income business from lower account values on fixed annuities and lower crediting rates as the fixed annuities reach the end of their initial crediting rate guarantee period.
Acquisition and operating expenses, net of deferrals
 
 	•	 	Our life insurance business increased $8 million primarily from growth of our life insurance products.	
 
 	•	 	Our long-term care insurance business increased $15 million related to growth of our in-force block.	
 
 	•	 	Our wealth management business increased $17 million primarily from increased asset-based expenses as assets under management increased from favorable market impacts and positive net flows.	
 
 	•	 	Our retirement income business remained relatively flat as higher costs associated with sales of our fee-based products were offset by lower sales of our spread-based products.	
 
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Amortization of deferred acquisition costs and intangibles
 
 	•	 	Our life insurance business increased $15 million primarily attributable to higher amortization related to lower persistency in our term life insurance products entering the post-level rate period.	
 
 	•	 	Our long-term care insurance business decreased $5 million from lower terminations in the current year, partially offset by growth of our in-force block.	
 
 	•	 	Our retirement income business decreased $44 million primarily related to a decrease of $29 million in our fee-based products largely attributable to a decrease in amortization of deferred acquisition costs from lower net investment gains, partially offset by an increase in amortization from unfavorable market performance in the current year. Our spread-based products decreased $15 million mainly from a $9 million favorable unlocking primarily related to lower lapse trends in the current year and lower amortization of deferred acquisition costs attributable to higher net investment losses.	
Interest expense. Interest expense increased $5 million primarily related to our life insurance business from higher costs associated with the issuance of letters of credit related to reinsurance transactions.
Provision for income taxes. The effective tax rate decreased to 33.1% for the three months ended June 30, 2010 from 36.1% for the three months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to a revision in the state effective tax  rate in the prior year and tax favored investments recognized in the current year.
Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
The following table sets forth the results of operations relating to our Retirement and Protection segment for the periods indicated:

 	  	Six months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	2010	 	 	2009	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	1,646	  	 	$	1,664	  	 	$	(18	) 	 	(1	)% 	
Net investment income	  	 	1,224	  	 	 	1,083	  	 	 	141	  	 	13	% 	
Net investment gains (losses)	  	 	(136	) 	 	 	(570	) 	 	 	434	  	 	76	% 	
Insurance and investment product fees and other	  	 	502	  	 	 	417	  	 	 	85	  	 	20	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	3,236	  	 	 	2,594	  	 	 	642	  	 	25	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Benefits and other changes in policy reserves	  	 	1,906	  	 	 	1,808	  	 	 	98	  	 	5	% 	
Interest credited	  	 	350	  	 	 	370	  	 	 	(20	) 	 	(5	)% 	
Acquisition and operating expenses, net of deferrals	  	 	482	  	 	 	414	  	 	 	68	  	 	16	% 	
Amortization of deferred acquisition costs and intangibles	  	 	209	  	 	 	301	  	 	 	(92	) 	 	(31	)% 	
Interest expense	  	 	51	  	 	 	50	  	 	 	1	  	 	2	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	2,998	  	 	 	2,943	  	 	 	55	  	 	2	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Income (loss) before income taxes	  	 	238	  	 	 	(349	) 	 	 	587	  	 	168	% 	
Provision (benefit) for income taxes	  	 	73	  	 	 	(132	) 	 	 	205	  	 	155	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income (loss) available to Genworth Financial, Inc.’s common stockholders	  	 	165	  	 	 	(217	) 	 	 	382	  	 	176	% 	
Adjustment to net income (loss) available to Genworth Financial, Inc.’s common stockholders:	  				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	71	  	 	 	378	  	 	 	(307	) 	 	(81	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	236	  	 	$	161	  	 	$	75	  	 	47	% 	

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The following table sets forth net operating income for the businesses included in our Retirement and Protection segment for the periods indicated:

 	  	Six months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	  	    2009    	 	 	  2010 vs. 2009  	 	
Net operating income available to Genworth Financial, Inc.’s common stockholders:	  			  				 				 			
Life insurance	  	$	69	  	$	96	  	 	$	(27	) 	 	(28	)% 	
Long-term care insurance	  	 	87	  	 	83	  	 	 	4	  	 	5	% 	
Wealth management	  	 	21	  	 	13	  	 	 	8	  	 	62	% 	
Retirement income	  	 	59	  	 	(31	) 	 	 	90	  	 	NM	(1)  	
	  	 	 	  	 	 	 	 	 	 	 	 			
Total net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	236	  	$	161	  	 	$	75	  	 	47	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
Net operating income available to Genworth Financial, Inc.’s common stockholders
 
 	•	 	Our life insurance business decreased $27 million primarily in our term life insurance products attributable to higher mortality compared to the prior year, lower persistency in the post-level rate period and an unfavorable reinsurance adjustment of $5 million, partially offset by higher net investment income and a favorable tax settlement in the current year.	
 
 	•	 	Our long-term care insurance business increased $4 million as the favorable performance of newer issued policies and higher investment income in the current year were partially offset by higher claims in older issued policies and lower terminations in the current year.	
 
 	•	 	Our wealth management business increased $8 million from higher average assets under management from favorable equity market performance and positive net flows and a $2 million favorable tax adjustment in the current year.	
 
 	•	 	Our retirement income business increased $90 million. Our spread-based products increased $61 million primarily from an increase in net investment income. Our fee-based products increased $29 million mainly attributable to lower amortization of deferred acquisition costs from increases in the equity market performance.	
Revenues
Premiums
 
 	•	 	Our life insurance business decreased $23 million mainly attributable to the introduction of our term universal life insurance product that is designed to replace new sales of our existing term life insurance products with fees associated with deposits of the new product reflected in insurance and investment product fees and other. The decrease was also a result of an unfavorable reinsurance adjustment of $8 million and higher lapses on policies entering the post-level rate period in the current year.	
 
 	•	 	Our long-term care insurance business increased $22 million mainly attributable to growth of the in-force block from new sales, renewal premiums and in-force rate actions.	
 
 	•	 	Our retirement income business decreased $17 million primarily driven by lower life-contingent sales of our spread-based products in the current market environment.	
 
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Net investment income
 
 	•	 	Our life insurance business increased $14 million mainly related to $24 million of lower losses in the current year related to limited partnerships accounted for under the equity method. This increase was partially offset by a decline in average invested assets related to our term life insurance products and lower yields on the assets backing our non-recourse funding obligations supporting certain term and universal life insurance reserves.	
 
 	•	 	Our long-term care insurance business increased $64 million largely as a result of an increase in average invested assets due to growth of our in-force block. Additionally, net investment income in the current year included $17 million of lower losses related to limited partnerships accounted for under the equity method.	
 
 	•	 	Our retirement income business increased $63 million primarily attributable to $78 million of lower losses related to limited partnerships accounted for under the equity method. Net investment income for our spread-based products also benefited from the reinvestment of the high cash balances we were holding during 2009. These increases were partially offset by a decline in average invested assets of our fee-based products.	
Net investment gains (losses). For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
 
 	•	 	Net investment losses in our life insurance business decreased $169 million primarily driven by lower losses from the sale of investment securities related to portfolio repositioning and lower impairments recorded in the current year.	
 
 	•	 	Our long-term care insurance business had net investment gains in the current year from the sale of investment securities related to portfolio repositioning as compared to net investment losses in the prior year from derivative losses related to our derivative strategy to mitigate interest rate risk associated with our statutory capital position.	
 
 	•	 	Net investment losses in our retirement income business decreased $16 million primarily related to lower impairments recorded in the current year which were partially offset by higher losses related to embedded derivatives associated with our variable annuity products with GMWBs.	
Insurance and investment product fees and other
 
 	•	 	Our life insurance business increased $24 million primarily from growth of our new term universal life insurance product that is designed to replace sales of our traditional term life insurance products.	
 
 	•	 	Our wealth management business increased $40 million primarily attributable to higher average assets under management from favorable market impacts and positive net flows as gross flows exceeded redemptions.	
 
 	•	 	Our retirement income business increased $19 million mainly due to higher average account values of our fee-based products from market improvement in the second half of 2009 and the first quarter of 2010.	
 
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Benefits and expenses
Benefits and other changes in policy reserves
 
 	•	 	Our life insurance business increased $39 million principally related to increased claims associated with higher mortality in our term life insurance products compared to the prior year and aging of our life insurance products.	
 
 	•	 	Our long-term care insurance business increased $69 million primarily as a result of the aging and growth of the in-force block, higher claims in older issued policies and lower terminations in the current year.	
 
 	•	 	Our retirement income business decreased $10 million attributable to a decrease of $5 million from our fee-based products related to a decrease in guaranteed minimum death benefit claims, partially offset by an increase related to our guaranteed minimum benefit liabilities driven by unfavorable market performance in the current year. Our life-contingent spread-based products decreased $5 million driven by a decline in sales in the current market environment, partially offset by higher amortization of sales inducements as a result of lower net investment losses in the current year.	
Interest credited. Interest credited decreased $20 million primarily related to our retirement income business from lower account values on fixed annuities and lower crediting rates as the fixed annuities reach the end of their initial crediting rate guarantee period.
Acquisition and operating expenses, net of deferrals
 
 	•	 	Our life insurance business increased $12 million primarily from growth of our life insurance products.	
 
 	•	 	Our long-term care insurance business increased $21 million related to growth of our in-force block.	
 
 	•	 	Our wealth management business increased $31 million primarily from increased asset-based expenses as assets under management increased from favorable market impacts and positive net flows.	
 
 	•	 	Our retirement income business increased $4 million primarily from higher costs associated with sales of our fee-based products, partially offset by lower sales of our spread-based products.	
Amortization of deferred acquisition costs and intangibles
 
 	•	 	Our life insurance business increased $24 million primarily attributable to an increase in amortization related to lower persistency in our term life insurance products entering the post-level rate period.	
 
 	•	 	Our long-term care insurance business decreased $12 million from lower terminations in the current year, partially offset by growth of our in-force block.	
 
 	•	 	Our retirement income business decreased $104 million primarily related to a decrease of $107 million in our fee-based products largely attributable to lower amortization of deferred acquisition costs from improved equity market performance. The decrease was also related to a $12 million favorable adjustment in the current year. The prior year included additional amortization of deferred acquisition costs of $54 million from loss recognition testing that did not recur. This decrease was partially offset by an increase of $3 million in our spread-based products mainly from higher amortization of deferred acquisition costs attributable to lower net investment losses in the current year, partially offset by a $9 million favorable unlocking primarily related to lower lapse trends in the current year.	
Provision (benefit) for income taxes. The effective tax rate decreased to 30.7% for the six months ended June 30, 2010 from 37.8% for the six months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to tax favored investments recognized in the current year and the relationship of tax favored investments recognized in the prior year to the pre-tax loss.
 
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Retirement and Protection selected financial and operating performance measures
Life insurance
The following tables set forth selected operating performance measures regarding our life insurance business as of or for the dates indicated:

 	 	Three months
ended June 30,	 	Increase (decrease)
and percentage change	 	 	Six months
ended June 30,	 	Increase (decrease)
and percentage change	 	
(Amounts in millions)	 	  2010  	 	  2009  	 	        2010 vs. 2009         	 	 	  2010  	 	  2009  	 	        2010 vs. 2009         	 	
Term life insurance	 			 			 				 			 			 			 				 			
Net earned premiums	 	$	228	 	$	238	 	$	(10	) 	 	(4	)% 	 	$	452	 	$	475	 	$	(23	) 	 	(5	)% 	
Annualized first-year premiums	 	 	4	 	 	18	 	 	(14	) 	 	(78	)% 	 	 	18	 	 	37	 	 	(19	) 	 	(51	)% 	
									
Term universal life insurance	 			 			 				 			 			 			 				 			
Net deposits	 	$	14	 	$	—  	 	$	14	  	 	NM	(1)  	 	$	19	 	$	—  	 	$	19	  	 	NM	(1)  	
Term universal life annualized first-year deposits	 	 	24	 	 	—  	 	 	24	  	 	NM	(1)  	 	 	34	 	 	—  	 	 	34	  	 	NM	(1)  	
									
Universal and whole life insurance	 			 			 				 			 			 			 				 			
Net earned premiums and deposits	 	$	121	 	$	116	 	$	5	  	 	4	% 	 	$	239	 	$	240	 	$	(1	) 	 	—  	% 	
Universal life annualized first-year deposits	 	 	10	 	 	8	 	 	2	  	 	25	% 	 	 	17	 	 	17	 	 	—  	  	 	—  	% 	
Universal life excess deposits	 	 	28	 	 	23	 	 	5	  	 	22	% 	 	 	48	 	 	51	 	 	(3	) 	 	(6	)% 	
									
Total life insurance	 			 			 				 			 			 			 				 			
Net earned premiums and deposits	 	$	363	 	$	354	 	$	9	  	 	3	% 	 	$	710	 	$	715	 	$	(5	) 	 	(1	)% 	
Annualized first-year premiums	 	 	4	 	 	18	 	 	(14	) 	 	(78	)% 	 	 	18	 	 	37	 	 	(19	) 	 	(51	)% 	
Annualized first-year deposits	 	 	34	 	 	8	 	 	26	  	 	NM	(1)  	 	 	51	 	 	17	 	 	34	  	 	200	% 	
Excess deposits	 	 	28	 	 	23	 	 	5	  	 	22	% 	 	 	48	 	 	51	 	 	(3	) 	 	(6	)% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	

 	  	As of June 30,	  	Percentage
change	 	
(Amounts in millions)	  	2010	  	2009	  	2010 vs. 2009	 	
Term life insurance	  			  			  			
Life insurance in-force, net of reinsurance	  	$	468,098	  	$	477,759	  	(2	)% 	
Life insurance in-force before reinsurance	  	 	612,284	  	 	623,139	  	(2	)% 	
				
Term universal life insurance	  			  			  			
Life insurance in-force, net of reinsurance	  	$	17,754	  	$	—  	  	NM	(1)  	
Life insurance in-force before reinsurance	  	 	17,820	  	 	—  	  	NM	(1)  	
				
Universal and whole life insurance	  			  			  			
Life insurance in-force, net of reinsurance	  	$	43,743	  	$	43,800	  	—  	% 	
Life insurance in-force before reinsurance	  	 	50,617	  	 	50,994	  	(1	)% 	
				
Total life insurance	  			  			  			
Life insurance in-force, net of reinsurance	  	$	529,595	  	$	521,559	  	2	% 	
Life insurance in-force before reinsurance	  	 	680,721	  	 	674,133	  	1	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
 
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Term life insurance
Net earned premiums decreased mainly as a result of lower sales in the current year from the introduction of our term universal life insurance product that is designed to replace new sales of our existing term life insurance products and higher lapses on policies entering the post-level rate period. For the six months ended June 30, 2010, the decrease was also attributable to an unfavorable reinsurance adjustment of $8 million in the first quarter of 2010. Annualized first-year premiums decreased as we focused on sales of our new term universal life insurance product.
Term universal life insurance
In late 2009, we introduced a new term universal life insurance product that is designed to replace new sales of our existing term life insurance products. This new product provides greater flexibility typically associated with universal life insurance coverage.
Universal and whole life insurance
Annualized first-year deposits remained relatively flat as we maintained our focus on smaller face amounts. The in-force block was relatively flat as the growth of our universal life insurance products was offset by the continued runoff of our closed block of whole life insurance.
Long-term care insurance
The following table sets forth selected financial and operating performance measures regarding our long-term care insurance business, which includes individual and group long-term care insurance, Medicare supplement insurance, linked-benefits products, as well as several runoff blocks of accident and health insurance for the periods indicated:

 	  	Three months ended
June 30,	  	Increase
(decrease) and
percentage
change	 	 	Six months ended
June 30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	  	    2009    	  	    2010 vs. 2009    	 	 	    2010    	  	    2009    	  	    2010 vs. 2009    	 	
Net earned premiums:	  			  			  			  			 			  			  			  			
Long-term care	  	$	480	  	$	478	  	$	2	  	—  	% 	 	$	959	  	$	953	  	$	6	  	1	% 	
Medicare supplement and other	  	 	78	  	 	72	  	 	6	  	8	% 	 	 	158	  	 	142	  	 	16	  	11	% 	
	  	 	 	  	 	 	  	 	 	  			 	 	 	  	 	 	  	 	 	  			
Total	  	$	558	  	$	550	  	$	8	  	1	% 	 	$	1,117	  	$	1,095	  	$	22	  	2	% 	
	  	 	 	  	 	 	  	 	 	  			 	 	 	  	 	 	  	 	 	  			
Annualized first-year premiums and deposits	  	$	60	  	$	44	  	$	16	  	36	% 	 	$	127	  	$	91	  	$	36	  	40	% 	
	  	 	 	  	 	 	  	 	 	  			 	 	 	  	 	 	  	 	 	  			
Net earned premiums increased mainly attributable to growth of our in-force block from new sales, renewal premiums and in-force rate actions. The increase in annualized first-year premiums and deposits was primarily attributable to growth of our individual and group long-term care insurance and linked-benefits products.
Wealth management
The following table sets forth selected financial performance measures regarding our wealth management business as of or for the dates indicated:

 	  	As of or for the three
months ended June 30,	 	 	As of or for the six
months ended June 30,	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	    2010    	 	 	    2009    	 	
Assets under management, beginning of period	  	$	20,037	  	 	$	14,210	  	 	$	18,865	  	 	$	15,447	  	
Gross flows	  	 	1,362	  	 	 	1,113	  	 	 	2,837	  	 	 	1,909	  	
Redemptions	  	 	(926	) 	 	 	(953	) 	 	 	(1,897	) 	 	 	(2,227	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	436	  	 	 	160	  	 	 	940	  	 	 	(318	) 	
Market performance	  	 	(925	) 	 	 	1,539	  	 	 	(257	) 	 	 	780	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets under management, end of period	  	$	19,548	  	 	$	15,909	  	 	$	19,548	  	 	$	15,909	  	

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Wealth management results represent Genworth Financial Wealth Management, Inc., Genworth Financial Investment Services, Inc., Genworth Financial Trust Company, Centurion Financial Advisers, Inc. and Quantuvis Consulting, Inc.
The increase in assets under management was primarily attributable to favorable equity market performance and positive net flows.
Retirement income
Fee-based products
The following table sets forth selected operating performance measures regarding our fee-based products as of or for the dates indicated:

 	  	As of or for the three
months ended June 30,	 	 	As of or for the six
months ended June 30,	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	    2010    	 	 	    2009    	 	
Income Distribution Series (1)	  				 				 				 				
Account value, net of reinsurance, beginning of period	  	$	6,135	  	 	$	5,093	  	 	$	5,943	  	 	$	5,234	  	
Deposits	  	 	141	  	 	 	133	  	 	 	314	  	 	 	258	  	
Surrenders, benefits and product charges	  	 	(150	) 	 	 	(109	) 	 	 	(277	) 	 	 	(215	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	(9	) 	 	 	24	  	 	 	37	  	 	 	43	  	
Interest credited and investment performance	  	 	(162	) 	 	 	169	  	 	 	(16	) 	 	 	9	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Account value, net of reinsurance, end of period	  	$	5,964	  	 	$	5,286	  	 	$	5,964	  	 	$	5,286	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Traditional variable annuities	  				 				 				 				
Account value, net of reinsurance, beginning of period	  	$	2,048	  	 	$	1,642	  	 	$	2,016	  	 	$	1,756	  	
Deposits	  	 	25	  	 	 	16	  	 	 	52	  	 	 	35	  	
Surrenders, benefits and product charges	  	 	(70	) 	 	 	(60	) 	 	 	(135	) 	 	 	(123	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	(45	) 	 	 	(44	) 	 	 	(83	) 	 	 	(88	) 	
Interest credited and investment performance	  	 	(124	) 	 	 	198	  	 	 	(54	) 	 	 	128	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Account value, net of reinsurance, end of period	  	$	1,879	  	 	$	1,796	  	 	$	1,879	  	 	$	1,796	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Variable life insurance	  				 				 				 				
Account value, beginning of period	  	$	303	  	 	$	248	  	 	$	298	  	 	$	266	  	
Deposits	  	 	3	  	 	 	3	  	 	 	6	  	 	 	7	  	
Surrenders, benefits and product charges	  	 	(8	) 	 	 	(9	) 	 	 	(18	) 	 	 	(20	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	(5	) 	 	 	(6	) 	 	 	(12	) 	 	 	(13	) 	
Interest credited and investment performance	  	 	(19	) 	 	 	29	  	 	 	(7	) 	 	 	18	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Account value, end of period	  	$	279	  	 	$	271	  	 	$	279	  	 	$	271	  	

(1)	The Income Distribution Series products are comprised of our deferred and immediate variable annuity products, including those variable annuity products with rider options that provide guaranteed income benefits including GMWBs and certain types of guaranteed annuitization benefits. These products do not include fixed single premium immediate annuities or deferred annuities, which may also serve income distribution needs.	
Income Distribution Series
Account value related to our Income Distribution Series products increased from the prior year attributable to positive net flows and favorable market performance in the second half of 2009 and the first quarter of 2010. Net flows decreased during the second quarter of 2010 due to unfavorable equity market impacts.
 
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Traditional variable annuities
In our traditional variable annuities, the increase in account value from the prior year was principally the result of improved equity market performance in the second half of 2009, partially offset by surrenders outpacing sales.
Spread-based products
The following table sets forth selected operating performance measures regarding our spread-based products as of or for the dates indicated:

 	  	As of or for the three
months ended June 30,	 	 	As of or for the six
months ended June 30,	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	    2010    	 	 	    2009    	 	
Fixed annuities	  				 				 				 				
Account value, net of reinsurance, beginning of period	  	$	11,234	  	 	$	11,833	  	 	$	11,409	  	 	$	11,996	  	
Deposits	  	 	92	  	 	 	229	  	 	 	133	  	 	 	471	  	
Surrenders, benefits and product charges	  	 	(304	) 	 	 	(394	) 	 	 	(616	) 	 	 	(902	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	(212	) 	 	 	(165	) 	 	 	(483	) 	 	 	(431	) 	
Interest credited	  	 	95	  	 	 	102	  	 	 	191	  	 	 	205	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Account value, net of reinsurance, end of period	  	$	11,117	  	 	$	11,770	  	 	$	11,117	  	 	$	11,770	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Single premium immediate annuities	  				 				 				 				
Account value, net of reinsurance, beginning of period	  	$	6,593	  	 	$	6,925	  	 	$	6,675	  	 	$	6,957	  	
Premiums and deposits	  	 	100	  	 	 	101	  	 	 	195	  	 	 	212	  	
Surrenders, benefits and product charges	  	 	(251	) 	 	 	(289	) 	 	 	(516	) 	 	 	(525	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	(151	) 	 	 	(188	) 	 	 	(321	) 	 	 	(313	) 	
Interest credited	  	 	87	  	 	 	90	  	 	 	175	  	 	 	183	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Account value, net of reinsurance, end of period	  	$	6,529	  	 	$	6,827	  	 	$	6,529	  	 	$	6,827	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Structured settlements	  				 				 				 				
Account value, net of reinsurance, beginning of period	  	$	1,115	  	 	$	1,101	  	 	$	1,115	  	 	$	1,106	  	
Premiums and deposits	  	 	—  	  	 	 	6	  	 	 	—  	  	 	 	10	  	
Surrenders, benefits and product charges	  	 	(15	) 	 	 	(5	) 	 	 	(29	) 	 	 	(28	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net flows	  	 	(15	) 	 	 	1	  	 	 	(29	) 	 	 	(18	) 	
Interest credited	  	 	15	  	 	 	15	  	 	 	29	  	 	 	29	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Account value, net of reinsurance, end of period	  	$	1,115	  	 	$	1,117	  	 	$	1,115	  	 	$	1,117	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total premiums from spread-based retail products	  	$	32	  	 	$	38	  	 	$	68	  	 	$	85	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total deposits on spread-based retail products	  	$	160	  	 	$	298	  	 	$	260	  	 	$	608	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed annuities
Account value of our fixed annuities decreased as surrenders exceeded deposits. Sales have slowed significantly given market conditions and changes in the product management strategy.
Single premium immediate annuities
Account value of our single premium immediate annuities decreased as surrenders exceeded deposits and premiums. Sales have slowed significantly given market conditions and changes in the product management strategy.
 
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Structured settlements
We no longer solicit sales of this product; however, we continue to service our existing block of business.
International segment
Segment results of operations
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
The following table sets forth the results of operations relating to our International segment for the periods indicated:

 	 	Three months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	 	    2010    	 	 	    2009    	 	 	2010 vs. 2009	 	
Revenues:	 				 				 				 			
Premiums	 	$	495	  	 	$	508	  	 	$	(13	) 	 	(3	)% 	
Net investment income	 	 	127	  	 	 	122	  	 	 	5	  	 	4	% 	
Net investment gains (losses)	 	 	1	  	 	 	4	  	 	 	(3	) 	 	(75	)% 	
Insurance and investment product fees and other	 	 	(1	) 	 	 	5	  	 	 	(6	) 	 	(120	)% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	 	 	622	  	 	 	639	  	 	 	(17	) 	 	(3	)% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	 				 				 				 			
Benefits and other changes in policy reserves	 	 	163	  	 	 	226	  	 	 	(63	) 	 	(28	)% 	
Acquisition and operating expenses, net of deferrals	 	 	205	  	 	 	197	  	 	 	8	  	 	4	% 	
Amortization of deferred acquisition costs and intangibles	 	 	67	  	 	 	66	  	 	 	1	  	 	2	% 	
Interest expense	 	 	10	  	 	 	24	  	 	 	(14	) 	 	(58	)% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	 	 	445	  	 	 	513	  	 	 	(68	) 	 	(13	)% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Income before income taxes	 	 	177	  	 	 	126	  	 	 	51	  	 	40	% 	
Provision for income taxes	 	 	35	  	 	 	36	  	 	 	(1	) 	 	(3	)% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Net income	 	 	142	  	 	 	90	  	 	 	52	  	 	58	% 	
Less: net income attributable to noncontrolling interests	 	 	35	  	 	 	—  	  	 	 	35	  	 	NM	(1)  	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Net income available to Genworth Financial, Inc.’s common stockholders	 	 	107	  	 	 	90	  	 	 	17	  	 	19	% 	
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:	 				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	 	 	(2	) 	 	 	(3	) 	 	 	1	  	 	33	% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating income available to Genworth Financial, Inc.’s common stockholders	 	$	105	  	 	$	87	  	 	$	18	  	 	21	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
 
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The following table sets forth net operating income for the businesses included in our International segment for the periods indicated:

 	  	Three months ended
June 30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	2010	  	2009	  	2010 vs. 2009	 	
Net operating income available to Genworth Financial, Inc.’s common stockholders:	  			  			  			  			
International mortgage insurance	  	$	93	  	$	83	  	$	10	  	12	% 	
Lifestyle protection insurance	  	 	12	  	 	4	  	 	8	  	200	% 	
	  	 	 	  	 	 	  	 	 	  			
Total net operating income available to Genworth Financial, Inc.’s common stockholders:	  	$	105	  	$	87	  	$	18	  	21	% 	
	  	 	 	  	 	 	  	 	 	  			
Net operating income available to Genworth Financial, Inc.’s common stockholders
 
 	•	 	The three months ended June 30, 2010 included an increase of $14 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	Excluding the effect of foreign exchange, the decrease in our international mortgage insurance business was primarily driven by the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5% resulting in lower net operating income of $35 million, which included $4 million attributable to changes in foreign exchange rates, in the second quarter of 2010. Excluding the impact related to noncontrolling interests, net operating income for our international mortgage insurance business increased primarily due to lower losses in Canada and Australia. There was also a benefit from newly enacted Australian tax legislation in the current year.	
 
 	•	 	Net operating income for our lifestyle protection insurance business increased from a decrease in new claim registrations from stabilization of economic conditions and a favorable impact from our re-pricing actions that we began in the second half of 2009, partially offset by lower sales from reduced levels of consumer lending.	
Revenues
Premiums
 
 	•	 	Our international mortgage insurance business increased $27 million and our lifestyle protection insurance business decreased $40 million.	
 
 	•	 	The three months ended June 30, 2010 included an increase of $31 million and a decrease of $6 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was primarily related to Australia as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums in the second quarter of 2010 and lower new business volumes.	
 
 	•	 	The decrease in our lifestyle protection insurance business was primarily attributable to our runoff business. Reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions that we began in the second half of 2009.	
 
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Net investment income
 
 	•	 	Our international mortgage insurance business increased $14 million and our lifestyle protection insurance business decreased $9 million.	
 
 	•	 	The three months ended June 30, 2010 included an increase of $12 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	Our international mortgage insurance business was relatively flat as an increase in invested assets was offset by lower yields.	
 
 	•	 	The decrease in our lifestyle protection insurance business was principally attributable to reinsurance arrangements accounted for under the deposit method and a decrease in average invested assets. In 2009, we made a reclassification adjustment to interest expense related to our reinsurance arrangements that were in a loss position that did not recur.	
Benefits and expenses
Benefits and other changes in policy reserves
 
 	•	 	Our international mortgage insurance business decreased $19 million and our lifestyle protection insurance business decreased $44 million.	
 
 	•	 	The three months ended June 30, 2010 included an increase of $11 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The decrease in our international mortgage insurance business was primarily related to Canada and Australia. In Canada, losses declined driven by lower new delinquencies from an improving economy. In Australia, losses decreased as a result of lower reserves per delinquency primarily from an improving economy.	
 
 	•	 	The decrease in our lifestyle protection insurance business was largely attributable to a decrease in claim reserves from declining claim registrations as a result of stabilization of economic conditions in Europe. These decreases were partially offset by a favorable reserve adjustment in the second quarter of 2009 that did not recur.	
Acquisition and operating expenses, net of deferrals
 
 	•	 	Our international mortgage insurance business increased $11 million and our lifestyle protection insurance business decreased $3 million.	
 
 	•	 	The three months ended June 30, 2010 included an increase of $5 million and a decrease of $5 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The increase in our international mortgage insurance business was due to higher expenses in Canada and the cancellation of our capital maintenance agreement with our U.S. mortgage insurance business in the second quarter of 2009.	
 
 	•	 	Excluding the effects of foreign exchange, the increase in our lifestyle protection insurance business was largely attributable to an increase in profit commissions driven by lower claims, partially offset by a decrease in commissions related to a decline in new business.	
 
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Amortization of deferred acquisition costs and intangibles
 
 	•	 	Our international mortgage insurance business increased $7 million and our lifestyle protection insurance business decreased $6 million.	
 
 	•	 	The three months ended June 30, 2010 included an increase of $3 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The increase in our international mortgage insurance business was as a result of an increase in amortization of deferred acquisition costs from the seasoning of our in-force blocks of business.	
 
 	•	 	The decrease in our lifestyle protection insurance business was attributable to a decrease in the U.K. from lower single premium sales related to new business regulations and a decrease from our runoff business.	
Interest expense. Interest expense decreased $14 million primarily related to our lifestyle protection insurance business due to reinsurance arrangements accounted for under the deposit method. In 2009, we made a reclassification adjustment from net investment income related to our reinsurance arrangements that were in a loss position that did not recur.
Provision for income taxes. The effective tax rate decreased to 19.8% for the three months ended June 30, 2010 from 28.6% for the three months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to the favorable impact of newly enacted Australian tax legislation and lower taxed foreign income in the current year. The three months ended June 30, 2010 also included an increase of $7 million attributable to changes in foreign exchange rates for our international mortgage business.
Net income attributable to noncontrolling interests . The increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The three months ended June 30, 2010 included an increase of $4 million attributable to changes in foreign exchange rates.
 
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Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
The following table sets forth the results of operations relating to our International segment for the periods indicated:

 	  	Six months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	2010	 	 	2009	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	999	  	 	$	1,004	  	 	$	(5	) 	 	—  	% 	
Net investment income	  	 	259	  	 	 	226	  	 	 	33	  	 	15	% 	
Net investment gains (losses)	  	 	10	  	 	 	(11	) 	 	 	21	  	 	191	% 	
Insurance and investment product fees and other	  	 	5	  	 	 	10	  	 	 	(5	) 	 	(50	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	1,273	  	 	 	1,229	  	 	 	44	  	 	4	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Benefits and other changes in policy reserves	  	 	337	  	 	 	418	  	 	 	(81	) 	 	(19	)% 	
Acquisition and operating expenses, net of deferrals	  	 	408	  	 	 	392	  	 	 	16	  	 	4	% 	
Amortization of deferred acquisition costs and intangibles	  	 	139	  	 	 	140	  	 	 	(1	) 	 	(1	)% 	
Interest expense	  	 	33	  	 	 	32	  	 	 	1	  	 	3	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	917	  	 	 	982	  	 	 	(65	) 	 	(7	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Income before income taxes	  	 	356	  	 	 	247	  	 	 	109	  	 	44	% 	
Provision for income taxes	  	 	85	  	 	 	66	  	 	 	19	  	 	29	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income	  	 	271	  	 	 	181	  	 	 	90	  	 	50	% 	
Less: net income attributable to noncontrolling interests	  	 	69	  	 	 	—  	  	 	 	69	  	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net income available to Genworth Financial, Inc.’s common stockholders	  	 	202	  	 	 	181	  	 	 	21	  	 	12	% 	
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:	  				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	(6	) 	 	 	7	  	 	 	(13	) 	 	(186	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	196	  	 	$	188	  	 	$	8	  	 	4	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
The following table sets forth net operating income for the businesses included in our International segment for the periods indicated:

 	  	Six months ended
June  30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	  	    2009    	  	    2010 vs. 2009    	 	
Net operating income available to Genworth Financial, Inc.’s common stockholders:	  			  			  				 			
International mortgage insurance	  	$	172	  	$	173	  	$	(1	) 	 	(1	)% 	
Lifestyle protection insurance	  	 	24	  	 	15	  	 	9	  	 	60	% 	
	  	 	 	  	 	 	  	 	 	 	 			
Total net operating income available to Genworth Financial, Inc.’s common stockholders	  	$	196	  	$	188	  	$	8	  	 	4	% 	

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Net operating income available to Genworth Financial, Inc.’s common stockholders
 
 	•	 	The six months ended June 30, 2010 included an increase of $33 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The decrease in our international mortgage insurance business was primarily driven by the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5% resulting in lower net operating income of $68 million, which included $9 million attributable to changes in foreign exchange rates, for the six months ended June 30, 2010. Excluding the impact related to noncontrolling interests, net operating income for our international mortgage insurance business increased from lower losses partially offset by lower premiums. There was also a benefit from newly enacted Australian tax legislation in the current year.	
 
 	•	 	Net operating income for our lifestyle protection insurance business increased from a decrease in new claim registrations from stabilization of economic conditions and a favorable impact from our re-pricing actions that we began in the second half of 2009, partially offset by lower sales from reduced levels of consumer lending.	
Revenues
Premiums
 
 	•	 	Our international mortgage insurance business increased $59 million and our lifestyle protection insurance business decreased $64 million.	
 
 	•	 	The six months ended June 30, 2010 included increases of $77 million and $16 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was related to rescissions and other terminations related to loss mitigation activities in Europe, particularly in Spain. In addition, premiums in Australia decreased as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums during the six months ended June 30, 2010 and lower new business volumes. In Canada, premiums were relatively flat as seasoning of our in-force block of business was offset by lower policy cancellations.	
 
 	•	 	The decrease in our lifestyle protection insurance business was primarily attributable to our runoff business. Reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions that we began in the second half of 2009. Additionally, there was a favorable premium adjustment related to the timing of receiving client data which was partially offset by an unfavorable reinsurance adjustment in the first quarter of 2010. These adjustments were offset in expenses.	
Net investment income
 
 	•	 	Our international mortgage insurance business increased $27 million and our lifestyle protection insurance business increased $6 million.	
 
 	•	 	The six months ended June 30, 2010 included increases of $29 million and $3 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was principally attributable to lower yields, partially offset by an increase in invested assets.	
 
 	•	 	The increase in our lifestyle protection insurance business was largely related to reinsurance arrangements accounted for under the deposit method of accounting as these arrangements were in a gain position, partially offset by lower yields and invested assets.	
 
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Benefits and expenses
Benefits and other changes in policy reserves
 
 	•	 	Our international mortgage insurance business decreased $22 million and our lifestyle protection insurance business decreased $59 million.	
 
 	•	 	The six months ended June 30, 2010 included increases of $30 million and $5 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The decrease in our international mortgage insurance business was primarily related to Canada and Australia. In Canada, losses declined driven by lower new delinquencies from an improving economy. In Australia, losses decreased as a result of lower reserves per delinquency primarily from an improving economy. Losses in Europe also declined primarily related to ongoing loss mitigation activities.	
 
 	•	 	The decrease in our lifestyle protection insurance business was largely attributable to a decrease in claim reserves from declining claim registrations as a result of stabilization of economic conditions in Europe. These decreases were partially offset by higher paid claims, particularly in Denmark.	
Acquisition and operating expenses, net of deferrals
 
 	•	 	Our international mortgage insurance business increased $18 million and our lifestyle protection insurance business decreased $2 million.	
 
 	•	 	The six months ended June 30, 2010 included increases of $11 million and $8 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The increase in our international mortgage insurance business was primarily due to higher expenses in Canada and the cancellation of our capital maintenance agreement with our U.S. mortgage insurance business in the second quarter of 2009.	
 
 	•	 	The decrease in our lifestyle protection insurance business was largely attributable to a decrease in commissions related to a decline in new business. This decrease was partially offset by an increase in profit commissions driven by lower claims. Additionally, there was a favorable commission adjustment in the first quarter of 2010 that was offset in premiums and a favorable impact from our re-pricing actions that we began in the second half of 2009.	
Amortization of deferred acquisition costs and intangibles
 
 	•	 	Our international mortgage insurance business increased $13 million and our lifestyle protection insurance business decreased $14 million.	
 
 	•	 	The six months ended June 30, 2010 included increases of $7 million and $3 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.	
 
 	•	 	The increase in our international mortgage insurance business was as a result of an increase in amortization of deferred acquisition costs from the seasoning of our in-force blocks of business.	
 
 	•	 	The decrease in our lifestyle protection insurance business was attributable to a decrease in the U.K. from lower single premium sales related to new business regulations and a decrease from our runoff business. Additionally, there was an unfavorable adjustment in the first quarter of 2010 related to the timing of receiving client data that was offset in premiums.	
 
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Provision for income taxes. The effective tax rate decreased to 23.9% for the six months ended June 30, 2010 from 26.7% for the six months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to the favorable impact of newly enacted Australian tax legislation and lower taxed foreign income in the current year. The six months ended June 30, 2010 also included increases of $17 million and $2 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.
Net income attributable to noncontrolling interests . The increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The six months ended June 30, 2010 included an increase of $9 million attributable to changes in foreign exchange rates.
International selected operating performance measures
International mortgage insurance
The following table sets forth selected operating performance measures regarding our international mortgage insurance business as of or for the dates indicated:

 	  	As of June 30,	  	Increase
(decrease)  and
percentage
change	 	
(Amounts in millions)	  	2010	  	2009	  	2010 vs. 2009	 	
Primary insurance in-force	  	$	484,100	  	$	452,800	  	$	31,300	  	7	% 	
Risk in-force	  	 	163,000	  	 	148,000	  	 	15,000	  	10	% 	

 	  	Three months ended
June 30,	  	Increase
(decrease)  and
percentage
change	 	 	Six months ended
June 30,	  	Increase
(decrease)  and
percentage
change	 	
(Amounts in millions)	  	2010	  	2009	  	2010 vs. 2009	 	 	2010	  	2009	  	2010 vs. 2009	 	
New insurance written	  	$	14,900	  	$	13,000	  	$	1,900	  	15	% 	 	$	28,800	  	$	23,300	  	$	5,500	  	24	% 	
Net premiums written	  	 	218	  	 	181	  	 	37	  	20	% 	 	 	381	  	 	319	  	 	62	  	19	% 	
Net earned premiums	  	 	251	  	 	224	  	 	27	  	12	% 	 	 	497	  	 	438	  	 	59	  	13	% 	
Primary insurance in-force and risk in-force
Our businesses in Australia, New Zealand and Canada currently provide 100% coverage on the majority of the loans we insure in those markets. For the purpose of representing our risk in-force, we have computed an “effective” risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a factor that represents our highest expected average per-claim payment for any one underwriting year over the life of our businesses in Australia, New Zealand and Canada. For the three and six months ended June 30, 2010 and 2009, this factor was 35%.
Primary insurance in-force and risk in-force increased primarily as a result of new insurance written, partially offset by loss mitigation activities in Europe. Primary insurance in-force and risk in-force included increases of $25.1 billion and $9.5 billion, respectively, attributable to changes in foreign exchange rates as of June 30, 2010.
New insurance written
For the three and six months ended June 30, 2010, new insurance written increased primarily as a result of higher flow new insurance written in Canada driven by growth in the mortgage origination markets as consumer confidence improved. Also contributing to the increase was growth in bulk new insurance written in Australia
 
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and Canada as some liquidity returned to the securitization market in Australia and as select lenders look for capital relief in Canada. Partially offsetting these increases was a decrease in flow new insurance written in Australia reflecting higher interest rates and lower mortgage originations primarily from first-time homebuyers and in Europe where we have taken actions to selectively reduce new business including exiting selected distribution relationships. The three and six months ended June 30, 2010 included increases of $1.9 billion and $4.8 billion, respectively, attributable to changes in foreign exchange rates.
Net premiums written and net earned premiums
Most of our international mortgage insurance policies provide for single premiums at the time that loan proceeds are advanced. We initially record the single premiums to unearned premium reserves and recognize the premiums earned over time in accordance with the expected pattern of risk emergence. As of June 30, 2010, our unearned premium reserves decreased to $2.8 billion, including an increase of $0.2 billion attributable to changes in foreign exchange rates, from $2.9 billion as of June 30, 2009.
For the three and six months ended June 30, 2010, net premiums written increased primarily driven by an increase in new insurance written in Canada, partially offset by a decrease in new insurance written in Australia, a decrease in average price driven by a decline in new business volume with loan-to-value ratios of more than 90% and increased ceded reinsurance premiums. The three and six months ended June 30, 2010 included increases of $28 million and $59 million, respectively, attributable to changes in foreign exchange rates.
For the three months ended June 30, 2010, excluding the effects of foreign exchange, net earned premiums decreased primarily related to Australia as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums in the second quarter of 2010 and lower new business volumes.
For the six months ended June 30, 2010, excluding the effects of foreign exchange, net earned premiums decreased related to rescissions and other terminations related to loss mitigation activities in Europe, particularly in Spain. In addition, premiums in Australia decreased as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums during the six months ended June 30, 2010 and lower new business volumes. In Canada, premiums were relatively flat as seasoning of our in-force block of business was offset by lower policy cancellations. The three and six months ended June 30, 2010 included increases of $31 million and $77 million, respectively, attributable to changes in foreign exchange rates.
Loss and expense ratios
The following table sets forth the loss and expense ratios for our international mortgage insurance business for the dates indicated:

 	  	Three months ended
June 30,	 	 	Increase (decrease)	 	 	Six months ended
June 30,	 	 	Increase (decrease)	 	
 	  	    2010    	 	 	    2009    	 	 	2010 vs. 2009	 	 	  2010  	 	 	  2009  	 	 	2010 vs. 2009	 	
Loss ratio	  	42	% 	 	56	% 	 	(14	)% 	 	43	% 	 	53	% 	 	(10	)% 	
Expense ratio	  	33	% 	 	30	% 	 	3	% 	 	38	% 	 	35	% 	 	3	% 	
The loss ratio is the ratio of incurred losses and loss adjustment expenses to net earned premiums. The expense ratio is the ratio of general expenses to net premiums written. In our business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of deferred acquisition costs and intangibles.
The decrease in the loss ratio for the three months ended June 30, 2010 was primarily attributable to lower losses in Canada from a decrease in delinquencies and in Australia as a result of lower reserves per delinquency.
 
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The decrease in the loss ratio for the six months ended June 30, 2010 was primarily attributable to lower losses in Canada from a decrease in delinquencies and in Australia as a result of lower reserves per delinquency. There were also decreased losses in Europe related to ongoing loss mitigation activities in Spain. Partially offsetting the decrease in the loss ratio was a decline in net earned premiums.
The increase in the expense ratio for the three and six months ended June 30, 2010 was primarily attributable to higher expenses in Canada and a decrease in net premiums written in Australia.
Delinquent loans
The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our international mortgage insurance portfolio as of the dates indicated:

 	  	June 30, 2010	 	 	December 31, 2009	 	 	June 30, 2009	 	
Primary insurance	  			 			 			
Insured loans in-force	  	2,938,624	  	 	2,911,605	  	 	2,918,570	  	
Delinquent loans (1)	  	22,093	  	 	22,821	  	 	24,569	  	
Percentage of delinquent loans (delinquency rate) (1)	  	0.75	% 	 	0.78	% 	 	0.84	% 	
				
Flow loans in-force	  	2,447,543	  	 	2,418,144	  	 	2,392,425	  	
Flow delinquent loans (1)	  	19,219	  	 	19,652	  	 	21,389	  	
Percentage of flow delinquent loans (delinquency rate) (1)	  	0.79	% 	 	0.81	% 	 	0.89	% 	
				
Bulk loans in-force	  	491,081	  	 	493,461	  	 	526,145	  	
Bulk delinquent loans (2)	  	2,874	  	 	3,169	  	 	3,180	  	
Percentage of bulk delinquent loans (delinquency rate)	  	0.59	% 	 	0.64	% 	 	0.60	% 	

(1)	The amounts previously presented in our second quarter of 2009 Quarterly Report on Form 10-Q have been revised for June 30, 2009 to include delinquencies associated with a lender captive reinsured by us in Australia that had previously been excluded. There was no impact on reserves or losses as these items had previously been included in reported amounts.	
(2)	Included loans where we were in a secondary loss position for which no reserve was established due to an existing deductible. Excluding these loans, bulk delinquent loans were 2,858 as of June 30, 2010, 3,154 as of December 31, 2009 and 2,547 as of June 30, 2009.	
Flow loans in-force increased primarily due to growth in Canada that was partially offset by loss mitigation efforts in Europe. Bulk loans in-force decreased due to limited market opportunities. Delinquent loans decreased from lower new delinquencies in Canada from improving economic conditions and in Europe from ongoing loss mitigation activities, partially offset by a moderate increase in delinquencies in Australia.
Lifestyle protection insurance
The following table sets forth selected operating performance measures regarding our lifestyle protection insurance business and other related consumer protection insurance products for the periods indicated:

 	  	Three months ended
June  30,	  	Increase
(decrease) and
percentage
change	 	 	Six months ended
June  30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	  	    2009    	  	2010 vs. 2009	 	 	    2010    	  	    2009    	  	2010 vs. 2009	 	
Lifestyle protection insurance gross written premiums, premium equivalents and deposits	  	$	424	  	$	456	  	$	(32	) 	 	(7	)% 	 	$	861	  	$	863	  	$	(2	) 	 	—  	% 	
Mexico operations gross written premiums	  	 	—  	  	 	16	  	 	(16	) 	 	(100	)% 	 	 	—  	  	 	32	  	 	(32	) 	 	(100	)% 	
Net earned premiums	  	 	244	  	 	284	  	 	(40	) 	 	(14	)% 	 	 	502	  	 	566	  	 	(64	) 	 	(11	)% 	
 
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Gross written premiums, premium equivalents and deposits
The three and six months ended June 30, 2010 included a decrease of $8 million and an increase of $30 million, respectively, attributable to changes in foreign exchange rates. Gross written premiums, premium equivalents and deposits, gross of ceded reinsurance and cancellations, decreased mainly attributable to reduced levels of consumer lending. In the third quarter of 2009, we sold our Mexico operations; therefore, there were no sales in 2010.
Net earned premiums
For the three months ended June 30, 2010, the decrease in our lifestyle protection insurance business was primarily attributable to our runoff business. Reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions taken in the second half of 2009. The three months ended June 30, 2010 included a decrease of $6 million attributable to changes in foreign exchange rates.
For the six months ended June 30, 2010, the decrease in our lifestyle protection insurance business was primarily attributable to our runoff business. Reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions taken in the second half of 2009. Additionally, there was a favorable premium adjustment related to the timing of receiving client data which was partially offset by an unfavorable reinsurance adjustment in the first quarter of 2010. These adjustments were offset in expenses. The six months ended June 30, 2010 included an increase of $16 million attributable to changes in foreign exchange rates.
 
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U.S. Mortgage Insurance segment
Segment results of operations
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:

 	  	Three months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	153	  	 	$	164	  	 	$	(11	) 	 	(7	)% 	
Net investment income	  	 	31	  	 	 	35	  	 	 	(4	) 	 	(11	)% 	
Net investment gains (losses)	  	 	(3	) 	 	 	—  	  	 	 	(3	) 	 	NM	(1)  	
Insurance and investment product fees and other	  	 	—  	  	 	 	(3	) 	 	 	3	  	 	100	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	181	  	 	 	196	  	 	 	(15	) 	 	(8	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Benefits and other changes in policy reserves	  	 	216	  	 	 	371	  	 	 	(155	) 	 	(42	)% 	
Acquisition and operating expenses, net of deferrals	  	 	33	  	 	 	33	  	 	 	—  	  	 	—  	% 	
Amortization of deferred acquisition costs and intangibles	  	 	4	  	 	 	5	  	 	 	(1	) 	 	(20	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	253	  	 	 	409	  	 	 	(156	) 	 	(38	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Loss before income taxes	  	 	(72	) 	 	 	(213	) 	 	 	141	  	 	66	% 	
Benefit for income taxes	  	 	(29	) 	 	 	(79	) 	 	 	50	  	 	63	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net loss available to Genworth Financial, Inc.’s common stockholders	  	 	(43	) 	 	 	(134	) 	 	 	91	  	 	68	% 	
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:	  				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	3	 	 	 	—  	  	 	 	3	 	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating loss available to Genworth Financial, Inc.’s common stockholders	  	$	(40	) 	 	$	(134	) 	 	$	94	  	 	70	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
Net operating loss available to Genworth Financial, Inc.’s common stockholders
The decrease in the net operating loss available to Genworth Financial, Inc.’s common stockholders was as a result of moderating losses from a decrease in delinquencies and increasing loss mitigation activities, including settlements, in 2010.
Revenues
Premiums decreased primarily driven by lower new insurance written as a result of a smaller mortgage insurance market and policy coverage rescission activity, partially offset by the favorable impact of rate increases and an increase in flow persistency from 81% for the three months ended June 30, 2009 to 88% for the three months ended June 30, 2010.
Net investment income decreased primarily from lower average invested assets. Net investment income in 2010 included $2 million of lower losses related to limited partnerships accounted for under the equity method.
Net investment losses in 2010 were as a result of a decrease in gains on sales of investments from portfolio repositioning activities for the three months ended June 30, 2010 compared to the three months ended June 30, 2009.
 
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Insurance and investment product fees and other income increased primarily from the cancellation of a capital maintenance agreement with our European international mortgage insurance business in the second quarter of 2009.
Benefits and expenses
Benefits and other changes in policy reserves decreased due to a decrease in change in reserves of $202 million and an increase in net paid claims of $46 million. The decrease in change in reserves was primarily driven by a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase in average claim payments reflecting higher loan balances in more recent book years and higher claim counts. Benefits and other changes in reserves included a reinsurance credit principally related to our captive reinsurance arrangements of $55 million and $76 million for the three months ended June 30, 2010 and 2009, respectively.
Benefit for income taxes. The effective tax rate increased to 40.3% for the three months ended June 30, 2010 from 37.1% for the three months ended June 30, 2009. This increase in the effective tax rate was primarily attributable to proportion of tax  favored investment income and to the effects of interim tax accounting standards in the prior year.
Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:

 	  	Six months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	295	  	 	$	334	  	 	$	(39	) 	 	(12	)% 	
Net investment income	  	 	61	  	 	 	68	  	 	 	(7	) 	 	(10	)% 	
Net investment gains (losses)	  	 	1	  	 	 	(19	) 	 	 	20	  	 	105	% 	
Insurance and investment product fees and other	  	 	5	  	 	 	1	  	 	 	4	  	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	362	  	 	 	384	  	 	 	(22	) 	 	(6	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Benefits and other changes in policy reserves	  	 	412	  	 	 	774	  	 	 	(362	) 	 	(47	)% 	
Acquisition and operating expenses, net of deferrals	  	 	67	  	 	 	65	  	 	 	2	  	 	3	% 	
Amortization of deferred acquisition costs and intangibles	  	 	7	  	 	 	10	  	 	 	(3	) 	 	(30	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	486	  	 	 	849	  	 	 	(363	) 	 	(43	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Loss before income taxes	  	 	(124	) 	 	 	(465	) 	 	 	341	  	 	73	% 	
Benefit for income taxes	  	 	(48	) 	 	 	(183	) 	 	 	135	  	 	74	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net loss available to Genworth Financial, Inc.’s common stockholders	  	 	(76	) 	 	 	(282	) 	 	 	206	  	 	73	% 	
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:	  				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	—  	  	 	 	13	  	 	 	(13	) 	 	(100	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating loss available to Genworth Financial, Inc.’s common stockholders	  	$	(76	) 	 	$	(269	) 	 	$	193	  	 	72	% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
 
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Net operating loss available to Genworth Financial, Inc.’s common stockholders
The decrease in the net operating loss available to Genworth Financial, Inc.’s common stockholders was as a result of moderating losses from a decrease in delinquencies and increasing loss mitigation activities, including settlements, in 2010.
Revenues
Premiums decreased primarily driven by lower new insurance written as a result of a smaller mortgage insurance market and policy coverage rescission activity, partially offset by the favorable impact of rate increases and an increase in flow persistency from 82% for the six months ended June 30, 2009 to 87% for the six months ended June 30, 2010.
Net investment income decreased primarily from lower average invested assets. Net investment income in 2010 included $6 million of lower losses related to limited partnerships accounted for under the equity method.
The change in net investment gains (losses) was primarily driven by impairments recorded in the first quarter of 2009 that did not recur. Also contributing to the change was an increase in gains on sales of investments from portfolio repositioning activities for the six months ended June 30, 2010 compared to the six months ended June 30, 2009.
Insurance and investment product fees and other income increased primarily from the cancellation of a capital maintenance agreement with our European international mortgage insurance business in the second quarter of 2009.
Benefits and expenses
Benefits and other changes in policy reserves decreased due to a decrease in change in reserves of $639 million and an increase in net paid claims of $276 million. The decrease in change in reserves was primarily driven by a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase in average claim payments reflecting higher loan balances in more recent book years and higher claim counts. Benefits and other changes in reserves included a reinsurance credit principally related to our captive reinsurance arrangements of $89 million and $195 million for the six months ended June 30, 2010 and 2009, respectively.
Benefit for income taxes. The effective tax rate decreased to 38.7% for the six months ended June 30, 2010 from 39.4% for the six months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to tax favored investments.
U.S. Mortgage Insurance selected operating performance measures
The following table sets forth selected operating performance measures regarding our U.S. Mortgage Insurance segment as of or for the dates indicated:

 	  	As of June 30,	  	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	2010	  	2009	  	2010 vs. 2009	 	
Primary insurance in-force	  	$	131,900	  	$	155,200	  	$	(23,300	) 	 	(15	)% 	
Risk in-force	  	 	30,700	  	 	33,900	  	 	(3,200	) 	 	(9	)% 	
 
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 	  	Three months ended
June  30,	  	Increase
(decrease)  and
percentage
change	 	 	Six months ended
June 30,	  	Increase
(decrease)  and
percentage
change	 	
(Amounts in millions)	  	    2010    	  	    2009    	  	2010 vs. 2009	 	 	2010	  	2009	  	2010 vs. 2009	 	
New insurance written	  	$	2,200	  	$	3,400	  	$	(1,200	) 	 	(35	)% 	 	$	3,900	  	$	7,100	  	$	(3,200	) 	 	(45	)% 	
Net premiums written	  	 	152	  	 	160	  	 	(8	) 	 	(5	)% 	 	 	294	  	 	331	  	 	(37	) 	 	(11	)% 	
Primary insurance in-force and risk in-force
Primary insurance in-force and risk in-force decreased primarily as a result of an increase in rescissions and other loss mitigation actions, including agreements with a counterparty that reduced our bulk risk in-force exposure. This decrease was partially offset by an increase in flow new insurance written from an increase in our mortgage insurance market share, partially offset and limited by tight domestic credit markets and lending guidelines, as well as a weak housing market and limited mortgage credit liquidity. Our flow persistency was 87% and 82% for the six months ended June 30, 2010 and 2009, respectively.
New insurance written
New insurance written decreased during the three months ended June 30, 2010 primarily driven by constraints in the bulk market. This decrease was partially offset by an increase in flow new insurance written from an increase in our mortgage insurance market share, partially offset by tighter mortgage insurance guidelines and mortgage lender underwriting standards. New insurance written decreased during the six months ended June 30, 2010 primarily driven by constraints in the bulk market as well as a decrease in flow new insurance written from a decline in overall mortgage originations as a result of a weak housing market and reduced mortgage credit liquidity.
Net premiums written
Net premiums written decreased principally from lower new insurance written during 2010 as a result of a lower mortgage insurance origination market.
Loss and expense ratios
The following table sets forth the loss and expense ratios for our U.S. Mortgage Insurance segment for the periods indicated:

 	  	Three months ended
June  30,	 	 	Increase (decrease)	 	 	Six months ended
June  30,	 	 	Increase (decrease)	 	
 	  	2010	 	 	2009	 	 	2010 vs. 2009	 	 	2010	 	 	2009	 	 	2010 vs. 2009	 	
Loss ratio	  	141	% 	 	225	% 	 	(84	)% 	 	140	% 	 	231	% 	 	(91	)% 	
Expense ratio	  	25	% 	 	24	% 	 	1	% 	 	25	% 	 	23	% 	 	2	% 	
The loss ratio is the ratio of incurred losses and loss adjustment expenses to net earned premiums. The expense ratio is the ratio of general expenses to net premiums written. In our business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of deferred acquisition costs and intangibles.
For the three months ended June 30, 2010, the decrease in the loss ratio was primarily attributable to a decrease in change in reserves which was partially offset by an increase in paid claims. The decrease in change in reserves was primarily driven by lower new delinquencies and a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase in average claim payments reflecting higher loan balances in more recent book years and higher claim counts. Partially offsetting the decrease in the loss ratio was a decline in net earned premiums.
 
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For the six months ended June 30, 2010, the decrease in the loss ratio was primarily attributable to a decrease in change in reserves which was partially offset by an increase in paid claims. The remaining decrease in change in reserves was primarily driven by lower new delinquencies and a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase in average claim payments reflecting higher loan balances in more recent book years and higher claim counts. Partially offsetting the decrease in the loss ratio was a decline in net earned premiums.
The expense ratio increased as a result of a decrease in net premiums written for the three and six months ended June 30, 2010.
Delinquent loans
The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our U.S. mortgage insurance portfolio as of the dates indicated:

 	  	June 30,
2010	 	 	December 31,
2009	 	 	June 30,
2009	 	
Primary insurance:	  			 			 			
Insured loans in-force	  	821,617	  	 	890,730	  	 	947,777	  	
Delinquent loans	  	101,759	  	 	122,279	  	 	102,800	  	
Percentage of delinquent loans (delinquency rate)	  	12.39	% 	 	13.73	% 	 	10.85	% 	
				
Flow loans in-force	  	723,301	  	 	753,370	  	 	796,633	  	
Flow delinquent loans	  	98,771	  	 	107,495	  	 	87,590	  	
Percentage of flow delinquent loans (delinquency rate)	  	13.66	% 	 	14.27	% 	 	11.00	% 	
				
Bulk loans in-force	  	98,316	  	 	137,360	  	 	151,144	  	
Bulk delinquent loans (1)	  	2,988	  	 	14,784	  	 	15,210	  	
Percentage of bulk delinquent loans (delinquency rate)	  	3.04	% 	 	10.76	% 	 	10.06	% 	
				
A minus and sub-prime loans in-force	  	83,859	  	 	89,678	  	 	97,271	  	
A minus and sub-prime delinquent loans	  	24,867	  	 	29,238	  	 	25,271	  	
Percentage of A minus and sub-prime delinquent loans (delinquency rate)	  	29.65	% 	 	32.60	% 	 	25.98	% 	
				
Pool insurance:	  			 			 			
Insured loans in-force	  	19,473	  	 	20,370	  	 	21,166	  	
Delinquent loans	  	831	  	 	781	  	 	632	  	
Percentage of delinquent loans (delinquency rate)	  	4.27	% 	 	3.83	% 	 	2.99	% 	

(1)	Included loans where we were in a secondary loss position for which no reserve was established due to an existing deductible. Excluding these loans, bulk delinquent loans were 1,478 as of June 30, 2010, 11,319 as of December 31, 2009 and 10,294 as of June 30, 2009.	
Delinquency and foreclosure levels have increased significantly since the second quarter of 2009 as the U.S. continues to experience an economic recession and weakness in its housing markets. There has also been a continued increase in delinquencies and foreclosures in our 2005, 2006 and 2007 book years. These trends continue to be especially evident in Florida, California, Arizona and Nevada, as well as in our A minus, Alt-A, ARMs and certain 100% loan-to-value products. However, we have seen delinquencies decrease in our primary insurance in-force since the fourth quarter of 2009 as a result of settlements reached with counterparties in 2010, as well as a decline in new flow delinquencies and increased cures from loan modification programs.
 
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Primary insurance delinquency rates differ from region to region in the U.S. at any one time depending upon economic conditions and cyclical growth patterns. The tables below set forth our primary delinquency rates for the various regions of the U.S. and the ten largest states by our risk in-force and total reserves as of the dates indicated. Delinquency rates are shown by region based upon the location of the underlying property, rather than the location of the lender.

 	  	Percent of primary
risk in-force as of
June 30, 2010	 	 	Percent of total
reserves as of
June 30, 2010   (1) 	 	 	Delinquency rate	 	
	  			 			 	June 30,
2010	 	 	December 31,
2009	 	 	June 30,
2009	 	
By Region:	  			 			 			 			 			
Southeast (2)	  	23	% 	 	31	% 	 	17.06	% 	 	18.36	% 	 	14.98	% 	
South Central (3)	  	16	  	 	15	  	 	11.41	% 	 	12.42	% 	 	9.27	% 	
Northeast (4)	  	14	  	 	10	  	 	10.85	% 	 	11.60	% 	 	8.78	% 	
North Central (5)	  	11	  	 	12	  	 	11.50	% 	 	12.20	% 	 	9.08	% 	
Pacific (6)	  	11	  	 	15	  	 	15.83	% 	 	19.43	% 	 	16.14	% 	
Great Lakes (7)	  	9	  	 	7	  	 	9.08	% 	 	10.20	% 	 	8.58	% 	
Plains (8)	  	6	  	 	3	  	 	7.59	% 	 	8.29	% 	 	6.16	% 	
Mid-Atlantic (9)	  	5	  	 	4	  	 	11.23	% 	 	13.08	% 	 	9.63	% 	
New England (10)	  	5	  	 	3	  	 	11.11	% 	 	12.48	% 	 	9.38	% 	
	  	 	 	 	 	 	 			 			 			
Total	  	100	% 	 	100	% 	 	12.39	% 	 	13.73	% 	 	10.85	% 	

(1)	Total reserves were $1,952 million as of June 30, 2010.	
(2)	Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee.	
(3)	Arizona, Colorado, Louisiana, New Mexico, Oklahoma, Texas and Utah.	
(4)	New Jersey, New York and Pennsylvania.	
(5)	Illinois, Minnesota, Missouri and Wisconsin.	
(6)	Alaska, California, Hawaii, Nevada, Oregon and Washington.	
(7)	Indiana, Kentucky, Michigan and Ohio.	
(8)	Idaho, Iowa, Kansas, Montana, Nebraska, North Dakota, South Dakota and Wyoming.	
(9)	Delaware, Maryland, Virginia, Washington D.C. and West Virginia.	
(10)	Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.	

 	  	Percent of primary
risk in-force as of
June 30, 2010	 	 	Percent of total
reserves as of
June 30, 2010   (1) 	 	 	Delinquency rate	 	
	  			 			 	June 30,
2010	 	 	December 31,
2009	 	 	June 30,
2009	 	
By State:	  			 			 			 			 			
Florida	  	8	% 	 	20	% 	 	28.86	% 	 	30.77	% 	 	26.81	% 	
Texas	  	7	% 	 	3	% 	 	8.80	% 	 	9.49	% 	 	6.76	% 	
New York	  	6	% 	 	4	% 	 	8.88	% 	 	9.42	% 	 	7.03	% 	
California	  	5	% 	 	8	% 	 	16.40	% 	 	21.87	% 	 	19.08	% 	
Illinois	  	5	% 	 	7	% 	 	15.79	% 	 	16.40	% 	 	12.11	% 	
Georgia	  	4	% 	 	4	% 	 	17.13	% 	 	17.62	% 	 	13.06	% 	
North Carolina	  	4	% 	 	2	% 	 	11.12	% 	 	11.73	% 	 	8.44	% 	
Pennsylvania	  	4	% 	 	2	% 	 	10.34	% 	 	11.13	% 	 	8.41	% 	
New Jersey	  	4	% 	 	4	% 	 	16.36	% 	 	17.35	% 	 	13.31	% 	
Ohio	  	3	% 	 	2	% 	 	7.85	% 	 	8.47	% 	 	6.94	% 	

(1)	Total reserves were $1,952 million as of June 30, 2010.	
 
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The following table sets forth the dispersion of our total reserves and primary insurance in-force and risk in-force by year of policy origination and average annual mortgage interest rate as of June 30, 2010:

(Amounts in millions)	  	Average
rate	 	 	Percent of total
reserves (1) 	 	 	Primary
insurance
in-force	  	Percent
of total	 	 	Primary
risk in-force	  	Percent
of total	 	
Policy Year	  	 	 	 	 	 	 	 	  	 	 	 	 	  	 	 	
1999 and prior	  	7.80	% 	 	1	% 	 	$	2,004	  	1.5	% 	 	$	520	  	1.7	% 	
2000	  	8.26	% 	 	—  	  	 	 	353	  	0.3	  	 	 	89	  	0.3	  	
2001	  	7.49	% 	 	1	  	 	 	1,292	  	1.0	  	 	 	325	  	1.1	  	
2002	  	6.62	% 	 	1	  	 	 	3,098	  	2.3	  	 	 	753	  	2.5	  	
2003	  	5.65	% 	 	2	  	 	 	12,480	  	9.5	  	 	 	2,105	  	6.9	  	
2004	  	5.88	% 	 	2	  	 	 	7,317	  	5.5	  	 	 	1,640	  	5.4	  	
2005	  	5.98	% 	 	13	  	 	 	11,559	  	8.8	  	 	 	2,931	  	9.7	  	
2006	  	6.52	% 	 	23	  	 	 	15,453	  	11.7	  	 	 	3,737	  	12.3	  	
2007	  	6.61	% 	 	50	  	 	 	33,467	  	25.4	  	 	 	8,229	  	27.1	  	
2008	  	6.19	% 	 	7	  	 	 	30,998	  	23.5	  	 	 	7,633	  	25.2	  	
2009	  	5.08	% 	 	—  	  	 	 	10,061	  	7.6	  	 	 	1,563	  	5.1	  	
2010	  	4.97	% 	 	—  	  	 	 	3,854	  	2.9	  	 	 	820	  	2.7	  	
	  			 	 	 	 	 	 	  	 	 	 	 	 	  	 	 	
Total portfolio	  	6.22	% 	 	100	% 	 	$	131,936	  	100.0	% 	 	$	30,345	  	100.0	% 	

(1)	Total reserves were $1,952 million as of June 30, 2010.	
 
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Corporate and Other
Results of Operations
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:

 	  	Three months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	    2010 vs. 2009    	 	
Revenues:	  				 				 				 			
Premiums	  	$	—  	  	 	$	1	  	 	$	(1	) 	 	(100	)% 	
Net investment income	  	 	35	  	 	 	60	  	 	 	(25	) 	 	(42	)% 	
Net investment gains (losses)	  	 	(68	) 	 	 	(61	) 	 	 	(7	) 	 	(11	)% 	
Insurance and investment product fees and other	  	 	(3	) 	 	 	41	  	 	 	(44	) 	 	(107	)%  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	(36	) 	 	 	41	  	 	 	(77	) 	 	(188	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Interest credited	  	 	35	 	 	 	79	  	 	 	(44	) 	 	(56	)% 	
Acquisition and operating expenses, net of deferrals	  	 	9	  	 	 	15	  	 	 	(6	) 	 	(40	)% 	
Amortization of deferred acquisition costs and intangibles	  	 	4	  	 	 	3	  	 	 	1	  	 	33	% 	
Interest expense	  	 	70	  	 	 	66	  	 	 	4	  	 	6	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	118	  	 	 	163	  	 	 	(45	) 	 	(28	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Loss before income taxes	  	 	(154	) 	 	 	(122	) 	 	 	(32	) 	 	(26	)% 	
Benefit for income taxes	  	 	(51	) 	 	 	(17	) 	 	 	(34	) 	 	(200	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net loss available to Genworth Financial, Inc.’s common stockholders	  	 	(103	) 	 	 	(105	) 	 	 	2	  	 	2	% 	
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:	  				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	42	  	 	 	38	  	 	 	4	  	 	11	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating loss available to Genworth Financial, Inc.’s common stockholders	  	$	(61	) 	 	$	(67	) 	 	$	6	  	 	9	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating loss available to Genworth Financial, Inc.’s common stockholders
The decrease in the net operating loss available to Genworth Financial, Inc.’s common stockholders in the current year was primarily as a result of higher tax benefits.
Revenues
Net investment income decreased primarily driven by lower investment income related to policy loans from a bankruptcy-related lapse in 2009. This decrease was partially offset by an increase in net investment income largely related to the consolidation of certain securitization entities as of January 1, 2010.
Insurance and investment product fees and other decreased primarily as a result of income from the early retirement of institutional contracts at a discount to contract values in 2009 that did not recur.
Benefits and expenses
The decrease in interest credited was mainly attributable to lower interest rates on interest paid on our floating rate policyholder liabilities and a decrease in average outstanding liabilities. There was also a decrease as a result of a bankruptcy-related lapse in 2009 of a large group corporate-owned life insurance policy.
 
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Operating expenses decreased as a result of higher allocated expenses in the current year.
Interest expense increased primarily related to the consolidation of certain securitization entities as of January 1, 2010.
The increase in the income tax benefit was primarily related to allocated tax expense in the prior year.
Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:

 	  	Six months ended
June 30,	 	 	Increase
(decrease) and
percentage
change	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	2010 vs. 2009	 	
Revenues:	  				 				 				 			
Premiums	  	$	—  	  	 	$	2	  	 	$	(2	) 	 	(100	)% 	
Net investment income	  	 	44	  	 	 	115	  	 	 	(71	) 	 	(62	)% 	
Net investment gains (losses)	  	 	(84	) 	 	 	(223	) 	 	 	139	  	 	62	% 	
Insurance and investment product fees and other	  	 	—  	  	 	 	116	  	 	 	(116	) 	 	(100	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total revenues	  	 	(40	) 	 	 	10	  	 	 	(50	) 	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Benefits and expenses:	  				 				 				 			
Interest credited	  	 	74	  	 	 	168	  	 	 	(94	) 	 	(56	)% 	
Acquisition and operating expenses, net of deferrals	  	 	17	  	 	 	26	  	 	 	(9	) 	 	(35	)% 	
Amortization of deferred acquisition costs and intangibles	  	 	8	  	 	 	8	  	 	 	—  	  	 	—  	% 	
Interest expense	  	 	140	  	 	 	128	  	 	 	12	  	 	9	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Total benefits and expenses	  	 	239	  	 	 	330	  	 	 	(91	) 	 	(28	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Loss before income taxes	  	 	(279	) 	 	 	(320	) 	 	 	41	  	 	13	% 	
Benefit for income taxes	  	 	(208	) 	 	 	(119	) 	 	 	(89	) 	 	(75	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net loss available to Genworth Financial, Inc.’s common stockholders	  	 	(71	) 	 	 	(201	) 	 	 	130	  	 	65	% 	
Adjustments to net loss available to Genworth Financial, Inc.’s common stockholders:	  				 				 				 			
Net investment (gains) losses, net of taxes and other adjustments	  	 	53	  	 	 	144	  	 	 	(91	) 	 	(63	)% 	
Net tax benefit related to separation from our former parent	  	 	(106	) 	 	 	—  	  	 	 	(106	) 	 	NM	(1)  	
	  	 	 	 	 	 	 	 	 	 	 	 	 			
Net operating loss available to Genworth Financial, Inc.’s common stockholders	  	$	(124	) 	 	$	(57	) 	 	$	(67	) 	 	(118	)% 	

(1)	We define “NM” as not meaningful for increases or decreases greater than 200%.	
Net operating loss available to Genworth Financial, Inc.’s common stockholders
The increase in the net operating loss available to Genworth Financial, Inc.’s common stockholders in the current year was primarily attributable to income from the early retirement of institutional contracts at a discount to contract values in the prior year that did not recur.
Revenues
Net investment income decreased primarily driven by lower investment income related to policy loans from a bankruptcy-related lapse in 2009, lower yields on floating rate investments and a decline in average invested
 
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assets. Net investment income also included $9 million of higher losses related to limited partnership investments accounted for under the equity method in 2010. These decreases were partially offset by an increase in net investment income largely related to the consolidation of certain securitization entities as of January 1, 2010.
Insurance and investment product fees and other decreased primarily as a result of income from the early retirement of institutional contracts at a discount to contract values in 2009 that did not recur.
Benefits and expenses
The decrease in interest credited was mainly attributable to lower interest rates on interest paid on our floating rate policyholder liabilities and a decrease in average outstanding liabilities. There was also a decrease as a result of a bankruptcy-related lapse in 2009 of a large group corporate-owned life insurance policy.
Operating expenses decreased as a result of higher allocated expenses in the current year.
Interest expense increased largely related to the consolidation of certain securitization entities as of January 1, 2010.
The increase in the income tax benefit was primarily related to changes in uncertain tax benefits related to separation from  our former parent.
Investments and Derivative Instruments
Investment results
The following tables set forth information about our investment income, excluding net investment gains (losses), for each component of our investment portfolio for the periods indicated:

 	  	Three months ended
June 30,	 	 	Increase (decrease)	 	
 	  	2010	 	 	2009	 	 	2010 vs. 2009	 	
(Amounts in millions)	  	Yield	 	 	Amount	 	 	Yield	 	 	Amount	 	 	Yield	 	 	Amount	 	
Fixed maturity securities—taxable	  	5.0	% 	 	$	646	  	 	5.2	% 	 	$	604	  	 	(0.2	)% 	 	$	42	  	
Fixed maturity securities—non-taxable	  	4.3	% 	 	 	16	  	 	4.6	% 	 	 	28	  	 	(0.3	)% 	 	 	(12	) 	
Commercial mortgage loans	  	5.5	% 	 	 	99	  	 	5.5	% 	 	 	109	  	 	—  	% 	 	 	(10	) 	
Restricted commercial mortgage loans related to securitization entities   (1)	  	7.3	% 	 	 	10	  	 	—  	% 	 	 	—  	  	 	7.3	% 	 	 	10	  	
Equity securities	  	11.8	% 	 	 	5	  	 	3.6	% 	 	 	3	  	 	8.2	% 	 	 	2	  	
Other invested assets	  	14.9	% 	 	 	39	  	 	(1.3	)% 	 	 	(7	) 	 	16.2	% 	 	 	46	  	
Policy loans	  	7.7	% 	 	 	28	  	 	10.5	% 	 	 	52	  	 	(2.8	)% 	 	 	(24	) 	
Cash, cash equivalents and short-term investments	  	0.3	% 	 	 	4	  	 	0.7	% 	 	 	14	  	 	(0.4	)% 	 	 	(10	) 	
	  			 	 	 	 	 			 	 	 	 	 			 	 	 	 	
Gross investment income before expenses and fees	  	4.9	% 	 	 	847	  	 	4.7	% 	 	 	803	  	 	0.2	% 	 	 	44	  	
Expenses and fees	  	(0.1	)% 	 	 	(24	) 	 	(0.1	)% 	 	 	(22	) 	 	—  	% 	 	 	(2	) 	
	  			 	 	 	 	 			 	 	 	 	 			 	 	 	 	
Net investment income	  	4.8	% 	 	$	823	  	 	4.6	% 	 	$	781	  	 	0.2	% 	 	$	42	  	

(1)	See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.	
 
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 	  	Six months ended
June 30,	 	 	Increase (decrease)	 	
 	  	2010	 	 	2009	 	 	2010 vs. 2009	 	
(Amounts in millions)	  	Yield	 	 	Amount	 	 	Yield	 	 	Amount	 	 	Yield	 	 	Amount	 	
Fixed maturity securities—taxable	  	5.0	% 	 	$	1,272	  	 	5.3	% 	 	$	1,227	  	 	(0.3	)% 	 	$	45	  	
Fixed maturity securities—non-taxable	  	4.3	% 	 	 	32	  	 	4.6	% 	 	 	58	  	 	(0.3	)% 	 	 	(26	) 	
Commercial mortgage loans	  	5.7	% 	 	 	203	  	 	5.5	% 	 	 	223	  	 	0.2	% 	 	 	(20	) 	
Restricted commercial mortgage loans related to securitization entities   (1)	  	7.4	% 	 	 	20	  	 	—  	% 	 	 	—  	  	 	7.4	% 	 	 	20	  	
Equity securities	  	9.4	% 	 	 	7	  	 	4.1	% 	 	 	6	  	 	5.3	% 	 	 	1	  	
Other invested assets	  	6.8	% 	 	 	37	  	 	(9.3	)% 	 	 	(106	) 	 	16.1	% 	 	 	143	  	
Restricted other invested assets related to securitization entities   (1)	  	0.6	% 	 	 	1	  	 	—  	% 	 	 	—  	  	 	0.6	% 	 	 	1	  	
Policy loans	  	7.6	% 	 	 	55	  	 	10.0	% 	 	 	96	  	 	(2.4	)% 	 	 	(41	) 	
Cash, cash equivalents and short-term investments	  	0.3	% 	 	 	9	  	 	0.8	% 	 	 	31	  	 	(0.5	)% 	 	 	(22	) 	
	  			 	 	 	 	 			 	 	 	 	 			 	 	 	 	
Gross investment income before expenses and fees	  	4.8	% 	 	 	1,636	  	 	4.4	% 	 	 	1,535	  	 	0.4	% 	 	 	101	  	
Expenses and fees	  	(0.2	)% 	 	 	(48	) 	 	(0.1	)% 	 	 	(43	) 	 	(0.1	)% 	 	 	(5	) 	
	  			 	 	 	 	 			 	 	 	 	 			 	 	 	 	
Net investment income	  	4.6	% 	 	$	1,588	  	 	4.3	% 	 	$	1,492	  	 	0.3	% 	 	$	96	  	

(1)	See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.	
Yields for fixed maturity and equity securities are based on weighted-average amortized cost or cost, respectively. Yields for other invested assets, which include securities lending activity, are calculated net of the corresponding securities lending liability. All other yields are based on average carrying values.
For the three and six months ended June 30, 2010, the increase in overall weighted-average investment yields was primarily attributable to lower losses on limited partnerships. Net investment income for the three months ended June 30, 2010 included $10 million of gains related to limited partnerships accounted for under the equity method as compared to losses of $33 million in the three months ended June 30, 2009. Net investment income for the six months ended June 30, 2010 included $116 million of lower losses related to limited partnerships accounted for under the equity method as compared to the six months ended June 30, 2009. Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of January 1, 2010. These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009 and lower yields on floating rate investments.
 
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The following table sets forth net investment gains (losses) for the periods indicated:

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
(Amounts in millions)	  	    2010    	 	 	    2009    	 	 	    2010    	 	 	    2009    	 	
Available-for-sale securities:	  				 				 				 				
Realized gains on sale	  	$	53	  	 	$	21	  	 	$	76	  	 	$	50	  	
Realized losses on sale	  	 	(36	) 	 	 	(48	) 	 	 	(74	) 	 	 	(111	) 	
Impairments:	  				 				 				 				
Total other-than-temporary impairments	  	 	(24	) 	 	 	(476	) 	 	 	(101	) 	 	 	(1,073	) 	
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)	  	 	(27	) 	 	 	324	  	 	 	(30	) 	 	 	324	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net other-than-temporary impairments	  	 	(51	) 	 	 	(152	) 	 	 	(131	) 	 	 	(749	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Trading securities	  	 	(4	) 	 	 	11	  	 	 	2	  	 	 	(1	) 	
Commercial mortgage loans	  	 	(18	) 	 	 	(5	) 	 	 	(22	) 	 	 	(11	) 	
Net gains (losses) related to securitization entities (1)	  	 	(47	) 	 	 	—  	  	 	 	(36	) 	 	 	—  	  	
Derivative instruments	  	 	(38	) 	 	 	114	  	 	 	(46	) 	 	 	(7	) 	
Other	  	 	2	  	 	 	6	  	 	 	22	  	 	 	6	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment gains (losses)	  	$	(139	) 	 	$	(53	) 	 	$	(209	) 	 	$	(823	) 	

(1)	See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.	
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
 
 	•	 	We recorded $51 million of net other-than-temporary impairments for the three months ended June 30, 2010 as compared to $152 million for the three months ended June 30, 2009. Of total impairments, for the three months ended June 30, 2010 and 2009, $43 million and $109 million, respectively, related to structured securities, including $23 million and $66 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. For the three months ended June 30, 2010, we recorded $5 million of impairments related to commercial mortgage loans and $4 million related to limited partnership investments. For the three months ended June 30, 2009, we recorded a $36 million impairment related to a retained interest in securitized assets based on revised assumptions regarding cash flows from the assets underlying this securitization transaction. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year. We also recorded $5 million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the three months ended June 30, 2009.	
 
 	•	 	Net investment losses related to derivatives of $38 million in the second quarter of 2010 were primarily related to $31 million of losses from the change in value of our credit default swaps due to widening credit spreads, $21 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs and $9 million of losses related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. These losses were partially offset by $15 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $4 million of gains from other non-qualified interest rate swaps, $2 million of gains related to embedded derivatives associated with certain reinsurance agreements and $2 million of gains from foreign currency options and forward contracts. Net investment gains related to derivatives of $114 million in the second quarter of 2009 were primarily related to gains in embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.	
 
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 	•	 	We also recorded $47 million of net losses related to securitization entities in the second quarter of 2010 primarily associated with derivatives and $18 million of losses related to commercial mortgage loans from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance. Net gains related to the sale of available-for-sale securities were $17 million in the second quarter of 2010 compared to losses of $27 million in the second quarter of 2009.	
 
 	•	 	The aggregate fair value of securities sold at a loss during the three months ended June 30, 2010 and 2009 was $858 million from the sale of 159 securities and $367 million from the sale of 106 securities, respectively, which was approximately 96% and 89%, respectively, of book value. The loss on sales of securities in the three months ended June 30, 2010 was primarily driven by widening credit spreads. Generally, securities that are sold at a loss represent either small dollar amounts or percentage losses upon disposition. However, in certain circumstances, events may occur that change our intent to hold specific securities and thus result in our disposition of the security at a loss. Examples of these events include unforeseen issuer-specific events or conditions and shifts in risk or uncertainty of certain securities. Of the securities that were sold at a loss during the three months ended June 30, 2010, the average period of time those securities had been continuously in an unrealized loss position was approximately 19 months. The securities sold at a loss during the three months ended June 30, 2010 included one mortgage-backed security that was sold for a total loss of $4 million related to portfolio repositioning activities. Of the securities that were sold at a loss during the three months ended June 30, 2009, the average period of time those securities had been continuously in an unrealized loss position was approximately nine months. Of the securities that were sold at a loss, there were no individual transactions that produced losses considered material to the consolidated financial statements.	
Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
 
 	•	 	We recorded $131 million of net other-than-temporary impairments for the six months ended June 30, 2010 as compared to $749 million for the six months ended June 30, 2009. Of total impairments, for the six months ended June 30, 2010 and 2009, $105 million and $389 million, respectively, related to structured securities, including $59 million and $268 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. Impairments related to corporate securities as a result of bankruptcies, receivership or concerns about the issuer’s ability to continue to make contractual payments or where we have intent to sell were $5 million and $59 million for the six months ended June 30, 2010 and 2009, respectively. We also recorded $6 million and $245 million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the six months ended June 30, 2010 and 2009, respectively. For the six months ended June 30, 2010, we recorded $10 million of impairments related to limited partnership investments and $5 million related to commercial mortgage loans. We recorded a $36 million impairment related to a retained interest in securitized assets based on revised assumptions regarding cash flows from the assets underlying this securitization transaction during the six months ended June 30, 2009. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year.	
 
 	•	 	Net investment losses related to derivatives of $46 million for the six months ended June 30, 2010 were primarily related to $35 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs, $27 million of losses from the change in value of our credit default swaps due to widening credit spreads and $6 million of losses related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. These losses were partially offset by $13 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $7 million of gains from other non-qualified interest rate swaps and $2 million of gains related to embedded derivatives associated with certain reinsurance agreements. Net investment losses related to derivatives	
 
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 	of $7 million for the six months ended June 30, 2009 were primarily related to losses from a derivative strategy to mitigate the interest rate risk associated with our statutory capital position which were partially offset by gains in embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.	
 
 	•	 	We also recorded $36 million of net losses related to securitization entities primarily associated with derivatives and $22 million of losses related to commercial mortgage loans from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance during the six months ended June 30, 2010. There was also a net gain of $16 million from the recovery of a counterparty receivable in 2010. Net gains related to the sale of available-for-sale securities were $2 million during the six months ended June 30, 2010 compared to losses of $61 million during the six months ended June 30, 2009.	
 
 	•	 	The aggregate fair value of securities sold at a loss during the six months ended June 30, 2010 and 2009 was $1,416 million from the sale of 239 securities and $737 million from the sale of 199 securities, respectively, which was approximately 95% and 87%, respectively, of book value. The loss on sales of securities in the six months ended June 30, 2010 was primarily driven by widening credit spreads. Generally, securities that are sold at a loss represent either small dollar amounts or percentage losses upon disposition. However, in certain circumstances, events may occur that change our intent to hold specific securities and thus result in our disposition of the security at a loss. Examples of these events include unforeseen issuer-specific events or conditions and shifts in risk or uncertainty of certain securities. Of the securities that were sold at a loss during the six months ended June 30, 2010, the average period of time those securities had been continuously in an unrealized loss position was approximately 18 months. The securities sold at a loss during the six months ended June 30, included one non-U.S. government security that was sold for a total loss of $7 million in the first quarter of 2010 and one mortgage-backed security that was sold for a total loss of $4 million in the second quarter of 2010 related to portfolio repositioning activities. Of the securities that were sold at a loss during the six months ended June 30, 2009, the average period of time those securities had been continuously in an unrealized loss position was approximately nine months. The securities sold at a loss during the six months ended June 30, 2009 included one in the financial services sector totaling $10 million due to portfolio repositioning.	
Investment portfolio
The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:

 	  	June 30, 2010	 	 	December 31, 2009	 	
(Amounts in millions)	  	Carrying value	  	% of total	 	 	Carrying value	  	% of total	 	
Fixed maturity securities, available-for-sale:	  			  			 			  			
Public	  	$	40,677	  	56	% 	 	$	37,158	  	54	% 	
Private	  	 	12,709	  	18	  	 	 	12,594	  	19	  	
Commercial mortgage loans	  	 	7,208	  	10	  	 	 	7,499	  	11	  	
Other invested assets	  	 	4,042	  	6	  	 	 	4,702	  	7	  	
Policy loans	  	 	1,467	  	2	  	 	 	1,403	  	2	  	
Restricted commercial mortgage loans related to securitization entities (1)	  	 	535	  	1	  	 	 	—  	  	—  	  	
Restricted other invested assets related to securitization entities (1)	  	 	374	  	1	  	 	 	—  	  	—  	  	
Equity securities, available-for-sale	  	 	199	  	—  	  	 	 	159	  	—  	  	
Cash and cash equivalents	  	 	4,586	  	6	  	 	 	5,002	  	7	  	
	  	 	 	  	 	 	 	 	 	  	 	 	
Total cash, cash equivalents and invested assets	  	$	71,797	  	100	% 	 	$	68,517	  	100	% 	

(1)	See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.	
 
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For a discussion of the change in cash, cash equivalents and invested assets, see the comparison for this line item under “—Consolidated Balance Sheets.” See note 4 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to our investment portfolio.
We hold fixed maturity, equity and trading securities, derivatives, embedded derivatives, securities held as collateral and certain other financial instruments, which are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As of June 30, 2010, approximately 6% of our investment holdings recorded at fair value was based on significant inputs that were not market observable and were classified as Level 3 measurements. See note 6 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to fair value.
Fixed maturity and equity securities
As of June 30, 2010, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

 	 	Amortized
cost or
cost	 	Gross unrealized gains	 	Gross unrealized losses	 	 	Fair
value	
(Amounts in millions)	 		 	Not other-than-
temporarily
impaired	 	Other-than-
temporarily
impaired	 	Not other-than-
temporarily
impaired	 	 	Other-than-
temporarily
impaired	 	 		
Fixed maturity securities:	 			 			 			 				 				 			
U.S. government, agencies and government-sponsored enterprises	 	$	3,422	 	$	262	 	$	—  	 	$	—  	  	 	$	—  	  	 	$	3,684	
Tax-exempt	 	 	1,407	 	 	39	 	 	—  	 	 	(96	) 	 	 	—  	  	 	 	1,350	
Government—non-U.S.	 	 	2,023	 	 	126	 	 	—  	 	 	(3	) 	 	 	—  	  	 	 	2,146	
U.S. corporate	 	 	22,529	 	 	1,332	 	 	7	 	 	(489	) 	 	 	(1	) 	 	 	23,378	
Corporate—non-U.S.	 	 	12,572	 	 	494	 	 	12	 	 	(279	) 	 	 	—  	  	 	 	12,799	
Residential mortgage-backed (1)	 	 	4,395	 	 	160	 	 	8	 	 	(347	) 	 	 	(261	) 	 	 	3,955	
Commercial mortgage-backed	 	 	4,117	 	 	152	 	 	7	 	 	(488	) 	 	 	(62	) 	 	 	3,726	
Other asset-backed (1)	 	 	2,640	 	 	18	 	 	—  	 	 	(297	) 	 	 	(13	) 	 	 	2,348	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	53,105	 	 	2,583	 	 	34	 	 	(1,999	) 	 	 	(337	) 	 	 	53,386	
Equity securities	 	 	192	 	 	13	 	 	—  	 	 	(6	) 	 	 	—  	  	 	 	199	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total available-for-sale securities	 	$	53,297	 	$	2,596	 	$	34	 	$	(2,005	) 	 	$	(337	) 	 	$	53,585	

(1)	Fair value included $434 million collateralized by sub-prime residential mortgage loans and $358 million collateralized by Alt-A residential mortgage loans.	
 
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As of December 31, 2009, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

 	 	Amortized
cost or
cost	 	Gross unrealized gains	 	Gross unrealized losses	 	 	Fair
value	
(Amounts in millions)	 		 	Not other-than-
temporarily
impaired	 	Other-than-
temporarily
impaired	 	Not other-than-
temporarily
impaired	 	 	Other-than-
temporarily
impaired	 	 		
Fixed maturity securities:	 			 			 			 				 				 			
U.S. government, agencies and government-sponsored enterprises	 	$	2,673	 	$	25	 	$	—  	 	$	(96	) 	 	$	—  	  	 	$	2,602	
Tax-exempt	 	 	1,606	 	 	42	 	 	—  	 	 	(104	) 	 	 	—  	  	 	 	1,544	
Government—non-U.S.	 	 	2,310	 	 	96	 	 	—  	 	 	(22	) 	 	 	—  	  	 	 	2,384	
U.S. corporate	 	 	21,598	 	 	628	 	 	3	 	 	(814	) 	 	 	(3	) 	 	 	21,412	
Corporate—non-U.S.	 	 	12,530	 	 	366	 	 	11	 	 	(356	) 	 	 	—  	  	 	 	12,551	
Residential mortgage-backed (1)	 	 	3,989	 	 	41	 	 	7	 	 	(484	) 	 	 	(326	) 	 	 	3,227	
Commercial mortgage-backed	 	 	4,404	 	 	44	 	 	4	 	 	(738	) 	 	 	(97	) 	 	 	3,617	
Other asset-backed (1)	 	 	2,887	 	 	8	 	 	—  	 	 	(466	) 	 	 	(14	) 	 	 	2,415	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed maturity securities	 	 	51,997	 	 	1,250	 	 	25	 	 	(3,080	) 	 	 	(440	) 	 	 	49,752	
Equity securities	 	 	139	 	 	23	 	 	—  	 	 	(3	) 	 	 	—  	  	 	 	159	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total available-for-sale securities	 	$	52,136	 	$	1,273	 	$	25	 	$	(3,083	) 	 	$	(440	) 	 	$	49,911	

(1)	Fair value included $422 million collateralized by sub-prime residential mortgage loans and $369 million collateralized by Alt-A residential mortgage loans.	
Fixed maturity securities increased $3.6 billion primarily attributable to improved market performance as our fixed maturity securities were in a net unrealized gain position as of June 30, 2010 as compared to a net unrealized loss position as of December 31, 2009. The increase is also attributable to purchases of fixed maturity securities during 2010 as we continue to reinvest cash.
We allocate net unrealized investment gains (losses) from Corporate and Other activities to our Retirement and Protection segment using an approach based principally upon the investment portfolio established to support the segment’s products and targeted capital levels. We do not allocate net unrealized investment gains (losses) from Corporate and Other activities to our International and U.S. Mortgage Insurance segments because they have their own separate investment portfolios, and net unrealized investment gains (losses) from those portfolios are reflected in the International and U.S. Mortgage Insurance segment balance sheets, respectively. The majority of our unrealized losses related to securities held within our Retirement and Protection segment. Our U.S. Mortgage Insurance segment had gross unrealized losses of $102 million and $134 million as of June 30, 2010 and December 31, 2009, respectively.
 
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Our sub-prime securities were principally backed by first lien mortgages. We did not have any exposure to interest margin deals, highly leveraged transactions or collateralized debt obligation-squared investments. The fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans by rating and vintage was as follows as of June 30, 2010:

(Amounts in millions)	  	2004
and prior	  	2005	  	2006	  	2007	  	Total	
Ratings (1) :	  			  			  			  			  			
AAA	  	$	44	  	$	7	  	$	—  	  	$	—  	  	$	51	
AA	  	 	21	  	 	17	  	 	—  	  	 	20	  	 	58	
A	  	 	11	  	 	19	  	 	3	  	 	—  	  	 	33	
BBB	  	 	17	  	 	15	  	 	—  	  	 	—  	  	 	32	
BB	  	 	12	  	 	25	  	 	—  	  	 	—  	  	 	37	
B	  	 	4	  	 	28	  	 	28	  	 	—  	  	 	60	
CCC and lower	  	 	24	  	 	38	  	 	87	  	 	14	  	 	163	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total sub-prime securities	  	$	133	  	$	149	  	$	118	  	$	34	  	$	434	

(1)	Based on ratings as of June 30, 2010.	
The fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans by rating and vintage was as follows as of December 31, 2009:

(Amounts in millions)	  	2004
and prior	  	2005	  	2006	  	2007	  	Total	
Ratings (1) :	  			  			  			  			  			
AAA	  	$	42	  	$	12	  	$	—  	  	$	—  	  	$	54	
AA	  	 	23	  	 	20	  	 	1	  	 	19	  	 	63	
A	  	 	17	  	 	47	  	 	4	  	 	—  	  	 	68	
BBB	  	 	11	  	 	6	  	 	1	  	 	—  	  	 	18	
BB	  	 	8	  	 	13	  	 	27	  	 	—  	  	 	48	
B	  	 	6	  	 	24	  	 	25	  	 	—  	  	 	55	
CCC and lower	  	 	24	  	 	16	  	 	62	  	 	14	  	 	116	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total sub-prime securities	  	$	131	  	$	138	  	$	120	  	$	33	  	$	422	

(1)	Based on ratings as of December 31, 2009.	
The fair value of our mortgage-backed and asset-backed securities collateralized by Alt-A residential mortgage loans by rating and vintage was as follows as of June 30, 2010:

(Amounts in millions)	  	2004
and prior	  	2005	  	2006	  	2007	  	2008	  	2009	  	2010	  	Total	
Ratings (1) :	  			  			  			  			  			  			  			  			
AAA	  	$	43	  	$	18	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	$	7	  	$	68	
AA	  	 	8	  	 	7	  	 	1	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	16	
A	  	 	17	  	 	2	  	 	1	  	 	6	  	 	—  	  	 	—  	  	 	—  	  	 	26	
BBB	  	 	25	  	 	—  	  	 	3	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	28	
BB	  	 	1	  	 	4	  	 	—  	  	 	4	  	 	—  	  	 	—  	  	 	—  	  	 	9	
B	  	 	3	  	 	40	  	 	29	  	 	4	  	 	—  	  	 	—  	  	 	—  	  	 	76	
CCC and lower	  	 	4	  	 	71	  	 	31	  	 	29	  	 	—  	  	 	—  	  	 	—  	  	 	135	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total Alt-A securities	  	$	101	  	$	142	  	$	65	  	$	43	  	$	—  	  	$	—  	  	$	7	  	$	358	

(1)	Based on ratings of June 30, 2010.	
 
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The fair value of our mortgage-backed and asset-backed securities collateralized by Alt-A residential mortgage loans by rating and vintage was as follows as of December 31, 2009:

(Amounts in millions)	  	2004
and prior	  	2005	  	2006	  	2007	  	Total	
Ratings (1) :	  			  			  			  			  			
AAA	  	$	43	  	$	—  	  	$	1	  	$	—  	  	$	44	
AA	  	 	9	  	 	26	  	 	1	  	 	—  	  	 	36	
A	  	 	17	  	 	23	  	 	1	  	 	8	  	 	49	
BBB	  	 	26	  	 	1	  	 	3	  	 	—  	  	 	30	
BB	  	 	2	  	 	25	  	 	—  	  	 	4	  	 	31	
B	  	 	2	  	 	19	  	 	32	  	 	6	  	 	59	
CCC and lower	  	 	5	  	 	55	  	 	36	  	 	24	  	 	120	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total Alt-A securities	  	$	104	  	$	149	  	$	74	  	$	42	  	$	369	

(1)	Based on ratings of December 31, 2009.	
Gross unrealized losses in our sub-prime and Alt-A residential mortgage-backed and asset-backed securities as of June 30, 2010 were primarily a result of credit spreads that have widened since acquisition as a result of marketplace uncertainty arising from higher defaults in sub-prime and Alt-A residential mortgage loans, partially offset by lower asset balances. Our investments in sub-prime residential mortgage-backed and asset-backed securities increased primarily attributable to tightening credit spreads, partially offset by principal payment activity. Our investments in Alt-A residential mortgage-backed and asset-backed securities decreased primarily as a result of principal payment activity, partially offset by tightening credit spreads.
The fair value of our commercial mortgage-backed securities by rating and vintage was as follows as of June 30, 2010:

(Amounts in millions)	  	2004
and prior	  	2005	  	2006	  	2007	  	2008	  	2009	  	Total	
Ratings (1) :	  			  			  			  			  			  			  			
AAA	  	$	1,942	  	$	332	  	$	331	  	$	118	  	$	—  	  	$	29	  	$	2,752	
AA	  	 	45	  	 	46	  	 	109	  	 	61	  	 	—  	  	 	—  	  	 	261	
A	  	 	49	  	 	26	  	 	78	  	 	107	  	 	—  	  	 	—  	  	 	260	
BBB	  	 	52	  	 	17	  	 	39	  	 	47	  	 	—  	  	 	—  	  	 	155	
BB	  	 	33	  	 	7	  	 	47	  	 	75	  	 	—  	  	 	—  	  	 	162	
B	  	 	17	  	 	—  	  	 	12	  	 	21	  	 	—  	  	 	—  	  	 	50	
CCC and lower	  	 	15	  	 	6	  	 	60	  	 	5	  	 	—  	  	 	—  	  	 	86	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total commercial mortgage-backed securities	  	$	2,153	  	$	434	  	$	676	  	$	434	  	$	—  	  	$	29	  	$	3,726	

(1)	Based on ratings as of June 30, 2010.	
 
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The fair value of our commercial mortgage-backed securities by rating and vintage was as follows as of December 31, 2009:

(Amounts in millions)	  	2004
and prior	  	2005	  	2006	  	2007	  	2008	  	2009	  	Total	
Ratings (1) :	  			  			  			  			  			  			  			
AAA	  	$	1,943	  	$	338	  	$	336	  	$	120	  	$	—  	  	$	20	  	$	2,757	
AA	  	 	52	  	 	63	  	 	85	  	 	127	  	 	—  	  	 	—  	  	 	327	
A	  	 	69	  	 	36	  	 	54	  	 	54	  	 	—  	  	 	—  	  	 	213	
BBB	  	 	50	  	 	12	  	 	41	  	 	33	  	 	—  	  	 	—  	  	 	136	
BB	  	 	30	  	 	6	  	 	33	  	 	52	  	 	—  	  	 	—  	  	 	121	
B	  	 	17	  	 	—  	  	 	10	  	 	11	  	 	—  	  	 	—  	  	 	38	
CCC and lower	  	 	10	  	 	4	  	 	11	  	 	—  	  	 	—  	  	 	—  	  	 	25	
	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Total commercial mortgage-backed securities	  	$	2,171	  	$	459	  	$	570	  	$	397	  	$	—  	  	$	20	  	$	3,617	

(1)	Based on ratings as of December 31, 2009.	
Commercial mortgage loans
The following tables set forth additional information regarding our commercial mortgage loans as of the dates indicated:

 	  	June 30, 2010	 	
(Loan amounts in millions)	  	Total loan
balance  (1) 	  	Delinquent
loan balance	  	Number of
loans	  	Number of
delinquent
loans	  	Average loan-
to-value (2) 	 	
Loan Year	  	 	  	 	  	 	  	 	  	 	 	
2004 and prior	  	$	2,470	  	$	18	  	989	  	8	  	49	% 	
2005	  	 	1,564	  	 	—  	  	319	  	—  	  	64	% 	
2006	  	 	1,497	  	 	11	  	288	  	2	  	72	% 	
2007	  	 	1,435	  	 	14	  	199	  	4	  	81	% 	
2008	  	 	288	  	 	9	  	59	  	2	  	80	% 	
2009	  	 	—  	  	 	—  	  	—  	  	—  	  	—  	% 	
2010	  	 	23	  	 	—  	  	4	  	—  	  	52	% 	
	  	 	 	  	 	 	  	 	  	 	  			
Total	  	$	7,277	  	$	52	  	1,858	  	16	  	65	% 	

(1)	Does not include $4 million of premium.	
(2)	Represents loan-to-value as of June 30, 2010.	

 	  	December 31, 2009	 	
(Loan amounts in millions)	  	Total loan
balance	  	Delinquent
loan balance	  	Number of
loans	  	Number of
delinquent
loans	  	Average loan-
to-value (1) 	 	
Loan Year	  	 	  	 	  	 	  	 	  	 	 	
2004 and prior	  	$	2,644	  	$	5	  	1,039	  	2	  	49	% 	
2005	  	 	1,607	  	 	—  	  	320	  	—  	  	63	% 	
2006	  	 	1,521	  	 	15	  	290	  	4	  	70	% 	
2007	  	 	1,458	  	 	76	  	203	  	3	  	80	% 	
2008	  	 	295	  	 	—  	  	61	  	—  	  	77	% 	
2009 (2)	  	 	16	  	 	—  	  	518	  	—  	  	—  	% 	
	  	 	 	  	 	 	  	 	  	 	  			
Total	  	$	7,541	  	$	96	  	2,431	  	9	  	63	% 	

(1)	Represents loan-to-value as of December 31, 2009.	
(2)	Loan balance represents reverse mortgage originations not sold as of December 31, 2009 and number of loans represents total reverse mortgage loan originations for 2009. In the first quarter of 2010, we began reporting reverse mortgages in other invested assets.	
 
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The following table presents the activity in the allowance for losses during the periods indicated:

(Amounts in millions)	  	As of or for the
three months  ended
June 30, 2010	  	As of or for the
six months  ended
June 30, 2010	
Beginning balance	  	$	52	  	$	48	
Provision (1)	  	 	18	  	 	22	
Release	  	 	—  	  	 	—  	
	  	 	 	  	 	 	
Ending balance	  	$	70	  	$	70	

(1)	Included $13 million related to held-for-sale commercial mortgage loans.	
The increase in the provision during 2010 was related to a change in reserving assumptions to reflect the current market environment.
Restricted commercial mortgage loans related to securitization entities
The following table sets forth additional information regarding our restricted commercial mortgage loans related to securitization entities as of the date indicated:

 	  	June 30, 2010	 	
(Loan amounts in millions)	  	Total loan
balance	  	Delinquent
loan balance	  	Number of
loans	  	Number of
delinquent
loans	  	Average loan-
to-value (1) 	 	
Loan Year	  	 	  	 	  	 	  	 	  	 	 	
2004 and prior	  	$	537	  	$	—  	  	209	  	—  	  	44	% 	
	  	 	 	  	 	 	  	 	  	 	  			
Total	  	$	537	  	$	—  	  	209	  	—  	  	44	% 	

(1)	Represents loan-to-value as of June 30, 2010.	
See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities. 
Other invested assets
The following table sets forth the carrying values of our other invested assets as of the dates indicated:

 	  	June 30, 2010	 	 	December 31, 2009	 	
(Amounts in millions)	  	Carrying value	  	% of total	 	 	Carrying value	  	% of total	 	
Derivatives	  	$	1,443	  	36	% 	 	$	946	  	20	% 	
Derivatives counterparty collateral	  	 	1,058	  	26	  	 	 	647	  	14	  	
Securities lending collateral	  	 	680	  	17	  	 	 	853	  	18	  	
Limited partnerships	  	 	363	  	9	  	 	 	430	  	9	  	
Trading securities	  	 	221	  	5	  	 	 	174	  	4	  	
Short-term investments	  	 	190	  	5	  	 	 	1,590	  	34	  	
Other investments	  	 	87	  	2	  	 	 	62	  	1	  	
	  	 	 	  	 	 	 	 	 	  	 	 	
Total other invested assets	  	$	4,042	  	100	% 	 	$	4,702	  	100	% 	
	  	 	 	  	 	 	 	 	 	  	 	 	
Our investments in derivatives and derivative counterparty collateral increased primarily as a result of a decrease in long-term interest rates. Securities lending collateral decreased primarily from our decision to decrease the program size. Limited partnership investments decreased primarily from sales and unrealized depreciation and returned capital, partially offset by calls on outstanding commitments. The decrease in short-term investments was attributable to portfolio repositioning activities in the first half of 2010.
 
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Derivatives
The following table sets forth our positions in derivative instruments as of the dates indicated:

 	 	Derivative assets	 	 	Derivative liabilities	
 	 	Balance
sheet
classification	 	Fair value	 	 	Balance
sheet
classification	 	Fair value	
(Amounts in millions)	 		 	June 30,
2010	 	December 31,
2009	 	 		 	June 30,
2010	 	December 31,
2009	
Derivatives designated as hedges	 		 			 				 		 			 			
Cash flow hedges:	 		 			 				 		 			 			
Interest rate swaps	 	Other invested
assets	 	$	540	 	$	72	  	 	Other
liabilities	 	$	9	 	$	114	
Inflation indexed swaps	 	Other invested
assets	 	 	1	 	 	—  	  	 	Other
liabilities	 	 	22	 	 	21	
Foreign currency swaps	 	Other invested
assets	 	 	140	 	 	101	  	 	Other
liabilities	 	 	—  	 	 	—  	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total cash flow hedges	 		 	 	681	 	 	173	  	 		 	 	31	 	 	135	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Fair value hedges:	 		 			 				 		 			 			
Interest rate swaps	 	Other invested
assets	 	 	124	 	 	132	  	 	Other
liabilities	 	 	11	 	 	15	
Foreign currency swaps	 	Other invested
assets	 	 	20	 	 	24	  	 	Other
liabilities	 	 	—  	 	 	—  	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total fair value hedges	 		 	 	144	 	 	156	  	 		 	 	11	 	 	15	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total derivatives designated as hedges	 		 	 	825	 	 	329	  	 		 	 	42	 	 	150	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Derivatives not designated as hedges	 		 			 				 		 			 			
Interest rate swaps	 	Other invested
assets	 	 	509	 	 	505	  	 	Other
liabilities	 	 	41	 	 	59	
Interest rate swaps related to securitization entities (1)	 	Restricted
other invested
assets	 	 	—  	 	 	—  	  	 	Other
liabilities	 	 	23	 	 	—  	
Interest rate swaptions	 	Other invested
assets	 	 	4	 	 	54	  	 	Other
liabilities	 	 	—  	 	 	67	
Credit default swaps	 	Other invested
assets	 	 	2	 	 	11	  	 	Other
liabilities	 	 	27	 	 	3	
Credit default swaps related to securitization entities (1)	 	Restricted
other invested
assets	 	 	—  	 	 	—  	  	 	Other
liabilities	 	 	159	 	 	—  	
Equity index options	 	Other invested
assets	 	 	97	 	 	39	  	 	Other
liabilities	 	 	—  	 	 	2	
Financial futures	 	Other invested
assets	 	 	—  	 	 	—  	  	 	Other
liabilities	 	 	—  	 	 	—  	
Other foreign currency contracts	 	Other invested
assets	 	 	6	 	 	8	  	 	Other
liabilities	 	 	—  	 	 	—  	
Reinsurance embedded derivatives (2)	 	Other assets	 	 	2	 	 	—  	  	 	Other
liabilities	 	 	—  	 	 	—  	
GMWB embedded derivatives	 	Reinsurance
recoverable  (3 )	 	 	9	 	 	(5	) 	 	Policyholder
account
balances (4 )	 	 	447	 	 	175	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total derivatives not designated as hedges	 		 	 	629	 	 	612	  	 		 	 	697	 	 	306	
	 		 	 	 	 	 	 	 	 		 	 	 	 	 	 	
Total derivatives	 		 	$	1,454	 	$	941	  	 		 	$	739	 	$	456	

(1)	See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.	
(2)	Represents embedded derivatives associated with certain reinsurance agreements.	
(3)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.	
(4)	Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.	
 
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The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:

(Notional in millions)	 	Measurement	 	December 31, 2009	 	Additions	 	Maturities/
terminations	 	 	June 30, 2010	
Derivatives designated as hedges	 		 			 			 				 			
Cash flow hedges:	 		 			 			 				 			
Interest rate swaps	 	Notional	 	$	9,479	 	$	1,382	 	$	(206	) 	 	$	10,655	
Inflation indexed swaps	 	Notional	 	 	376	 	 	157	 	 	(6	) 	 	 	527	
Foreign currency swaps	 	Notional	 	 	491	 	 	—  	 	 	—  	  	 	 	491	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cash flow hedges	 		 	 	10,346	 	 	1,539	 	 	(212	) 	 	 	11,673	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value hedges:	 		 			 			 				 			
Interest rate swaps	 	Notional	 	 	2,366	 	 	—  	 	 	(139	) 	 	 	2,227	
Foreign currency swaps	 	Notional	 	 	85	 	 	—  	 	 	—  	  	 	 	85	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fair value hedges	 		 	 	2,451	 	 	—  	 	 	(139	) 	 	 	2,312	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivatives designated as hedges	 		 	 	12,797	 	 	1,539	 	 	(351	) 	 	 	13,985	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives not designated as hedges	 		 			 			 				 			
Interest rate swaps	 	Notional	 	 	6,474	 	 	2,345	 	 	(577	) 	 	 	8,242	
Interest rate swaps related to securitization entities	 	Notional	 	 	—  	 	 	138	 	 	(3	) 	 	 	135	
Interest rate swaptions	 	Notional	 	 	5,100	 	 	200	 	 	(5,100	) 	 	 	200	
Credit default swaps	 	Notional	 	 	1,090	 	 	50	 	 	—  	  	 	 	1,140	
Credit default swaps related to securitization entities	 	Notional	 	 	—  	 	 	322	 	 	(5	) 	 	 	317	
Equity index options	 	Notional	 	 	912	 	 	397	 	 	(614	) 	 	 	695	
Financial futures	 	Notional	 	 	5,822	 	 	3,696	 	 	(5,019	) 	 	 	4,499	
Other foreign currency contracts	 	Notional	 	 	521	 	 	73	 	 	—  	  	 	 	594	
Reinsurance embedded derivatives	 	Notional	 	 	—  	 	 	47	 	 	—  	  	 	 	47	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivatives not designated as hedges	 		 	 	19,919	 	 	7,268	 	 	(11,318	) 	 	 	15,869	
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	
Total derivatives	 		 	$	32,716	 	$	8,807	 	$	(11,669	) 	 	$	29,854	

												
(Number of policies)	 	Measurement	 	December 31, 2009	 	Additions	 	Terminations	 	 	June 30, 2010	
Derivatives not designated as hedges	 		 		 		 			 		
GMWB embedded derivatives	 	Policies	 	47,543	 	2,244	 	(1,445	) 	 	48,342	
The decrease in the notional value of derivatives was primarily attributable to a $3.1 billion notional decrease in swaps and swaptions related to a derivative strategy to mitigate interest rate risk associated with our statutory capital position, a $1.4 billion notional decrease in non-qualifying futures used for duration management related to our long-term care insurance and deferred annuity products and a $0.6 billion notional decrease in non-qualifying futures and interest rate swaps related to our institutional products. The decreases were partially offset by a $1.6 billion notional increase in qualifying and non-qualifying cash flow hedges related to our interest rate hedging strategy associated with our long-term care insurance products, a $0.5 billion notional increase in credit default swaps and interest rate swaps related to securitization entities and a $0.2 billion notional increase in inflation indexed swaps.
 
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Consolidated Balance Sheets
Total assets . Total assets increased $2.2 billion from $108.2 billion as of December 31, 2009 to $110.4 billion as of June 30, 2010.
 
 	•	 	Cash, cash equivalents and invested assets increased $3.3 billion primarily from an increase of $3.6 billion in our fixed maturity securities portfolio resulting primarily from improved market performance and an increase in purchases of fixed maturity securities. Also contributing to the increase was an increase of $0.9 billion in restricted commercial mortgage loans and other invested assets from the consolidation of certain securitization entities as of January 1, 2010. Partially offsetting these increases was a decrease in other invested assets of $0.7 billion primarily driven by a decrease in short-term investments and securities lending, partially offset by an increase in derivatives and derivatives counterparty collateral. Also contributing to the decrease was a decrease of $0.4 billion in cash and cash equivalents as the net proceeds from the U.S. and Canadian senior note issuances in the second quarter of 2010 were more than offset by purchases of fixed maturity securities.	
 
 	•	 	Separate account assets decreased $0.7 billion primarily as a result of unfavorable market performance of the underlying securities.	
Total liabilities . Total liabilities increased $0.5 billion from $94.8 billion as of December 31, 2009 to $95.3 billion as of June 30, 2010.
 
 	•	 	Our policyholder-related liabilities decreased $0.4 billion largely attributable to a decrease in reserves associated with our retirement income business from benefit payments and scheduled maturities of our spread-based products and a decrease in our U.S. mortgage insurance business primarily from settlements and a decline in delinquencies in 2010. Unearned premiums decreased in our international mortgage insurance business primarily attributable to seasoning and in our lifestyle protection insurance business from a decline in sales. These decreases were partially offset by an increase in reserves related to our long-term care insurance business from growth of our in-force block and an increase in our retirement income business from an increase in fee-based product sales.	
 
 	•	 	Borrowings related to securitization entities increased $0.5 billion from the consolidation of certain securitization entities as of January 1, 2010.	
 
 	•	 	Long-term borrowings increased $0.7 billion from the issuance of $400 million of senior notes in the second quarter of 2010 and from the issuance of CDN$275 million of senior notes by our majority-owned subsidiary, Genworth MI Canada Inc. (“Genworth Canada”), in the second quarter of 2010.	
 
 	•	 	Separate account liabilities decreased $0.7 billion primarily as a result of unfavorable market performance of the underlying securities.	
Total stockholders’ equity . Total stockholders’ equity increased $1.6 billion from $13.4 billion as of December 31, 2009 to $15.0 billion as of June 30, 2010.
 
 	•	 	We reported net income available to Genworth Financial, Inc.’s common stockholders of $0.2 billion for the six months ended June 30, 2010.	
 
 	•	 	We recorded a cumulative effect adjustment that reduced retained earnings by $104 million with a partial offset to accumulated other comprehensive income (loss) of $91 million related to the consolidation of certain securitization entities as of January 1, 2010.	
 
 	•	 	We had accumulated other comprehensive income of $1.3 billion as of June 30, 2010 compared to accumulated other comprehensive loss of $0.2 billion as of December 31, 2009. The change in accumulated other comprehensive income was primarily attributable to a decrease of $1.4 billion in net unrealized investment losses from improved market performance during the first half of 2010.	
 
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Liquidity and Capital Resources
Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth needs.
Genworth Financial and subsidiaries
The following table sets forth our condensed consolidated cash flows for the six months ended June 30:

(Amounts in millions)	  	2010	 	 	2009	 	
Net cash from operating activities	  	$	557	  	 	$	1,369	  	
Net cash from investing activities	  	 	(723	) 	 	 	635	  	
Net cash from financing activities	  	 	(243	) 	 	 	(4,041	) 	
	  	 	 	 	 	 	 	 	
Net decrease in cash before foreign exchange effect	  	$	(409	) 	 	$	(2,037	) 	
	  	 	 	 	 	 	 	 	
Our principal sources of cash include sales of our products and services, income from our investment portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash flows from operating activities, as premiums collected from our insurance products and income received from our investments exceed policy acquisition costs, benefits paid, redemptions and operating expenses. These positive cash flows are then invested to support the obligations of our insurance and investment products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. The decrease in cash inflows from operating activities in the first half of 2010 compared to the first half of 2009 was primarily as a result of higher tax settlements, higher paid claims in our U.S. mortgage insurance business, including settlements that were paid in the first half of 2010, and a decrease from other liabilities and policy-related balances associated with the timing of payments.
In analyzing our cash flow, we focus on the change in the amount of cash available and used in investing activities. We had net cash outflows from investing activities in the first half of 2010 as purchases of investments exceeded proceeds from maturities and sales of fixed maturity securities. In early 2009, we were holding excess cash balances. In the second half of 2009 and into 2010, we began reinvesting this excess cash.
Changes in cash from financing activities primarily relate to the issuance of, and redemptions and benefit payments on, universal life insurance and investment contracts; the issuance and acquisition of debt and equity securities; the issuance and repayment of borrowings and non-recourse funding obligations; and dividends to our preferred stockholders and other capital transactions. We had net cash outflows from financing activities in the first half of 2010 related to redemptions of our investment contracts primarily from scheduled maturities and surrenders which exceeded deposits received on these contracts. In 2009, redemptions were significantly higher due to scheduled maturities and the early retirement of institutional contracts. This was partially offset by net proceeds received from the issuance of senior notes in the U.S. and Canada.
In the U.S. and Canada, we engage in certain securities lending transactions for the purpose of enhancing the yield on our investment securities portfolio, which require the borrower to provide collateral, consisting of cash and government securities, on a daily basis in amounts equal to or exceeding 102% in the U.S. and 105% in Canada of the fair value of the applicable securities loaned. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturity securities on the consolidated balance sheets. Cash and non-cash collateral, such as a security, received by us on securities lending transactions is reflected in other invested assets with an offsetting liability recognized in other liabilities for the obligation to return the collateral. Any cash collateral received is reinvested by our custodian based upon the investment guidelines provided within our agreement. In the U.S., the reinvested cash collateral is primarily invested in U.S. and foreign government securities, U.S. government agency securities, asset-backed securities and corporate debt
 
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securities, all of which have scheduled maturities of less than three years. In Canada, the lending institution must be included on the approved Securities Lending Borrowers List with the Canadian regulator and the intermediary must be rated at least “AA-” by Standard & Poor’s Financial Services LLC. We are currently fully indemnified against counterparty credit risk by the intermediary. As of June 30, 2010 and December 31, 2009, the fair value of securities loaned under the securities lending program was $0.7 billion and $0.9 billion, respectively, consisting of $0.5 billion and $0.6 billion, respectively, in the U.S. and $0.2 billion and $0.3 billion, respectively, in Canada. As of June 30, 2010 and December 31, 2009, the fair value of collateral held under the securities lending program was $0.7 billion and $0.9 billion, respectively, and the offsetting obligation to return collateral of $0.7 billion and $0.9 billion, respectively, was included in other liabilities in the consolidated balance sheets. We had non-cash collateral of $221 million and $326 million as of June 30, 2010 and December 31, 2009, respectively.
We also have a repurchase program in which we sell an investment security at a specified price and agree to repurchase that security at another specified price at a later date. Repurchase agreements are treated as collateralized financing transactions and are carried at the amounts at which the securities will be subsequently reacquired, including accrued interest, as specified in the respective agreement. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities. As of June 30, 2010 and December 31, 2009, the fair value of securities pledged under the repurchase program was $2.2 billion and $2.1 billion, respectively, and the repurchase obligation of $1.9 billion and $2.1 billion, respectively, was included in other liabilities in the consolidated balance sheets.
Genworth Financial, Inc.—holding company
We conduct all our operations through our operating subsidiaries. Dividends from our subsidiaries and permitted payments to us under our tax sharing arrangements with our subsidiaries are our principal sources of cash to pay stockholder dividends and to meet our holding company obligations, including payments of principal and interest on our outstanding indebtedness. Other principal sources of cash include proceeds from the issuance of debt and equity securities, borrowings pursuant to our credit facilities and sales of assets.
Our primary uses of funds at our holding company level include payment of general operating expenses, payment of principal, interest and other expenses related to holding company debt, payment of stockholder dividends, amounts we owe to GE under the Tax Matters Agreement, contributions to subsidiaries, repurchase of stock and, potentially, acquisitions.
Our holding company had $916 million and $1,298 million of cash and cash equivalents as of June 30, 2010 and December 31, 2009, respectively. During the six months ended June 30, 2010, we contributed $200 million to one of our life insurance subsidiaries to fund growth and invested $200 million in highly liquid U.S. government bonds.
In November 2008, our Board of Directors decided to suspend the payment of dividends on our common stock indefinitely. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements of our subsidiaries, legal requirements, regulatory constraints, our credit and financial strength ratings and such other factors as the Board of Directors deems relevant.
Regulated insurance subsidiaries
The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities associated with their various insurance and investment products, operating costs and expenses, the payment of dividends to us, contributions to their subsidiaries, payment of principal and interest on their outstanding debt
 
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obligations and income taxes. Liabilities arising from insurance and investment products include the payment of benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and obligations to redeem funding agreements.
Our insurance subsidiaries have used cash flows from operations and investment activities to fund their liquidity requirements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived from premiums, annuity deposits and insurance and investment product fees and other income, including commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment management fees and dividends and distributions from their subsidiaries. The principal cash inflows from investment activities result from repayments of principal, investment income and, as necessary, sales of invested assets.
Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits without forced sales of investments. Products having liabilities with longer durations, such as certain life insurance and long-term care insurance policies, are matched with investments having similar estimated lives such as long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are matched with fixed maturity securities that have short- and medium-term fixed maturities. In addition, our insurance subsidiaries hold highly liquid, high-quality short-term investment securities and other liquid investment grade fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of June 30, 2010, our total cash, cash equivalents and invested assets were $71.8 billion. Our investments in privately placed fixed maturity securities, commercial mortgage loans, policy loans, limited partnership interests and select mortgage-backed and asset-backed securities are relatively illiquid. These asset classes represented approximately 33% of the carrying value of our total cash, cash equivalents and invested assets as of June 30, 2010.
As of June 30, 2010, we had approximately $860 million of GICs outstanding. Substantially all of these contracts allow for the payment of benefits at contract value to Employee Retirement Income Security Act of 1974 (“ERISA”) plans prior to contract maturity in the event of death, disability, retirement or change in investment election. Contracts also provide for early termination by the contractholder but are subject to an adjustment to the contract value for changes in the level of interest rates from the time the GIC was issued plus an early withdrawal penalty. We carefully underwrite these risks before issuing a GIC to a plan and historically have been able to effectively manage our exposure to these benefit payments. Our GICs typically credit interest at a fixed interest rate and have a fixed maturity generally ranging from two to six years.
During 2005, certain of our domestic life insurance subsidiaries transferred primarily foreign-issued investment securities to an affiliated special-purpose entity (“SPE”) that is consolidated in our financial statements and whose sole purpose is to securitize these investment securities and issue secured notes to various affiliated insurance companies. The securitized investments are owned in their entirety by the SPE and are not available to satisfy the claims of our creditors. These securitized investments provide collateral to the notes issued by the SPE to the insurance companies. The value of those securities as of June 30, 2010 was $802 million. In July 2010, the affiliated SPE redeemed the structured notes that were held by our domestic life insurance subsidiaries with investment securities. There was no gain or loss recorded on the transaction.
Capital resources and financing activities
We have two five-year revolving credit facilities that mature in May 2012 and August 2012. These facilities bear variable interest rates based on a one-month London Interbank Offered Rate (“LIBOR”) plus a margin. Each of these facilities originally had $1.0 billion available for borrowings. Lehman Commercial Paper Inc. (“LCP”) had committed $70 million under the August 2012 credit facility and Lehman Brothers Bank, FSB (“Lehman FSB”) had committed $70 million under the May 2012 credit facility. On October 5, 2008, LCP filed for protection under Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. LCP was unable to fulfill its commitments under the August 2012 credit facility and
 
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Lehman FSB declined to fulfill its commitment under the May 2012 credit facility. On April 1, 2010, a consent and waiver agreement was entered into which releases the Lehman Brothers-related commitments under the facilities and reduces the remaining commitments by those respective amounts. Therefore, as of June 30, 2010, we had access to $1.9 billion under these facilities. In June 2010, we repaid $100 million of outstanding borrowings under each of our five-year revolving credit facilities using the net proceeds from our senior notes offering that was completed in June 2010. As of June 30, 2010, we had borrowings of $730 million under these facilities, and we utilized $54 million of the commitment under these facilities primarily for the issuance of a letter of credit for the benefit of one of our lifestyle protection insurance subsidiaries. As of June 30, 2010, we have an unused credit capacity under our revolving credit facilities of $1.1 billion. These two facilities contain minimum consolidated net worth requirements. Consolidated net worth, as defined in these agreements, means all amounts that would be included on a consolidated balance sheet of the borrower and its subsidiaries under stockholders’ equity, excluding accumulated other comprehensive income (loss).
In June 2010, we issued senior notes having an aggregate principal amount of $400 million, with an interest rate equal to 7.700% per year payable semi-annually, and maturing in June 2020 (“2020 Notes”). The 2020 Notes are our direct, unsecured obligations and will rank equally with all of our existing and future unsecured and unsubordinated obligations. We have the option to redeem all or a portion of the 2020 Notes at any time with proper notice to the note holders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread. The net proceeds of $397 million from the issuance of the 2020 Notes were used to repay $100 million of outstanding borrowings under each of our five-year revolving credit facilities and the remainder of the proceeds were used for general corporate purposes.
In June 2010, our majority-owned subsidiary, Genworth Canada, issued CDN$275 million of 5.68% senior notes due 2020. The net proceeds of the offering will be used to fund transactions among Genworth Canada and its Canadian wholly-owned subsidiaries. Genworth Canada is expected to use any proceeds it receives from such transactions for general corporate and investment purposes, and/or to fund a distribution to, or a repurchase of common shares from, Genworth Canada’s shareholders. In July 2010, Genworth Canada announced a substantial issuer bid, pursuant to which it will offer to purchase for cancellation up to CDN$325 million of its common shares. Brookfield Life Assurance Company Limited, our wholly-owned subsidiary and majority shareholder of Genworth Canada, intends to ultimately sell a sufficient number of shares to maintain its ownership at the current 57.5% level.
We believe our revolving credit facilities and anticipated cash flows from operations will provide us with sufficient capital flexibility and liquidity to meet our future operating requirements, as well as optimize our capital structure. In addition, we actively monitor our liquidity position, liquidity generation options and the credit markets given changing market conditions. However, we cannot predict with any certainty the impact to us from any further disruptions in the credit markets or further downgrades by one or more of the rating agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our holding company. The availability of additional funding will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, the overall availability of credit to the financial services industry, the level of activity and availability of reinsurers, our credit ratings and credit capacity and the performance of and outlook for our business.
Contractual obligations and commercial commitments
We enter into obligations to third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed based upon analysis of these obligations as the funding of these future cash obligations will be from future cash flows from premiums, deposits, fees and investment income that are not reflected herein. Future cash outflows, whether they are contractual obligations or not, also will vary based upon our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed obligations include our obligations to pay principal and interest on fixed-rate borrowings.
 
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Examples of obligations that will vary include obligations to pay interest on variable-rate borrowings and insurance liabilities that depend on future interest rates and market performance. Many of our obligations are linked to cash-generating contracts. These obligations include payments to contractholders that assume those contractholders will continue to make deposits in accordance with the terms of their contracts. In addition, our operations involve significant expenditures that are not based upon “commitments.”
There have been no material additions or changes to our contractual obligations and commercial commitments as set forth in our 2009 Annual Report on Form 10-K filed on February 26, 2010, except as discussed above under “Capital resources and financing activities.”
Securitization Entities
There were no off-balance sheet securitization transactions in the six months ended June 30, 2010 or 2009. See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.
New Accounting Standards
For a discussion of recently adopted and not yet adopted accounting standards, see note 2 in our “—Notes to Condensed  Consolidated Financial Statements.”
 Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. The following is a discussion of our market risk exposures and our risk management practices.
Credit markets have continued to show signs of improvement across most asset classes in the first quarter of 2010. See “—Business trends and conditions” and “—Investments and Derivative Instruments” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of recent market conditions.
In the second quarter of 2010, the currencies in Canada and Australia strengthened against the U.S. dollar, while in Europe, the currencies weakened against the U.S. dollar, as compared to the prior year. This has generally resulted in higher levels of reported revenues and net income (loss), assets, liabilities and accumulated other comprehensive income (loss) in our U.S. dollar consolidated financial statements. See “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion on the impact changes in foreign currency exchange rates have had during the year.
There were no other material changes in these risks since December 31, 2009.
 Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2010, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.
 
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Changes in Internal Control Over Financial Reporting During the Quarter Ended June 30, 2010
There were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 PART II—OTHER INFORMATION
 Item 1.    Legal Proceedings
We face a significant risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, payment of contingent or other sales commissions, bidding practices in connection with our management and administration of a third party’s municipal guaranteed investment contract business, claims payments and procedures, cancellation or rescission of coverage, product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of RESPA or related state anti-inducement laws, and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts, including punitive and treble damages, which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. We are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition and results of operations.
There were no material developments during the six months ended June 30, 2010 in any of the legal proceedings identified in Part I, Item 3 of our 2009 Annual Report on Form 10-K, as updated in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010. In addition, there were no new material legal proceedings during the six months ended June 30, 2010.
We cannot ensure that the current investigations and proceedings will not have a material adverse effect on our business, financial condition or results of operations. In addition, it is possible that related investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed against us. Increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely affect our business, financial condition and results of operations.
 
 Item 1A.	Risk Factors	
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 2009 Annual Report on Form 10-K which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of June 30, 2010, there have been no material changes to the risk factors set forth in the above-referenced filing.
 
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 Item 6.    Exhibits		

12	  	Statement of Ratio of Income to Fixed Charges	
		
31.1	  	Certification of Michael D. Fraizer	
		
31.2	  	Certification of Patrick B. Kelleher	
		
32.1	  	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Michael D. Fraizer	
		
32.2	  	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Patrick B. Kelleher	
		
101	  	The following consolidated financial statements from Genworth Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed on July 30, 2010, formatted in XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Stockholders’ Equity and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.	
 
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 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 thereunto duly authorized.

 	 	GENWORTH FINANCIAL, INC.
(Registrant)	
			
Date: July 30, 2010	 		 		
	 	By:	 	/s/    A MY R. C ORBIN        	
	 		 	Amy R. Corbin
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)	
 
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Exhibit 12
Genworth Financial, Inc.
Statement of Ratio of Income to Fixed Charges
(Dollar amounts in millions)

 	  	Six months
ended  June 30,
2010	  	Years ended December 31,	
 	  		  	2009	 	 	2008	 	 	2007	  	2006	  	2005	
Income (loss) from continuing operations before income taxes and accounting changes	  	$	191	  	$	(792	) 	 	$	(942	) 	 	$	1,606	  	$	1,853	  	$	1,745	
Less: income attributable to noncontrolling interests before income taxes	  	 	98	  	 	87	  	 	 	—  	  	 	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Income (loss) from continuing operations before income taxes and accounting changes and excluding income attributable to noncontrolling interests	  	$	93	  	$	(879	) 	 	$	(942	) 	 	$	1,606	  	$	1,853	  	$	1,745	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Fixed charges included in income (loss) from continuing operations:	  			  				 				 			  			  			
Interest expense	  	$	224	  	$	393	  	 	$	470	  	 	$	481	  	$	364	  	$	293	
Interest portion of rental expense	  	 	8	  	 	14	  	 	 	18	  	 	 	15	  	 	15	  	 	13	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Subtotal	  	 	232	  	 	407	  	 	 	488	  	 	 	496	  	 	379	  	 	306	
Interest credited to investment contractholders	  	 	424	  	 	984	  	 	 	1,293	  	 	 	1,552	  	 	1,520	  	 	1,423	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Total fixed charges from continuing operations	  	 	656	  	 	1,391	  	 	 	1,781	  	 	 	2,048	  	 	1,899	  	 	1,729	
Fixed charges included in income from discontinued operations:	  			  				 				 			  			  			
Interest expense	  	 	—  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	—  	  	 	—  	
Interest portion of rental expense	  	 	—  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	—  	  	 	—  	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Subtotal	  	 	—  	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	—  	  	 	—  	
Interest credited to investment contractholders	  	 	—  	  	 	—  	  	 	 	—  	  	 	 	1	  	 	2	  	 	2	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Total fixed charges from discontinued operations	  	 	—  	  	 	—  	  	 	 	—  	  	 	 	1	  	 	2	  	 	2	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Total fixed charges	  	$	656	  	$	1,391	  	 	$	1,781	  	 	$	2,049	  	$	1,901	  	$	1,731	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Income (loss) available for fixed charges (including interest credited to investment contractholders)	  	$	749	  	$	512	  	 	$	839	  	 	$	3,655	  	$	3,754	  	$	3,476	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Ratio of income (loss) to fixed charges (including interest credited to investment contractholders)	  	 	1.14	  	 	0.37	  	 	 	0.47	  	 	 	1.78	  	 	1.97	  	 	2.01	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Income (loss) available for fixed charges (excluding interest credited to investment contractholders)	  	$	325	  	$	(472	) 	 	$	(454	) 	 	$	2,102	  	$	2,232	  	$	2,051	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
Ratio of income (loss) to fixed charges (excluding interest credited to investment contractholders)	  	 	1.40	  	 	(1.16	) 	 	 	(0.93	) 	 	 	4.24	  	 	5.89	  	 	6.70	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	  	 	 	  	 	 	
For the years ended December 31, 2009 and 2008, our deficiency in income necessary to cover fixed charges was $879 million and $942 million, respectively.

Exhibit 31.1
CERTIFICATIONS
I, Michael D. Fraizer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Genworth Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: July 30, 2010

/s/    M ICHAEL D. F RAIZER        	
Michael D. Fraizer
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)	

Exhibit 31.2
CERTIFICATIONS
I, Patrick B. Kelleher, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Genworth Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: July 30, 2010

/s/    P ATRICK B. K ELLEHER        	
Patrick B. Kelleher
Senior Vice President—Chief Financial Officer
(Principal Financial Officer)	

Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
I, Michael D. Fraizer, as Chairman of the Board, President and Chief Executive Officer of Genworth Financial, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:
 
 	(1)	the accompanying Quarterly Report on Form 10-Q of the Company for the six months ended June 30, 2010 (the “Report”), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
 
 	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Dated: July 30, 2010

/s/    M ICHAEL D. F RAIZER        	
Michael D. Fraizer
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)	

Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
I, Patrick B. Kelleher, as Senior Vice President—Chief Financial Officer of Genworth Financial, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:
 
 	(1)	the accompanying Quarterly Report on Form 10-Q of the Company for the six months ended June 30, 2010 (the “Report”), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
 
 	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Dated: July 30, 2010

/s/    P ATRICK B. K ELLEHER        	
Patrick B. Kelleher
Senior Vice President—Chief Financial Officer
(Principal Financial Officer)