GENWORTH FINANCIAL INC, 10-K filed on 2/27/2012
Annual Report
Document And Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Feb. 13, 2012
Jun. 30, 2011
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
GNW 
 
 
Entity Registrant Name
GENWORTH FINANCIAL INC 
 
 
Entity Central Index Key
0001276520 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
491,384,594 
 
Entity Public Float
 
 
$ 5 
Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenues:
 
 
 
Premiums
$ 5,705 
$ 5,854 
$ 6,019 
Net investment income
3,380 
3,266 
3,033 
Net investment gains (losses)
(220)
(143)
(1,041)
Insurance and investment product fees and other
1,479 
1,112 
1,058 
Total revenues
10,344 
10,089 
9,069 
Benefits and expenses:
 
 
 
Benefits and other changes in policy reserves
5,926 
5,994 
5,818 
Interest credited
794 
841 
984 
Acquisition and operating expenses, net of deferrals
2,032 
1,965 
1,884 
Amortization of deferred acquisition costs and intangibles
743 
756 
782 
Goodwill impairment
29 
   
   
Interest expense
506 
457 
393 
Total benefits and expenses
10,030 
10,013 
9,861 
Income (loss) before income taxes
314 
76 
(792)
Provision (benefit) for income taxes
53 
(209)
(393)
Net income (loss)
261 
285 
(399)
Less: net income attributable to noncontrolling interests
139 
143 
61 
Net income (loss) available to Genworth Financial, Inc.'s common stockholders
122 
142 
(460)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders per common share:
 
 
 
Basic
$ 0.25 1
$ 0.29 1
$ (1.02)1
Diluted
$ 0.25 1
$ 0.29 1
$ (1.02)1
Weighted-average common shares outstanding:
 
 
 
Basic
490.6 
489.3 
451.1 
Diluted
493.5 2
493.9 2
451.1 2
Supplemental disclosures:
 
 
 
Total other-than-temporary impairments
(118)
(122)
(1,499)
Portion of other-than-temporary impairments included in other comprehensive income (loss)
(14)
(86)
441 
Net other-than-temporary impairments
(132)
(208)
(1,058)
Other investments gains (losses)
(88)
65 
17 
Total net investment gains (losses)
$ (220)
$ (143)
$ (1,041)
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Assets
 
 
Fixed maturity securities available-for-sale, at fair value
$ 58,295 
$ 55,183 
Equity securities available-for-sale, at fair value
361 
332 
Commercial mortgage loans
6,092 
6,718 
Restricted commercial mortgage loans related to securitization entities
411 
507 
Policy loans
1,549 
1,471 
Other invested assets
4,819 
3,854 
Restricted other invested assets related to securitization entities ($376 and $370 at fair value)
377 
372 
Total investments
71,904 
68,437 
Cash and cash equivalents
4,488 
3,132 
Accrued investment income
691 
733 
Deferred acquisition costs
7,327 
7,256 1
Intangible assets
577 
741 
Goodwill
1,253 
1,329 
Reinsurance recoverable
16,982 
17,191 
Other assets
958 
810 
Deferred tax asset
 
1,100 
Separate account assets
10,122 
11,666 
Total assets
114,302 
112,395 
Liabilities and stockholders' equity
 
 
Future policy benefits
31,971 
30,717 
Policyholder account balances
26,345 
26,978 
Liability for policy and contract claims
7,620 2
6,933 2 3
Unearned premiums
4,257 
4,541 
Other liabilities ($210 and $150 other liabilities related to securitization entities)
6,308 
6,085 
Borrowings related to securitization entities ($48 and $51 at fair value)
396 
494 
Non-recourse funding obligations
3,256 
3,437 
Long-term borrowings
4,726 
4,952 
Deferred tax liability
1,636 
1,621 
Separate account liabilities
10,122 
11,666 
Total liabilities
96,637 
97,424 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 579 million and 578 million shares issued as of December 31, 2011 and 2010, respectively; 491 million and 490 million shares outstanding as of December 31, 2011 and 2010, respectively
Additional paid-in capital
12,124 
12,095 
Net unrealized investment gains (losses):
 
 
Net unrealized gains (losses) on securities not other-than-temporarily impaired
1,586 
21 
Net unrealized gains (losses) on other-than-temporarily impaired securities
(132)
(121)
Net unrealized investment gains (losses)
1,454 
(100)
Derivatives qualifying as hedges
2,009 
924 
Foreign currency translation and other adjustments
558 
668 
Total accumulated other comprehensive income (loss)
4,021 
1,492 
Retained earnings
3,095 
2,973 
Treasury stock, at cost (88 million shares as of December 31, 2011 and 2010)
(2,700)
(2,700)
Total Genworth Financial, Inc.'s stockholders' equity
16,541 
13,861 
Noncontrolling interests
1,124 
1,110 
Total stockholders' equity
17,665 
14,971 
Total liabilities and stockholders' equity
$ 114,302 
$ 112,395 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Consolidated Balance Sheets
 
 
Restricted other invested assets related to securitization entities, at fair value
$ 376 1
$ 370 
Other liabilities related to securitization entities
210 
150 
Borrowings related to securitization entities, at fair value
$ 48 
$ 51 
Class A common stock, par value
$ 0.001 
$ 0.001 
Class A common stock, shares authorized
1,500,000,000 
1,500,000,000 
Class A common stock, shares issued
579,000,000 
578,000,000 
Class A common stock, shares outstanding
491,000,000 
490,000,000 
Treasury stock, shares
88,000,000 
88,000,000 
Consolidated Statements Of Changes In Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Earnings [Member]
Treasury Stock, At Cost [Member]
Total Genworth Financial, Inc.'s Stockholders' Equity [Member]
Noncontrolling Interests [Member]
Total
Balances at Dec. 31, 2008
$ 1 
$ 11,477 
$ (3,062)
$ 3,210 
$ (2,700)
$ 8,926 
 
$ 8,926 
Cumulative effect of change in accounting, net of taxes and other adjustments
 
 
(349)
355 
 
 
Initial sale of subsidiary shares to noncontrolling interests
 
(85)
(60)
 
 
(145)
828 
683 
Additional sale of subsidiary shares to noncontrolling interests
 
(3)
(12)
 
 
(15)
99 
84 
Issuance of common stock
 
622 
 
 
 
622 
 
622 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
(460)
 
(460)
61 
(399)
Net unrealized gains (losses) on securities not other- than-temporarily impaired
 
 
2,997 
 
 
2,997 
17 
3,014 
Net unrealized gains (losses) on other-than-temporarily impaired securities
 
 
14 
 
 
14 
 
14 
Derivatives qualifying as hedges
 
 
(359)
 
 
(359)
 
(359)
Foreign currency translation and other adjustments
 
 
667 
 
 
667 
79 
746 
Total comprehensive income (loss)
 
 
 
 
 
 
 
3,016 
Dividends to noncontrolling interests
 
 
 
 
 
 
(10)
(10)
Stock-based compensation expense and exercises and other
 
23 
 
 
 
23 
 
23 
Balances at Dec. 31, 2009
12,034 
(164)
3,105 
(2,700)
12,276 
1,074 
13,350 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
 
212 
Other capital transactions
 
23 
 
 
 
 
 
 
Balances at Mar. 31, 2010
 
 
 
 
 
 
 
 
Balances at Dec. 31, 2009
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
 
 
260 
(275)
 
(15)
 
(15)
Repurchase of subsidiary shares
 
 
 
 
 
 
(131)
(131)
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
142 
 
142 
143 
285 
Net unrealized gains (losses) on securities not other- than-temporarily impaired
 
 
912 
 
 
912 
11 
923 
Net unrealized gains (losses) on other-than-temporarily impaired securities
 
 
126 
 
 
126 
 
126 
Derivatives qualifying as hedges
 
 
122 
 
 
122 
 
122 
Foreign currency translation and other adjustments
 
 
236 
 
 
236 
56 
292 
Total comprehensive income (loss)
 
 
 
 
 
 
 
1,748 
Dividends to noncontrolling interests
 
 
 
 
 
 
(43)
(43)
Stock-based compensation expense and exercises and other
 
38 
 
 
 
38 
 
38 
Other capital transactions
 
23 
 
 
24 
 
24 
Balances at Dec. 31, 2010
12,095 
1,492 
2,973 
(2,700)
13,861 
1,110 
14,971 
Repurchase of subsidiary shares
 
 
 
 
 
 
(71)
(71)
Comprehensive income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
122 
 
122 
139 
261 
Net unrealized gains (losses) on securities not other- than-temporarily impaired
 
 
1,565 
 
 
1,565 
39 
1,604 
Net unrealized gains (losses) on other-than-temporarily impaired securities
 
 
(11)
 
 
(11)
 
(11)
Derivatives qualifying as hedges
 
 
1,085 
 
 
1,085 
 
1,085 
Foreign currency translation and other adjustments
 
 
(110)
 
 
(110)
(26)
(136)
Total comprehensive income (loss)
 
 
 
 
 
 
 
2,803 
Dividends to noncontrolling interests
 
 
 
 
 
 
(67)
(67)
Stock-based compensation expense and exercises and other
 
29 
 
 
 
29 
 
29 
Balances at Dec. 31, 2011
$ 1 
$ 12,124 
$ 4,021 
$ 3,095 
$ (2,700)
$ 16,541 
$ 1,124 
$ 17,665 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:
 
 
 
Net income (loss)
$ 261 
$ 285 
$ (399)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Amortization of fixed maturity discounts and premiums and limited partnerships
(77)
(55)
84 
Net investment losses (gains)
220 
143 
1,041 
Charges assessed to policyholders
(690)
(506)
(442)
Acquisition costs deferred
(899)
(839)
(707)
Amortization of deferred acquisition costs and intangibles
743 
756 
782 
Goodwill impairment
29 
   
   
Deferred income taxes
(309)
(294)
(476)
Gain on sale of subsidiary
(20)
 
(4)
Net increase (decrease) in trading securities, held-for-sale investments and derivative instruments
1,451 
(100)
(59)
Stock-based compensation expense
31 
44 
26 
Change in certain assets and liabilities:
 
 
 
Accrued investment income and other assets
(140)
(33)
(90)
Insurance reserves
2,492 
2,406 
2,763 
Current tax liabilities
131 
(173)
(119)
Other liabilities and other policy-related balances
(98)
(298)
(469)
Net cash from operating activities
3,125 
1,336 
1,931 
Cash flows from investing activities:
 
 
 
Fixed maturity securities
5,233 
4,589 
4,105 
Commercial mortgage loans
912 
769 
710 
Restricted commercial mortgage loans related to securitization entities
96 
52 
Proceeds from sales of investments:
 
 
 
Fixed maturity and equity securities
6,284 
4,643 
5,808 
Purchases and originations of investments:
 
 
 
Fixed maturity and equity securities
(11,885)
(13,237)
(9,869)
Commercial mortgage loans
(300)
(105)
Other invested assets, net
(527)
1,579 
(314)
Policy loans, net
(79)
(68)
431 
Net cash transferred related to the sale of a subsidiary
211 
 
(51)
Payments for businesses purchased, net of cash acquired
(4)
(37)
Net cash from investing activities
(59)
(1,815)
820 
Cash flows from financing activities:
 
 
 
Deposits to universal life and investment contracts
2,664 
2,737 
2,271 
Withdrawals from universal life and investment contracts
(3,688)
(4,429)
(7,975)
Short-term borrowings and other, net
(38)
(777)
(375)
Redemption and repurchase of non-recourse funding obligations
(130)
(6)
(12)
Proceeds from the issuance of long-term debt
545 
1,204 
298 
Repayment and repurchase of long-term debt
(760)
(6)
(898)
Proceeds from issuance of common stock
 
 
622 
Repayment of borrowings related to securitization entities
(96)
(61)
 
Repurchase of subsidiary shares
(71)
(131)
 
Dividends paid to noncontrolling interests
(67)
(43)
(10)
Proceeds from the sale of subsidiary shares to noncontrolling interests
 
 
770 
Net cash from financing activities
(1,641)
(1,512)
(5,309)
Effect of exchange rate changes on cash and cash equivalents
(69)
121 
232 
Net change in cash and cash equivalents
1,356 
(1,870)
(2,326)
Cash and cash equivalents at beginning of period
3,132 
5,002 
7,328 
Cash and cash equivalents at end of period
$ 4,488 
$ 3,132 
$ 5,002 
Nature Of Business And Formation Of Genworth
Nature Of Business And Formation Of Genworth

(1) Nature of Business and Formation of Genworth

Genworth Financial, Inc. ("Genworth") was incorporated in Delaware on October 23, 2003 as an indirect subsidiary of General Electric Company ("GE") in preparation for the initial public offering ("IPO") of Genworth's common stock, which was completed on May 28, 2004. In connection with our IPO, Genworth acquired substantially all of the assets and liabilities of GE Financial Assurance Holdings, Inc. ("GEFAHI"). The transaction was accounted for at book value as a transfer between entities under common control and is referred to as our corporate formation.

The accompanying financial statements include on a consolidated basis the accounts of Genworth and our affiliate companies in which we hold a majority voting interest or power to direct activities of certain variable interest entities ("VIEs"), which we refer to as the "Company," "we," "us" or "our" unless the context otherwise requires.

We have the following operating segments:

 

   

U.S. Life Insurance. We offer and manage a variety of insurance and fixed annuity products. Our primary insurance products include life and long-term care insurance.

 

   

International Protection. We are a leading provider of payment protection coverages (referred to as lifestyle protection) in multiple European countries. Our lifestyle protection insurance products primarily help consumers meet specified payment obligations should they become unable to pay due to accident, illness, involuntary unemployment, disability or death.

 

   

Wealth Management. We offer and manage a variety of wealth management products that include managed account programs together with advisor support and financial planning services.

 

   

International Mortgage Insurance. We are a leading provider of mortgage insurance products and related services 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.

 

   

U.S. Mortgage Insurance. In the United States, 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 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.

 

   

Runoff. The Runoff segment includes the results of non-strategic products which are no longer actively sold. Our non-strategic products include our variable annuity, variable life insurance, institutional, corporate-owned life insurance and Medicare supplement insurance products. Institutional products consist of: funding agreements, funding agreements backing notes ("FABNs") and guaranteed investment contracts ("GICs"). In January 2011, we discontinued new sales of retail and group variable annuities while continuing to service our existing blocks of business. Effective October 1, 2011, we completed the sale of our Medicare supplement insurance business.

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 other non-core businesses that are managed outside of our operating segments.

 

Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

Our consolidated financial statements have been prepared on the basis of U.S. generally accepted accounting principles ("U.S. GAAP"). 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. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation.

 

 

 

 

 

 

 

 
 

 

 

          

 

 

 

Earnings (Loss) Per Share
Earnings (Loss) Per Share

(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:

 

                         

(Amounts in millions, except per share amounts)

  2011     2010     2009  

Net income (loss)

  $ 261      $ 285      $ (399

Less: net income attributable to noncontrolling interests

    139        143        61   
   

 

 

   

 

 

   

 

 

 

Net income (loss) available to Genworth Financial, Inc.'s common stockholders

  $ 122      $ 142      $ (460
   

 

 

   

 

 

   

 

 

 

Basic per common share:

                       

Net income (loss)

  $ 0.53      $ 0.58      $ (0.88

Less: net income attributable to noncontrolling interests

    0.28        0.29        0.14   
   

 

 

   

 

 

   

 

 

 

Net income (loss) available to Genworth Financial, Inc.'s common stockholders (1)

  $ 0.25      $ 0.29      $ (1.02
   

 

 

   

 

 

   

 

 

 

Diluted per common share:

                       

Net income (loss)

  $ 0.53      $ 0.58      $ (0.88

Less: net income attributable to noncontrolling interests

    0.28        0.29        0.14   
   

 

 

   

 

 

   

 

 

 

Net income (loss) available to Genworth Financial, Inc.'s common stockholders (1)

  $ 0.25      $ 0.29      $ (1.02
   

 

 

   

 

 

   

 

 

 

Weighted-average shares used in basic earnings per common share calculations

    490.6        489.3        451.1   

Potentially dilutive securities:

                       

Stock options, restricted stock units and stock appreciation rights

    2.9        4.6        —     
   

 

 

   

 

 

   

 

 

 

Weighted-average shares used in diluted earnings per common share calculations (2)

    493.5        493.9        451.1   
   

 

 

   

 

 

   

 

 

 

   

On September 21, 2009, we completed the public offering of 55.2 million shares of our Class A Common Stock, par value $0.001 per share (including the exercise in full of the underwriters' option to purchase up to an additional 7.2 million shares of our Class A Common Stock). Net proceeds were $622 million.

Investments
Investments

(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the years ended December 31:

 

                         

(Amounts in millions)

   2011     2010     2009  

Fixed maturity securities—taxable

   $ 2,697      $ 2,619      $ 2,458   

Fixed maturity securities—non-taxable

     35        59        107   

Commercial mortgage loans

     365        391        432   

Restricted commercial mortgage loans related to securitization entities (1)

     40        39        —     

Equity securities

     19        14        16   

Other invested assets (2)

     162        104        (82

Restricted other invested assets related to securitization entities (1)

     —          2        —     

Policy loans

     120        112        143   

Cash, cash equivalents and short-term investments

     37        21        49   
    

 

 

   

 

 

   

 

 

 

Gross investment income before expenses and fees

     3,475        3,361        3,123   

Expenses and fees

     (95     (95     (90
    

 

 

   

 

 

   

 

 

 

Net investment income

   $ 3,380      $ 3,266      $ 3,033   
    

 

 

   

 

 

   

 

 

 

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the years ended December 31:

 

                         

(Amounts in millions)

   2011     2010     2009  

Available-for-sale securities:

                        

Realized gains

   $ 210      $ 156      $ 255   

Realized losses

     (160     (151     (226
    

 

 

   

 

 

   

 

 

 

Net realized gains (losses) on available-for-sale securities

     50        5        29   
    

 

 

   

 

 

   

 

 

 

Impairments:

                        

Total other-than-temporary impairments

     (118     (122     (1,499

Portion of other-than-temporary impairments included in other comprehensive income (loss)

     (14     (86     441   
    

 

 

   

 

 

   

 

 

 

Net other-than-temporary impairments

     (132     (208     (1,058
    

 

 

   

 

 

   

 

 

 

Trading securities

     27        19        22   

Commercial mortgage loans

     6        (29     (28

Net gains (losses) related to securitization entities (1)

     (47     (3     —     

Derivative instruments (2)

     (99     50        21   

Contingent purchase price valuation change

     (25     —          —     

Other

     —          23        (27
    

 

 

   

 

 

   

 

 

 

Net investment gains (losses)

   $ (220   $ (143   $ (1,041
    

 

 

   

 

 

   

 

 

 

We generally intend to hold securities in unrealized loss positions until they recover. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the years ended December 31, 2011, 2010 and 2009 was $1,884 million, $1,932 million and $1,513 million, respectively, which was approximately 93%, 93% and 88%, 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 OCI as of and for the years ended December 31:

 

                         

(Amounts in millions)

   2011     2010     2009  

Beginning balance

   $ 784      $ 1,059      $ —     

Adoption of new accounting guidance related to other-than-temporary impairments

     —          —          1,204   

Adoption of new accounting guidance related to securitization entities

     —          (36     —     

Additions:

                        

Other-than-temporary impairments not previously recognized

     39        63        120   

Increases related to other-than-temporary impairments previously recognized

     82        117        227   

Reductions:

                        

Securities sold, paid down or disposed

     (259     (419     (485

Securities where there is intent to sell

     —          —          (7
    

 

 

   

 

 

   

 

 

 

Ending balance

   $ 646      $ 784      $ 1,059   
    

 

 

   

 

 

   

 

 

 

(c) Unrealized Investment Gains and Losses

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 December 31:

 

                         

(Amounts in millions)

   2011     2010     2009  

Net unrealized gains (losses) on investment securities:

                        

Fixed maturity securities

   $ 3,742      $ 511      $ (2,245

Equity securities

     5        9        20   

Other invested assets

     (30     (22     (29
    

 

 

   

 

 

   

 

 

 

Subtotal

     3,717        498        (2,254

Adjustments to DAC, PVFP, sales inducements and benefit reserves

     (1,349     (583     138   

Income taxes, net

     (825     35        757   
    

 

 

   

 

 

   

 

 

 

Net unrealized investment gains (losses)

     1,543        (50     (1,359

Less: net unrealized investment gains (losses) attributable to noncontrolling interests

     89        50        39   
    

 

 

   

 

 

   

 

 

 

Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.

   $ 1,454      $ (100   $ (1,398
    

 

 

   

 

 

   

 

 

 

The change in net unrealized gains (losses) on available-for-sale investment securities reported in accumulated other comprehensive income (loss) was as follows as of and for the years ended December 31:

 

                         

(Amounts in millions)

   2011     2010     2009  

Beginning balance

   $ (100   $ (1,398   $ (4,038

Cumulative effect of changes in accounting

     —          260        (349

Unrealized gains (losses) arising during the period:

                        

Unrealized gains (losses) on investment securities

     3,137        2,141        4,379   

Adjustment to DAC

     (117     (274     (526

Adjustment to PVFP

     (86     (134     (178

Adjustment to sales inducements

     (3     (35     (20

Adjustment to benefit reserves

     (560     (273     —     

Provision for income taxes

     (831     (509     (1,296
    

 

 

   

 

 

   

 

 

 

Change in unrealized gains (losses) on investment securities

     1,540        916        2,359   

Reclassification adjustments to net investment (gains) losses, net of taxes of $(29), $(71) and $(360)

     53        133        669   
    

 

 

   

 

 

   

 

 

 

Change in net unrealized investment gains (losses)

     1,593        1,309        2,679   

Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests

     39        11        39   
    

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,454      $ (100   $ (1,398
    

 

 

   

 

 

   

 

 

 

(d) Fixed Maturity and Equity Securities

As of December 31, 2011, 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:

 

                                                 
            Gross unrealized gains      Gross unrealized losses        

(Amounts in millions)

   Amortized
cost or
cost
     Not other-than-
temporarily
impaired
     Other-than-
temporarily
impaired
     Not other-than-
temporarily
impaired
    Other-than-
temporarily
impaired
    Fair
value
 

Fixed maturity securities:

                                                   

U.S. government, agencies and government-sponsored enterprises

   $ 3,946       $ 918       $ —         $ (1   $ —        $ 4,863   

Tax-exempt

     564         15         —           (76     —          503   

Government—non-U.S.

     2,017         196         —           (2     —          2,211   

U.S. corporate

     23,024         2,542         18         (325     (1     25,258   

Corporate—non-U.S.

     13,156         819         —           (218     —          13,757   

Residential mortgage-backed

     5,695         446         9         (252     (203     5,695   

Commercial mortgage-backed

     3,470         157         4         (179     (52     3,400   

Other asset-backed

     2,686         18         —           (95     (1     2,608   
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

     54,558         5,111         31         (1,148     (257     58,295   

Equity securities

     356         19         —           (14     —          361   
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

   $ 54,914       $ 5,130       $ 31       $ (1,162   $ (257   $ 58,656   
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

As of December 31, 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:

 

                                                 
            Gross unrealized gains      Gross unrealized losses        

(Amounts in millions)

   Amortized
cost or
cost
     Not other-than-
temporarily
impaired
     Other-than-
temporarily
impaired
     Not other-than-
temporarily
impaired
    Other-than-
temporarily
impaired
    Fair
value
 

Fixed maturity securities:

                                                   

U.S. government, agencies and government-sponsored enterprises

   $ 3,568       $ 145       $ —         $ (8   $ —        $ 3,705   

Tax-exempt

     1,124         19         —           (113     —          1,030   

Government—non-U.S.

     2,257         118         —           (6     —          2,369   

U.S. corporate

     23,282         1,123         10         (448     —          23,967   

Corporate—non-U.S.

     13,180         485         —           (167     —          13,498   

Residential mortgage-backed

     4,821         116         18         (304     (196     4,455   

Commercial mortgage-backed

     3,936         132         6         (286     (45     3,743   

Other asset-backed

     2,494         18         —           (94     (2     2,416   
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

     54,662         2,156         34         (1,426     (243     55,183   

Equity securities

     323         13         —           (4     —          332   
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total available-for- sale securities

   $ 54,985       $ 2,169       $ 34       $ (1,430   $ (243   $ 55,515   
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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, 2011:

 

                                                                         
     Less than 12 months      12 months or more      Total  

(Dollar amounts in millions)

   Fair
value
     Gross
unrealized
losses
    Number of
securities
     Fair
value
     Gross
unrealized
losses
(1)
    Number of
securities
     Fair
value
     Gross
unrealized
losses
(2)
    Number of
securities
 

Description of Securities

                                                                             

Fixed maturity securities:

                                                                             

U.S. government, agencies and government-sponsored enterprises

   $ 160       $ (1     2       $ —         $ —          —         $ 160       $ (1 )       2   

Tax-exempt

     —           —          —           230         (76 )       72         230         (76 )       72   

Government—non-U.S.

     90         (1     25         8         (1 )       8         98         (2 )       33   

U.S. corporate

     1,721         (68     175         1,416         (258 )       136         3,137         (326 )       311   

Corporate—non-U.S.

     1,475         (86     188         705         (132 )       75         2,180         (218 )       263   

Residential mortgage-backed

     276         (5     68         727         (450 )       359         1,003         (455 )       427   

Commercial mortgage-backed

     282         (36     49         831         (195 )       159         1,113         (231 )       208   

Other asset-backed

     623         (3     83         309         (93 )       35         932         (96 )       118   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Subtotal, fixed maturity securities

     4,627         (200     590         4,226         (1,205     844         8,853         (1,405     1,434   

Equity securities

     92         (11     39         25         (3 )       13         117         (14 )       52   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total for securities in an unrealized loss position

   $ 4,719       $ (211     629       $ 4,251       $ (1,208     857       $ 8,970       $ (1,419     1,486   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

% Below cost—fixed maturity securities:

                                                                             

<20% Below cost

   $ 4,545       $ (156     548       $ 2,758       $ (252 )       435       $ 7,303       $ (408 )       983   

20%-50% Below cost

     78         (30     27         1,335         (653 )       283         1,413         (683 )       310   

>50% Below cost

     4         (14     15         133         (300 )       126         137         (314 )       141   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed maturity securities

     4,627         (200     590         4,226         (1,205     844         8,853         (1,405     1,434   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

% Below cost—equity securities:

                                                                             

<20% Below cost

     80         (6     36         21         (1 )       12         101         (7 )       48   

20%-50% Below cost

     12         (5     3         4         (2 )       1         16         (7 )       4   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total equity securities

     92         (11     39         25         (3 )       13         117         (14 )       52   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total for securities in an unrealized loss position

   $ 4,719       $ (211     629       $ 4,251       $ (1,208     857       $ 8,970       $ (1,419     1,486   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
                   

Investment grade

   $ 4,292       $ (165     502       $ 3,066       $ (577 )       479       $ 7,358       $ (742 )       981   

Below investment grade (3)

     427         (46     127         1,185         (631 )       378         1,612         (677 )       505   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total for securities in an unrealized loss position

   $ 4,719       $ (211     629       $ 4,251       $ (1,208     857       $ 8,970       $ (1,419     1,486   
    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 
 

As indicated in the table above, the majority of the securities in a continuous unrealized loss position for less than 12 months were investment grade and less than 20% below cost. These unrealized losses were primarily attributable to credit spreads that have widened since acquisition for corporate securities across various industry sectors, including finance and insurance as well as utilities and energy. For securities that have been in a continuous unrealized loss for less than 12 months, the average fair value percentage below cost was approximately 4% as of December 31, 2011.

 

 

 

 

Fixed Maturity Securities In A Continuous Unrealized Loss Position For 12 Months Or More

 

Of the $252 million of unrealized losses on fixed maturity securities in a continuous unrealized loss for 12 months or more that were less than 20% below cost, the weighted-average rating was "BBB" and approximately 73% of the unrealized losses were related to investment grade securities as of December 31, 2011. These unrealized losses were attributable to the widening of credit spreads for these securities since acquisition, primarily associated with corporate securities in the finance and insurance sector as well as mortgage-backed and asset-backed securities. The average fair value percentage below cost for these securities was approximately 8% as of December 31, 2011. See below for additional discussion related to fixed maturity securities that have been in a continuous loss position for 12 months or more with a fair value that was more than 20% below cost.

The following tables present the concentration of gross unrealized losses and fair values of fixed maturity securities that were more than 20% below cost and in a continuous loss position for 12 months or more by asset class as of December 31, 2011:

 

                                                                 
     Investment Grade  
     20% to 50%      Greater than 50%  

(Dollar amounts in millions)

   Fair
value
     Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
     Fair
value
     Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
 

Fixed maturity securities:

                                                                   

Tax-exempt

   $ 144       $ (67     5     28       $ —         $ —          —       —     

Government—non-U.S.

     2         (1     —          1         —           —          —          —     

U.S. corporate

     322         (134     9        22         —           —          —          —     

Corporate—non-U.S.

     223         (98     7        21         —           —          —          —     

Structured securities:

                                                                   

Residential mortgage-backed

     69         (29     2        26         11         (27     2        14   

Commercial mortgage-backed

     60         (23     2        14         —           (1     —          3   

Other asset-backed

     27         (8     1        3         1         (2     —          1   
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total structured securities

     156         (60     5        43         12         (30     2        18   
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 847       $ (360     26     115       $ 12       $ (30     2     18   
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
                                                                 
     Below Investment Grade  
     20% to 50%      Greater than 50%  

(Dollar amounts in millions)

   Fair
value
     Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
     Fair
value
     Gross
unrealized
losses
    % of total
gross
unrealized
losses
    Number of
securities
 

Fixed maturity securities:

                                                                   

U.S. corporate

   $ 40       $ (28     2     11       $ —         $ —          —       —     

Structured securities:

                                                                   

Residential mortgage-backed

     263         (158     11        117         82         (205     14        90   

Commercial mortgage-backed

     112         (53     4        36         29         (51     4        16   

Other asset-backed

     73         (54     4        4         10         (14     1        2   
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total structured securities

     448         (265     19        157         121         (270     19        108   
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 488       $ (293     21     168       $ 121       $ (270     19     108   
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

For all securities in an unrealized loss position, we expect to recover the 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. See below for further discussion of gross unrealized losses by asset class.

Tax-Exempt Securities

As indicated in the table above, $67 million of gross unrealized losses were related to tax-exempt securities that have been in a continuous unrealized loss position for more than 12 months and were more than 20% below cost. The unrealized losses for tax-exempt securities represent municipal bonds that were diversified by state as well as municipality or political subdivision within those states. Of these tax-exempt securities, the average unrealized loss was approximately $2 million which represented an average of 32% below cost. The unrealized losses primarily related to widening of credit spreads on these securities since acquisition as a result of higher risk premiums being attributed to these securities from uncertainty in many political subdivisions related to special revenues supporting these obligations as well as certain securities having longer duration that may be viewed as less desirable in the current market place. Additionally, the fair value of certain of these securities has been negatively impacted as a result of having certain bond insurers associated with the security. In our analysis of impairment for these securities, we expect to recover our amortized cost from the cash flows of the underlying securities before any guarantee support. However, the existence of these guarantees may negatively impact the value of the debt security in certain instances. We performed an analysis of these securities and the underlying activities that are expected to support the cash flows and determined we expect to recover our amortized cost.

 

Corporate Debt Securities

The following tables present the concentration of gross unrealized losses and fair values related to corporate debt fixed maturity securities that were more than 20% below cost and in a continuous loss position for 12 months or more by industry as of December 31, 2011:

 

                                                                 
     Investment Grade  
     20% to 50%      Greater than 50%  

(Dollar amounts in millions)

   Fair
value
     Gross
unrealized
losses
    % of total
gross
unrealized
losses
   

Number 

of
securities

     Fair
value
     Gross
unrealized
losses
     % of total
gross
unrealized
losses
   

Number 

of
securities

 

Industry:

                                                                    

Finance and insurance

   $ 455       $ (203     14     38       $ —         $ —           —       —     

Utilities and energy

     18         (6     —          1         —           —           —          —     

Consumer-non-cyclical

     30         (10     1        1         —           —           —          —     

Capital goods

     11         (4     —          1         —           —           —          —     

Technology and

     communications

     31         (9     1        2         —           —           —          —     
    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 545       $ (232     16     43       $ —         $ —           —