GENWORTH FINANCIAL INC (GNW) FY 2022 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes included in “Item 8—Financial Statements and Supplementary Data.”

Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, 2022 and 2021. Discussions of information related to 2020 and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K. Comparative discussions between 2021 and 2020 can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview

Our business

Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products which are no longer sold. We report our business results through three operating business segments: Enact; U.S. Life Insurance; and Runoff. We also have Corporate and Other activities. Our U.S. Life Insurance segment includes long-term care insurance, life insurance and fixed annuity products. The Runoff segment primarily includes variable annuity, variable life insurance and corporate-owned life insurance products, which have not been actively sold since 2011, as well as funding agreements.

Our financial information

The financial information in this Annual Report on Form 10-K has been derived from our consolidated financial statements.

Revenues and expenses

Our revenues consist primarily of the following:

Our expenses consist primarily of the following:

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The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers.

We allocate corporate expenses to each of our operating segments using various methodologies.

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Consolidated Results of Operations

The following table sets forth the consolidated results of operations for the periods indicated:

Unless otherwise stated, all references to net income (loss), net income (loss) per share, adjusted operating income (loss) and adjusted operating income (loss) per share found in “Item 7—Management’s Discussion and

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Analysis of Financial Condition and Results of Operations” should be read as net income (loss) available to Genworth Financial, Inc.’s common stockholders, net income (loss) available to Genworth Financial, Inc.’s common stockholders per share, adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share, respectively.

Use of non-GAAP measures

Reconciliation of net income (loss) to adjusted operating income (loss)

We use non-GAAP financial measures entitled “adjusted operating income (loss)” and “adjusted operating income (loss) per share.” Adjusted operating income (loss) per share is derived from adjusted operating income (loss). Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). We define adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Initial gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or initial gains (losses) on reinsurance restructuring for certain blocks of business. 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 component of our net investment gains (losses) is the result of estimated future credit losses, 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) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) 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) in accordance with U.S. GAAP, we believe that adjusted operating income (loss), and measures that are derived from or incorporate adjusted operating income (loss), including adjusted operating income (loss) per share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) and adjusted operating income (loss) per share on a basic and diluted basis are not substitutes for net income (loss) or net income (loss) per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) may differ from the definitions used by other companies.

Adjustments to reconcile net income (loss) to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.

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The following table presents a reconciliation of net income to adjusted operating income for the years ended December 31:

During 2022, we paid a pre-tax make-whole premium of $2 million and wrote off $1 million of bond consent fees and deferred borrowing costs related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in February 2024. Prior to the redemption, we repurchased $130 million principal amount of Genworth Holdings’ senior notes due in February 2024 for a pre-tax loss of $4 million. We also repurchased $13 million principal amount of Genworth Holdings’ senior notes due in 2034 for a pre-tax gain of $1 million during the fourth quarter of 2022. During 2021, we paid a pre-tax make-whole premium of $6 million and $20 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in September 2021 and August 2023, respectively. We also repurchased $146 million principal amount of Genworth Holdings’ senior notes due in September 2021 for a pre-tax loss of $4 million and repurchased $91 million and $118 million principal amount of Genworth Holdings’ senior notes due in 2023 and 2024, respectively, for a pre-tax loss of $15 million. During 2020, we repurchased $84 million principal amount of Genworth Holdings’ senior notes with 2021 maturity dates for a pre-tax gain of $4 million. In January 2020, we paid a pre-tax make-whole expense of $9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June 2020 and Rivermont Life Insurance Company I, our indirect wholly-owned special purpose consolidated captive insurance subsidiary, early redeemed all of its $315 million outstanding non-recourse funding obligations originally due in 2050 resulting in a pre-tax loss of $4 million from the write-off of deferred borrowing costs. These transactions were excluded from adjusted operating income as they relate to gains (losses) on the early extinguishment of debt.

In 2021, we recorded a pre-tax loss of $92 million as a result of ceding certain term life insurance policies as part of a life block transaction.

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In 2022, 2021 and 2020, we recorded a pre-tax expense of $2 million, $34 million and $3 million, respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational needs and expenses.

During 2022, we incurred $8 million of pre-tax pension plan termination costs related to one of our defined benefit pension plans. There were no other infrequent or unusual items excluded from adjusted operating income during the periods presented.

Earnings per share

The following table provides basic and diluted earnings per common share for the years ended December 31:

Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based awards.

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The following table presents a summary of adjusted operating income (loss) for our segments and Corporate and Other activities for the years ended December 31:

Executive Summary of Consolidated Financial Results

Below is an executive summary of our consolidated financial results for the periods indicated. Amounts included within this “Executive Summary of Consolidated Financial Results” are net of taxes, unless otherwise indicated. After-tax amounts assume a tax rate of 21%.

For a discussion of selected financial information and detailed descriptions of operating performance measures see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”

2022 compared to 2021

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Significant Developments and Strategic Highlights

The periods under review include, among others, the following significant developments and steps taken in the execution of our strategic priorities.

Enact

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For additional information related to PMIERs, see “Item 1—Business—Regulation—Enact—Mortgage Insurance Regulation—Other U.S. Regulation and Agency Qualification Requirements.”

U.S. Life Insurance

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For additional information see “—Critical Accounting Estimates.”

Liquidity and Capital Resources

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See note 12 in our consolidated financial statements under “Item 8—Financial Statements and Supplementary Data” for additional information on our long-term borrowings.

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 adjusted operating income (loss).

Management’s discussion and analysis by segment contains selected operating performance measures including “sales” and “insurance in-force” or “risk in-force” which are commonly used in the insurance industry as measures of operating performance.

Management regularly monitors and reports sales metrics as a measure of volume of new business generated in a period. Sales refer to new insurance written for mortgage insurance products included in our Enact segment. We consider new insurance written to be a measure of our Enact segment’s operating performance because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of revenues or profitability during that period.

Management regularly monitors and reports insurance in-force and risk in-force for our Enact segment. Insurance in-force is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans insured by our U.S. mortgage insurance subsidiaries. Risk in-force is based on the coverage percentage applied to the estimated current outstanding loan balance. We consider insurance in-force and risk in-force to be measures of our Enact segment’s operating performance because they represent measures of the size of its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period.

Management regularly monitors and reports a loss ratio for our businesses. For our mortgage insurance businesses included in our Enact segment, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For our long-term care insurance business included in our U.S. Life Insurance segment, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of our businesses.

Management also regularly monitors and reports adjusted operating income available to Genworth Financial, Inc.’s common stockholders attributable to in-force rate actions in the long-term care insurance

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business included in our U.S. Life Insurance segment. In-force rate actions include premium rate increases and associated benefit reductions implemented since 2012, which are presented net of estimated premium taxes, commissions, and other expenses on an after-tax basis. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual historical results, including but not limited to, a uniform rate of coinsurance and premium taxes in addition to consistent policyholder behavior over time. Actual policyholder behavior may differ significantly from these assumptions. In addition, estimates exclude reserve updates resulting from profits followed by losses and reserve changes for group products. Management considers adjusted operating income attributable to in-force rate actions to be a measure of our operating performance because it helps bring older generation long-term care insurance blocks closer to a break-even point over time and helps bring the loss ratios on newer long-term care insurance blocks back towards their original pricing.

These operating performance 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.

Enact segment

Trends and conditions

Results of our Enact segment are affected primarily by the following factors: competitor actions; unemployment or underemployment levels; other economic and housing market trends, including interest rates, home prices, the number of first-time homebuyers, and mortgage origination volume mix and practices; the levels and aging of mortgage delinquencies; the effect of seasonal variations; the inventory of unsold homes; loan modification and other servicing efforts; and litigation, among other items. References to “Enact” included herein “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Enact segment” are, unless the context otherwise requires, to our Enact segment.

Mortgage origination activity declined throughout 2022 in response to rising mortgage rates. If interest rates remain high, the refinance market is likely to remain depressed. Housing affordability was challenged in 2022 due to increasing interest rates, low inventory and elevated home prices, modestly offset by rising median family income, according to the National Association of Realtors Housing Affordability Index. Annual home price appreciation slowed throughout 2022, and home prices declined in the second half of the year, according to the FHFA Monthly Purchase-Only House Price Index.

The unemployment rate decreased to 3.5% in December 2022, compared to 3.9% in December 2021, following a decline from its peak of 14.8% in April 2020, bringing unemployment in line with the pre-pandemic level of 3.5% in February 2020. As of December 31, 2022, the number of unemployed Americans was under 6 million, and the number of long term unemployed over 26 weeks was approximately one million. Both of these metrics remain relatively in line with February 2020 levels.

For mortgages insured by the federal government (including those purchased by Fannie Mae and Freddie Mac), forbearance allows borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits. Currently, the GSEs do not have a deadline for requesting an initial forbearance. Federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend the foreclosure timeline, which could negatively impact the severity of loss on loans that go to claim.

Although it is difficult to predict the future level of reported forbearance and how many of the loans in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported forbearances have generally declined. As of December 31, 2022, approximately 1.5% or 14,270 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 36% were reported as delinquent compared with approximately 2% or 21,899 of its active primary policies reported in forbearance with

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approximately 47% reported as delinquent as of December 31, 2021. Natural disasters, such as hurricanes, often lead to temporary increases in delinquencies in forbearance. While Enact experienced a small increase in delinquencies in the fourth quarter of 2022 related to the recent hurricane impacting the southeastern United States, it did not have a material impact on loss reserves as of December 31, 2022. Enact will continue to monitor the affected areas and support measures enacted by the GSEs, including allowing forbearance, restricting foreclosure actions and providing other forms of mortgage relief for those who experienced property damage.

Total delinquencies decreased during 2022 compared to 2021 as a result of cures outpacing new delinquencies. The 2022 new delinquency rate of 3.8%, while slightly higher than the 2021 new delinquency rate of 3.5%, was in line with Enact’s pre-pandemic levels. The full impact of COVID-19 and its adverse economic effects on Enact’s future business results are difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan may not be known for several quarters. Enact continues to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated and delinquencies have declined, it is possible that COVID-19 related forbearance programs could have an adverse impact on Enact’s future results of operations and financial condition.

Private mortgage insurance market penetration and overall market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the FHA and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products. On February 25, 2022, the FHFA finalized the rule for the Enterprise Capital Framework, which included technical corrections to its December 17, 2020 rule. Higher GSE capital requirements could lead to increased costs to borrowers of GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender portfolios. Such a shift could result in a smaller market for private mortgage insurance.

In January 2022, the FHFA introduced new upfront fees charged to borrowers for some high-balance and second home loans sold to Fannie Mae and Freddie Mac, which became effective April 1, 2022. Upfront fees for high-balance loans increased between 0.25% and 0.75%, tiered by loan-to-value ratio. For second home loans, the upfront fees increased between 1.125% and 3.875%, also tiered by loan-to-value ratio. To date, Enact has not experienced a significant impact to its business or results of operations as a result of this new pricing framework.

On October 24, 2022, the FHFA announced targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain first-time home buyers with income at or below area median income and for certain GSE affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans. The fee reductions went into effect in the fourth quarter of 2022 while the new fees on cash-out refinance loans began February 1, 2023. Enact expects these price changes to have a net positive impact to the private mortgage insurance market.

The FHFA also announced in October 2022 its validation and approval of certain credit score models for use by the GSEs and changed the required number of credit reports provided by lenders from all three nationwide consumer reporting agencies to only two. The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs. There is currently no implementation deadline, and this is expected to be a multiple year process that will require system and process updates.

In January 2023, the FHFA announced additional updates to its upfront fee structure and pricing matrix. The changes impact purchase and rate-term refinance loans with pricing grids to be broken out by loan purpose and recalibrated to new credit score and loan-to-value ratio categories, along with associated loan attributes. The new pricing matrix also includes new upfront fees for loans with debt-to-income ratios greater than 40%. These changes will go into effect in May 2023. Enact is currently evaluating the impact of these changes but does not expect a significant impact to the private mortgage insurance market.

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In February 2023, the Department of Housing and Urban Development announced a 30 basis point reduction of the annual insurance premium charged to borrowers with FHA-insured mortgages in order to reduce the cost of borrowing for eligible lower and middle class homebuyers. This price reduction is expected to have a negative impact on the U.S. private mortgage insurance market but will be partially offset by the effects of the recent FHFA pricing changes referenced above. Enact does not expect the net impact to be material.

The U.S. private mortgage insurance industry is highly competitive. Enact Holdings’ market share is influenced by the execution of its go to market strategy, including but not limited to, pricing competitiveness relative to its peers and its selective participation in forward commitment transactions. Enact continues to manage the quality of new business through pricing and its underwriting guidelines, which are modified from time to time when circumstances warrant. The market and underwriting conditions, including the mortgage insurance pricing environment, are within Enact’s risk adjusted return appetite enabling it to write new business at returns it views as attractive.

New insurance written of $66.5 billion in 2022 decreased 31% compared to 2021 primarily due to a smaller estimated private mortgage insurance market. The decrease in the estimated private mortgage insurance market was largely driven by lower purchase and refinancing originations due to rising interest rates.

Enact’s primary persistency rate increased to 80% for the year ended December 31, 2022 compared to 62% for the year ended December 31, 2021. The increase in persistency was primarily driven by a decline in the percentage of in-force policies with mortgage rates above current interest rates and offset the decline in new insurance written in 2022, leading to an increase in insurance in-force of $21.7 billion during 2022. Higher persistency impacted business performance trends in several ways, including but not limited to, slowing the recognition of earned premiums due to lower single premium policy cancellations, slowing the amortization of existing reinsurance transactions and the corresponding reduction of PMIERs capital credit, and shifting the concentration of Enact’s primary insurance in-force by policy year. As of December 31, 2022, Enact’s primary insurance in-force had approximately 58% concentration in 2022 and 2021 book years compared to 71% primary insurance in-force concentration in 2021 and 2020 book years as of December 31, 2021.

Net earned premiums decreased in 2022 compared to 2021 primarily from the lapse of older, higher priced policies and from lower single premium policy cancellations, partially offset by insurance in-force growth in 2022. The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 as borrowers continued to exit forbearance plans and new forbearances declined. During this time, and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default and Enact refunds the post-delinquent premiums to the insured party if the delinquent loan goes to claim. Enact records a liability and a reduction to net earned premiums for the post-delinquent premiums it expects to refund. The post-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through December 31, 2022 was not significant to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated claim rate for these loans.

Enact’s loss ratio was (10)% for the year ended December 31, 2022, compared to 13% for the year ended December 31, 2021. The decrease was largely from net favorable reserve adjustments of $268 million in 2022, primarily related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021. During the peak of COVID-19, Enact experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have been curing at levels above Enact’s reserve expectations, which led to releases of $314 million of reserves in 2022. These reserve releases were partially offset by reserve strengthening on certain 2022 delinquencies. Due to uncertainty in the current economic environment, Enact increased the expected claim rate on new delinquencies during 2022. New delinquencies in the fourth quarter of 2022 were recorded at the higher expected claim rate and reserves on delinquencies from prior quarters in 2022 were strengthened by $46 million. In 2021, Enact decreased reserves by $22 million primarily related to positive frequency and severity development on pre-COVID-19 delinquencies.

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Enact’s loss reserves continue to be impacted by COVID-19 and remain subject to uncertainty. Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job continue to take advantage of available loss mitigation options, including forbearance programs, payment deferral options and other modifications. Loss reserves recorded on these delinquencies require a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments, as well as the timing and severity of those payments. The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated in part by embedded home price appreciation. For loans insured on or after October 1, 2014, Enact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

New primary delinquencies in 2022 increased compared to 2021. New primary delinquencies of 35,996 contributed $171 million of loss expense in 2022, while Enact incurred $144 million of losses from 32,624 new primary delinquencies in 2021. In determining the loss expense estimate, considerations were given to forbearance and non-forbearance delinquencies, recent cure and claim experience and the prevailing and prospective economic conditions. Approximately 21% of Enact’s primary new delinquencies in 2022 were subject to a forbearance plan as compared to 42% in 2021.

EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 12.9:1 as of December 31, 2022 compared with a risk-to-capital ratio of 12.3:1 as of December 31, 2021. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Under PMIERs, Enact is subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. Since 2020, the GSEs have issued several amendments to PMIERs, which implemented both permanent and temporary revisions to PMIERs. Many of the provisions are no longer applicable, but for loans that became non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) had an initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount factor for the non-performing loan is the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier was applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period. The PMIERs amendment dated June 30, 2021 further allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021 to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remains in forbearance. In addition, the PMIERs amendments made permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future FEMA Declared Major Disaster Areas eligible for individual assistance.

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In addition, in September 2020, certain GSE Restrictions were imposed with respect to capital on Enact, which will remain in effect until the collective GSE Conditions are met. For additional details related to PMIERs, the PMIERs amendments and the GSE Conditions and Restrictions, see “Item 1—Regulation—Enact—Mortgage Insurance Regulation—Other U.S. Regulation and Agency Qualification Requirements.”

As of December 31, 2022, Enact had estimated available assets of $5,206 million against $3,156 million net required assets under PMIERs compared to available assets of $5,077 million against $3,074 million net required assets as of December 31, 2021. The sufficiency ratio as of December 31, 2022 and 2021 was 165%, or $2,050 million and $2,003 million, respectively, above the published PMIERS requirements. PMIERs sufficiency is based on the published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions imposed on Enact. Enact’s PMIERs required assets as of December 31, 2022 and 2021 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided $132 million and $390 million of benefit to Enact’s PMIERs required assets as of December 31, 2022 and 2021, respectively. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.

Credit risk transfer transactions provided an aggregate of approximately $1,578 million of PMIERs capital credit as of December 31, 2022. Enact may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.

On April 26, 2022, Enact Holdings’ board of directors approved the initiation of a quarterly dividend program. Pursuant to the program, Enact Holdings paid quarterly dividends beginning in the second quarter of 2022, and Genworth Holdings received $57 million in 2022 as the majority shareholder. Enact Holdings also paid a special dividend in the fourth quarter of 2022, and Genworth Holdings received $148 million. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial. In addition, in November 2022, Enact Holdings announced approval by its board of directors of a share repurchase program under which it may repurchase up to $75 million of its outstanding common stock. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level. Enact Holdings began share repurchases under the program in the fourth quarter of 2022.

EMICO completed distributions to Enact Holdings in April 2022 and October 2022, the proceeds of which were used to support Enact Holdings’ cash dividends. Enact Holdings intends to use future EMICO distributions to fund the quarterly dividend as well as to bolster its financial flexibility and potentially return additional capital to shareholders. Returning capital to shareholders, balanced with growth and risk management priorities, remains a key commitment for Enact Holdings, as it looks to enhance shareholder value through time. Future return of capital will be shaped by Enact Holdings’ capital prioritization framework, including: supporting its existing policyholders; growing its mortgage insurance business; funding attractive new business opportunities; and returning capital to shareholders. Enact Holdings’ total return of capital will also be based on its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

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Segment results of operations

The following table sets forth the results of operations relating to our Enact segment for the periods indicated:

2022 compared to 2021

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders

Adjusted operating income increased primarily attributable to lower losses largely driven by net favorable reserve adjustments of $212 million, consisting of reserve releases of $248 million primarily related to COVID-19 delinquencies from 2020 and 2021 curing at levels above original reserve expectations, partially offset by reserve strengthening of $36 million related to 2022 delinquencies given uncertainty in the current economic environment. This improvement was partially offset by the minority IPO of Enact Holdings that closed in September 2021, which reduced Genworth Financial’s ownership percentage to 81.6%, and lower premiums in 2022.

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Revenues

Premiums decreased mainly driven by the lapse of older, higher priced policies and lower single premium policy cancellations, partially offset by higher insurance in-force in 2022 driven by increased persistency.

Net investment income increased primarily due to higher investment yields and higher average invested assets, partially offset by lower income from bond calls in 2022.

Benefits and expenses

Benefits and other changes in policy reserves decreased largely from net favorable reserve adjustments of $268 million, partially offset by higher new delinquencies in 2022. During 2022, Enact released $314 million of reserves primarily related to COVID-19 delinquencies from 2020 and 2021 curing at levels above original reserve expectations, partially offset by reserve strengthening on certain 2022 delinquencies. Due to uncertainty in the current economic environment, Enact increased the expected claim rate on new delinquencies during 2022. New delinquencies in the fourth quarter of 2022 were recorded at the higher expected claim rate and reserves on delinquencies from prior quarters in 2022 were strengthened by $46 million. In 2021, Enact decreased reserves by $22 million primarily related to positive frequency and severity development on pre-COVID-19 delinquencies.

Acquisition and operating expenses, net of deferrals, decreased primarily attributable to expenses associated with strategic transaction preparations in 2021 that did not recur.

Amortization of deferred acquisition costs and intangibles decreased primarily due to lower DAC amortization largely from higher persistency in 2022 driven by rising interest rates.

Provision for income taxes. The effective tax rate was 21.6% and 21.3% for the years ended December 31, 2022 and 2021, respectively, consistent with the U.S. corporate federal income tax rate.

Net income from continuing operations attributable to noncontrolling interests. The increase relates to the minority IPO of Enact Holdings on September 16, 2021, which reduced Genworth Financial’s ownership percentage to 81.6%.

Enact selected operating performance measures

The following table sets forth selected operating performance measures regarding Enact as of and for the dates indicated:

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2022 compared to 2021

Primary insurance in-force and risk in-force

Primary insurance in-force increased largely from new insurance written. In addition, lower lapses and cancellations drove higher primary persistency, largely as a result of a decline in refinancing activity due to rising interest rates in 2022. The primary persistency rate was 80% and 62% for the years ended December 31, 2022 and 2021, respectively. Total risk in-force increased largely from higher primary insurance in-force.

New insurance written

New insurance written decreased principally due to a smaller estimated private mortgage insurance market in 2022, which was primarily driven by a decline in both purchase and refinancing originations due to rising interest rates.

Loss and expense ratios

The following table sets forth the loss and expense ratios for Enact for the dates indicated:

The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio is the ratio of general expenses to net earned premiums. In Enact, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

2022 compared to 2021

The loss ratio decreased largely from net favorable reserve adjustments of $268 million, as discussed above, partially offset by higher new delinquencies in 2022. Enact decreased reserves by $22 million in 2021 primarily related to positive frequency and severity development on pre-COVID-19 delinquencies.

The expense ratio remained flat as lower premiums were offset by expenses associated with strategic transaction preparations in 2021 that did not recur.

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Mortgage insurance loan portfolio

The following table sets forth selected financial information regarding Enact’s loan portfolio as of December 31:

The FICO credit score is one indicator of a borrower’s credit quality. Enact continues to underwrite predominantly prime loan new business. Based upon FICO at loan closing, the weighted average FICO score of Enact’s primary insurance in-force was 743 as of December 31, 2022.

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Delinquent loans and claims

Enact’s delinquency management process begins with notification by the loan servicer of a delinquency on an insured loan. “Delinquency” is defined in Enact’s master policies as the borrower’s failure to pay when due an amount equal to the scheduled monthly mortgage payment under the terms of the mortgage. Generally, the master policies require an insured to notify Enact of a delinquency if the borrower fails to make two consecutive monthly mortgage payments prior to the due date of the next mortgage payment. Enact generally considers a loan to be delinquent and establishes required reserves after the insured gives notification that the borrower has failed to make two scheduled mortgage payments. Borrowers default for a variety of reasons, including a reduction of income, unemployment, divorce, illness/death, inability to manage credit, falling home prices and interest rate levels. Borrowers may cure delinquencies by making all of the delinquent loan payments, agreeing to a loan modification or by selling the property in full satisfaction of all amounts due under the mortgage. In most cases, delinquencies that are not cured result in a claim under Enact’s policy. The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for Enact’s loan portfolio as of December 31:

The delinquency rate as of December 31, 2022 decreased compared to December 31, 2021 and 2020 primarily from a decline in total delinquencies as cures outpaced new delinquencies.

The following tables set forth primary delinquencies, direct primary case reserves and risk in-force by aged missed payment status in Enact’s loan portfolio as of December 31:

Total reserves as a percentage of risk in-force as of December 31, 2022 remained relatively flat as both delinquent risk in-force and reserves decreased. Delinquent risk in-force decreased mainly from lower total delinquencies as cures outpaced new delinquencies in 2022, while reserves decreased largely from favorable

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reserve adjustments related to COVID-19 delinquencies from 2020 and 2021, partially offset by new delinquencies in 2022.

The number of loans that are delinquent for 12 months or more was elevated as of December 31, 2021 due in large part to borrowers in forbearance plans driven by COVID-19 and decreased in 2022 due to cure activity. Enact’s current reserve estimate assumes that remaining COVID-19 delinquencies will have a higher likelihood of going to claim given the uncertainty around lack of progression through the foreclosure process. While Enact has seen significant cure activity in aged delinquencies, forbearance options continue to exist, so Enact could continue to experience elevated delinquencies in this aged category. Resolution of a delinquency in a forbearance plan, whether it ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer.

Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns. The tables below set forth the dispersion of direct primary case reserves and primary delinquency rates for the 10 largest states and the 10 largest Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by Enact’s primary risk in-force 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.

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The number of delinquencies may not correlate directly with the number of claims received because delinquencies may cure. The rate at which delinquencies cure is influenced by borrowers’ financial resources and circumstances and regional economic differences. Whether a delinquency leads to a claim correlates highly with the borrower’s equity at the time of delinquency, as it influences the borrower’s willingness to continue to make payments, and the borrower’s or the insured’s ability to sell the home for an amount sufficient to satisfy all amounts due under the mortgage loan, as well as the borrower’s financial ability to continue making payments. When Enact receives notice of a delinquency, it uses its proprietary model to determine whether a delinquent loan is a candidate for a modification. When the model identifies such a candidate, Enact’s loan workout specialists prioritize cases for loss mitigation based upon the likelihood that the loan will result in a claim. Loss mitigation actions include loan modification, extension of credit to bring a loan current, foreclosure forbearance, pre-foreclosure sale and deed-in-lieu. These loss mitigation efforts often are an effective way to reduce Enact’s claim exposure and ultimate payouts.

The following table sets forth the dispersion of Enact’s direct primary case reserves, primary insurance in-force and risk in-force by year of policy origination, weighted average mortgage interest rate and delinquency rate as of December 31, 2022:

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Loss reserves in policy years 2008 and prior are outsized compared to their representation of risk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. The largest portion of reserves has shifted to newer book years as a result of COVID-19 given their significant representation of risk in-force. As of December 31, 2022, Enact’s 2015 and newer policy years represented approximately 96% of primary risk in-force and 70% of total direct primary case reserves.

The ratio of the claim paid to the current risk in-force for a loan is referred to as “claim severity.” The current risk in-force is equal to the unpaid principal amount multiplied by the coverage percentage. The main determinants of claim severity are the age of the mortgage loan, the value of the underlying property, accrued interest on the loan, expenses advanced by the insured and foreclosure expenses. These amounts depend partly upon the time required to complete foreclosure, which varies depending upon state laws. Pre-foreclosure sales, acquisitions and other early workout and claim administration actions help to reduce overall claim severity. Enact’s average primary mortgage insurance claim severity was 94%, 103% and 106% for the years ended December 31, 2022, 2021 and 2020, respectively. The average claim severity for the year ended December 31, 2022 was impacted by low claim volumes and lifetime home price appreciation. The average claim severities do not include the effects of agreements on non-performing loans.

U.S. Life Insurance segment

Trends and conditions

Results of our U.S. life insurance businesses depend significantly upon the extent to which our actual future experience is consistent with assumptions and methodologies we have used in calculating our reserves. Many factors can affect the results of our U.S. life insurance businesses. Because these factors are not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our U.S. life insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our DAC amortization, reserve levels, results of operations and financial condition.

Our liability for policy and contract claims is reviewed quarterly and we completed a detailed review of our claim reserve assumptions and methodologies for our long-term care insurance business in the fourth quarter of 2022 as discussed further below. In the fourth quarter of 2022, we performed assumption reviews for our U.S. life insurance products, including our long-term care and life insurance products, and completed our loss recognition testing as discussed below. For our 2022 assumption updates, we generally did not include data after 2019 in setting any long-term assumptions, as we do not yet have sufficient information around longer term effects of the pandemic, which is consistent with the approach for our 2021 assumptions. Our review of assumptions, as part of our testing in the fourth quarter of 2022, included assumptions regarding expected claim incidence and terminations, expenses, benefit utilization, mortality, persistency, interest rates and in-force rate actions, among other assumptions. In addition, we performed cash flow testing separately for each of our U.S. life insurance companies on a statutory accounting basis in the fourth quarter of 2022.

Our U.S. life insurance subsidiaries are subject to the NAIC’s RBC standards and other minimum statutory capital and surplus requirements. As of December 31, 2022, the RBC of each of our U.S. life insurance subsidiaries exceeded the level of RBC that would require any of them to take or become subject to any corrective action in their respective domiciliary state, or company action level RBC ratio. The consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries was approximately 291% and 289% as of December 31, 2022 and 2021, respectively. The slight increase was driven by earnings in our long-term care insurance business mainly from premium rate increases and benefit reductions, including policyholder benefit reduction elections

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made in connection with legal settlements, that were mostly offset by high mortality in our life insurance products and unfavorable equity market performance in our variable annuity products.

We continue to face challenges in our principal life insurance subsidiaries, particularly those subsidiaries that rely heavily on long-term care insurance in-force rate actions as a source of earnings and capital. We may see variability in statutory results and a decline in the company action level RBC ratios of these subsidiaries given the time lag between the approval of in-force rate actions versus when the benefits from the in-force rate actions (including increased premiums and associated benefit reductions) are fully realized in our financial results. Additionally, the company action level RBC ratio of our U.S. life insurance subsidiaries would be negatively impacted by future increases in our statutory reserves, including results of life mortality, cash flow testing and assumption reviews, particularly in our long-term care and life insurance products. Future declines in the company action level RBC ratio of our life insurance subsidiaries could result in heightened supervision and regulatory action.

Results of our U.S. life insurance businesses are also impacted by interest rates. Prior to the recent rise in interest rates during 2022, historic low interest rates put pressure on the profitability and returns of our U.S. life insurance businesses as higher yielding investments matured and were replaced with lower-yielding investments. We have sought to manage the impact of low interest rates through asset-liability management, investment in alternative assets, including limited partnerships, as well as interest rate hedging strategies for a portion of our long-term care insurance product cash flows. Additionally, certain products have implicit and explicit rate guarantees or optionality that are significantly impacted by changes in interest rates. During periods of increasing market interest rates, we may increase crediting rates on in-force universal life insurance and fixed annuity products to remain competitive in the marketplace. In addition, rapidly rising interest rates may cause increased unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-income investments in an unrealized loss position to satisfy surrenders or withdrawals. For a further discussion of the impact of interest rates on our U.S. life insurance businesses, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk.”

In recent years, our U.S. life insurance businesses have been impacted by COVID-19 as a result of elevated mortality. Our long-term care insurance operating results were favorably impacted by higher mortality in 2021 and 2020. This trend continued into 2022 albeit to a lesser extent, and we have seen mortality levels return to pre-pandemic levels in the latter half of 2022 in our long-term care insurance business. Conversely, higher mortality rates had unfavorable impacts in our life insurance products; however, we have seen lower mortality since the first quarter of 2022. We have also observed minimal impact from COVID-19 in our fixed annuity products. While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on the U.S. life insurance business currently depend on the after-effects indirectly caused by the pandemic, including supply chain shortages and high inflation, and the shape of the economic recovery. For sensitivities related to lapses and mortality on our U.S. life insurance products, see “—Critical Accounting Estimates.” We will continue to monitor COVID-19 associated impacts and evaluate all of our assumptions that may need updating as a result of longer-term trends related to the pandemic.

Long-term care insurance

The long-term profitability of our long-term care insurance business depends upon how our actual experience compares with our valuation assumptions, including but not limited to morbidity, mortality and persistency. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past has had, and may in the future have, a material adverse effect on our results of operations, financial condition and business. Results of our long-term care insurance business are also influenced by our ability to achieve in-force rate actions, improve investment yields and manage expenses and reinsurance, among other factors. Changes in

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laws or government programs, including long-term care insurance rate action legislation, regulation and/or practices, could also impact our long-term care insurance business either positively or negatively.

In the fourth quarter of 2022, we completed loss recognition and cash flow testing and reviewed key assumptions for future policy benefits, or active life reserves, for our long-term care insurance business, including assumptions regarding expected claim incidence and terminations, expenses, benefit utilization, interest rates and in-force rate actions, among other assumptions. As of December 31, 2022, our loss recognition testing margin for our long-term care insurance business, excluding the acquired block, was positive but slightly lower than the 2021 level. We continue to test our acquired block of long-term care insurance separately. In 2022, our loss recognition testing margin for the acquired block was positive and slightly higher than the 2021 level. All key margin testing assumptions were reviewed and updated where appropriate. We refined several assumptions, including reducing our lapse assumption in light of favorable experience from our long-term care insurance legal settlement elections and benefit reductions and updating our interest rate assumption to reflect the impact of the higher interest rate environment. These refinements were not significant and we believe our assumptions are holding up in the aggregate. We also evaluated our assumptions regarding expectations of future premium rate increase approvals and benefit reductions and made no significant changes to our 2022 multi-year in-force rate action plan. However, we did increase the value of our assumption for future approvals and benefit reductions based on recent rate increase approval experience, regulatory support and legal settlement results.

We will continue to regularly review our methodologies and assumptions in light of emerging experience and may be required to make adjustments to our long-term care insurance reserves in the future, which could also impact our loss recognition and cash flow testing results. For a discussion of additional information related to margins for our long-term care insurance business, see “—Critical Accounting Estimates—Future policy benefits.”

During the fourth quarter of 2022, we reviewed our assumptions and methodologies relating to our claim reserves of our long-term care insurance business. As part of our review, we considered emerging experience particularly in mortality and benefit utilization, including the impact of increased cost of care due to inflation. In 2022 and 2021, based on the review of our assumptions and methodologies, we did not make any significant changes to our claim reserves. For a discussion of additional information related to changes to our assumptions and methodologies to our long-term care insurance claim reserves, see “—Critical Accounting Estimates—Liability for policy and contract claims.”

As a result of the review of our claim reserves completed in prior years, we have been establishing higher claim reserves on new claims, which has negatively impacted earnings, and we expect this to continue going forward. Also, average claim reserves for new claims are trending higher over time as the mix of claims continues to evolve, with an increasing number of policies with higher daily benefit amounts and higher inflation factors going on claim. Although new claim counts on our older long-term care insurance blocks of business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks of business and expect continued growth in new claims on these blocks as policyholders reach older attained ages with higher likelihood of going on claim.

In our long-term care insurance products, we have experienced higher mortality during COVID-19 which has had a favorable impact on claim reserves and our operating results. Although it is not our practice to track cause of death for long-term care insurance policyholders and claimants, we believe the higher mortality in our long-term care insurance business in early 2022 as well as during 2021 was likely impacted by COVID-19, but we expect the impacts to be temporary. COVID-19 significantly increased mortality on our most vulnerable claimants, which may reduce mortality rates in future periods. To account for this change in experience due to COVID-19, we adjusted the mortality assumption in our claim reserves to reflect the risk of lower claim termination rates on remaining claims. As of December 31, 2022, the balance of our incremental claim reserves associated with COVID-19 mortality was $90 million, which decreased $44 million from the December 31, 2021 balance of $134 million as mortality decreased for most of 2022 as the impacts from the pandemic subsided.

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Short-term mortality experience may fluctuate, and we would decrease the COVID-19 mortality adjustment if we continue to experience lower mortality.

We also experienced lower new claims incidence in our long-term care insurance business during COVID-19. However, we expected this to be temporary and that claims incidence experience would ultimately revert to pre-pandemic trends. As a result, we strengthened our IBNR claim reserves during the height of COVID-19. As of December 31, 2022 and 2021, the balance of IBNR claim reserves due to lower claims incidence was $47 million and $75 million, respectively. We are seeing new claims incidence trending back to pre-pandemic levels. In addition, during the pandemic, a larger share of our claimants sought home care instead of facility-based care, and as the impacts of the pandemic subside, we have seen that trend begin to reverse. We continue to utilize virtual assessments to assess eligibility for benefits while in-person assessments have been temporarily discontinued since the onset of COVID-19. We are reviewing the options to resume in-person assessments, with appropriate protocols in place, while having virtual assessments available for those policyholders who would prefer this option. For claimants without the technology to perform virtual assessments, we have alternate options for gathering information. Our long-term care insurance benefit utilization will be monitored for impact, although it is too early to tell the magnitude and/or direction of that impact.

Given the ongoing challenges in our long-term care insurance business, we continue to pursue initiatives to improve the risk and profitability profile of our business, including: premium rate increases and associated benefit reductions on our in-force policies; managing expense levels; executing investment strategies targeting higher returns; and enhancing our financial and actuarial analytical capabilities. In addition, we have reached certain legal settlements regarding alleged disclosure deficiencies in premium increases for long-term care insurance policies. The first legal settlement related to certain of our long-term care insurance policies, which represents approximately 20% of our block, was implemented beginning in 2021 and its implementation was materially completed in the second quarter of 2022. Another similar legal settlement on certain of our long-term care insurance policies, which represents 15% of our block, became final on July 29, 2022. We began implementation of this settlement on August 1, 2022, and recognized modest benefits during the fourth quarter of 2022. Because the election mailings occur on the policyholder’s policy anniversary date, the majority of the impacts are expected to be realized in 2023. However, we do not expect the financial impacts of this settlement to be as significant as they were with the first settlement given the smaller policy block size. On February 15, 2023, the court issued final approval on another similar pending settlement on certain of our long-term care insurance policies, which represents 35% of our block. The judgment will become final 30 days after its entry, or upon final resolution of any timely appeal, and we would expect to begin implementation in the second quarter of 2023. While the two new settlements are similar to the previous settlement, their ultimate impact will depend on the policyholder election rates and the types of reduced benefits elected. Given our experience with the first settlement, we expect these additional settlements to result in an overall net favorable impact to our long-term care insurance business. While we expect renewal premiums to decline over time, the settlements could accelerate that decline if policyholders continue to elect non-forfeiture and reduced benefit options, which have predominantly been the most prevalent policyholder elections for these legal settlements. Executing on our multi-year long-term care insurance in-force rate action plan with premium rate increases and associated benefit reductions on our legacy long-term care insurance policies is critical to the business. For an update on in-force rate actions, refer to “—Significant Developments and Strategic Highlights—U.S. Life Insurance” and “Item 1—Business—U.S. Life Insurance—In-force rate actions.”

The approval process for in-force rate actions and the amount and timing of the premium rate increases and associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a rate increase can take a significant amount of time, and the approved amount may be phased in over time. After approval, insureds are provided with written notice of the increase and increases are generally applied on the insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the implementation cycle is complete and are, therefore, expected to be realized over time.

Because obtaining actuarially justified rate increases and associated benefit reductions is important to our ability to pay future claims, we will consider litigation against states that decline to approve those actuarially

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justified rate increases. In January 2022, we began litigation with two states that have refused to approve actuarially justified rate increases.

Life insurance

Results of our life insurance business are impacted primarily by mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements, among other factors. We no longer solicit sales of traditional life insurance products; however, we continue to service our existing retained and reinsured blocks of business.

Mortality levels may deviate each period from historical trends. Overall mortality experience was lower in 2022 compared to 2021. In our life insurance products, COVID-19 deaths also declined in 2022 compared to 2021. We have experienced higher mortality than our then-current and priced-for assumptions in recent years for our universal life insurance block. We have also been experiencing higher mortality related charges resulting from an increase in rates charged by our reinsurance partners reflecting natural block aging and higher mortality compared to expectations.

In the fourth quarters of 2022 and 2021, we performed our annual review of life insurance assumptions and loss recognition testing. Our reviews focused on assumptions for mortality, persistency and interest rates, among other assumptions. Our mortality assumption was updated in 2021 to align with the overall pre-COVID-19 experience in later-duration as well as in targeted blocks such as term universal life insurance, conversion policies and post-level term. As of December 31, 2022, the loss recognition testing margin for our term and whole life insurance products was positive and consistent with the 2021 level.

As part of our annual review of assumptions in the fourth quarter of 2022, we recorded a $34 million after-tax benefit in our universal and term universal life insurance products primarily related to higher interest rates. As part of our review in the fourth quarter of 2021, we recorded a $70 million after-tax expense in our universal and term universal life insurance products primarily related to higher pre-COVID-19 mortality experience.

For the year ended December 31, 2022, in connection with our review of DAC for recoverability, we recorded after-tax charges of $41 million in our universal and term universal life insurance products compared to $92 million after-tax charges in 2021. However, there was no recoverability charge in the fourth quarter of 2022 as a result of our favorable assumption update. For a discussion of additional information related to changes to our assumptions and DAC recoverability related to our life insurance business, see “—Critical Accounting Estimates.”

Our mortality experience for older ages is emerging and we continue to monitor trends in mortality improvement. We will continue to regularly review our mortality assumptions as well as all of our other assumptions in light of emerging experience. We may be required to make adjustments in the future to our assumptions which could impact our life insurance reserves. Any materially adverse changes to our assumptions, including mortality, persistency or interest rates, could have a materially negative impact on our results of operations, financial condition and business. For a discussion of additional information related to changes to our life insurance assumptions, see “—Critical Accounting Estimates.”

Compared to 1998 and prior years, we had a significant increase in term life insurance sales between 1999 and 2009, particularly in 1999 and 2000. The blocks of business issued since 2000 vary in size as compared to the large 1999 and 2000 blocks of business. As our large 10-, 15- and 20-year level premium period term life insurance policies written in 1999 and 2000 transitioned to their post-level guaranteed premium rate period, we experienced lower persistency compared to our pricing and valuation assumptions which accelerated DAC amortization in previous years. Our 20-year level premium period business written in 2002 began to enter its post-level period in 2022 and we experienced elevated DAC amortization, albeit lower than the levels we experienced in 2020 and 2019, due to higher-than-expected lapses as these policies exit the level premium period.

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Fixed annuities

Results of our fixed annuities business are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, persistency and expense and commission levels. We no longer solicit sales of traditional fixed annuity products; however, we continue to service our existing retained and reinsured blocks of business.

We monitor and change crediting rates on fixed deferred annuities on a regular basis to maintain spreads and targeted returns, if applicable. However, we could see declines in our fixed annuity spreads and margins as interest rates change, depending on the severity of the change.

We have previously had premium deficiencies in our single premium immediate annuity products that resulted in the establishment of additional future policy benefit reserves that were reflected as charges to net income. In 2022 and 2021, the results of our loss recognition testing did not result in a premium deficiency; therefore, our liability for future policy benefits was sufficient. The impacts of future adverse changes in our assumptions could result in the establishment of additional future policy benefit reserves and would be immediately reflected as a charge to earnings. For additional information, see “—Critical Accounting Estimates—Future Policy Benefits.”

For fixed indexed annuities, equity market and interest rate performance and volatility could also result in additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts.

Segment results of operations

The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:

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The following table sets forth adjusted operating income (loss) for the businesses included in our U.S. Life Insurance segment for the periods indicated:

2022 compared to 2021

Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders

Revenues

Premiums

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Net investment income

Net investment gains (losses)

Policy fees and other income. The decrease was largely related to our life insurance business driven mostly by the runoff of our in-force blocks.

Benefits and expenses

Benefits and other changes in policy reserves

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Interest credited. The decrease in interest credited was driven by declines of $18 million in our fixed annuities products and $6 million in our life insurance products due to lower average account values from block runoff.

Acquisition and operating expenses, net of deferrals

Amortization of deferred acquisition costs and intangibles

Provision for income taxes. The effective tax rate was 43.3% and 26.1% for the years ended December 31, 2022 and 2021, respectively. The increase in the effective tax rate was primarily attributable to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income, in relation to lower pre-tax income in 2022.

U.S. Life Insurance selected operating performance measures

Long-term care insurance

As part of our strategy for our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their original pricing. In aggregate, we estimate that we have achieved approximately $23.5 billion, on a net present value basis, of approved in-force rate increases since 2012. We continue to work closely with the NAIC and state regulators to demonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.

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The following table summarizes the impact from cumulative in-force rate actions on the results of operations of our long-term care insurance business for the periods indicated:

See our results of operations above for additional details.

The following table presents net earned premiums and the loss ratio for our long-term care insurance business for the periods indicated:

The loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums.

Net earned premiums decreased in 2022 compared to 2021 primarily driven by lower renewal premiums from policy terminations and policies entering paid-up status, partially offset by $93 million of increased premiums in 2022 from in-force rate actions approved and implemented.

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The loss ratio increased in 2022 compared to 2021 due to higher benefits and other changes in reserves and lower premiums in 2022 as discussed above.

Life insurance

The following table sets forth selected operating performance measures regarding our life insurance business as of and for the dates indicated:

We no longer solicit sales of our traditional life insurance products; however, we continue to service our existing blocks of business.

Term and whole life insurance

Net earned premiums increased in 2022 compared to 2021 mainly attributable to lower ceded premiums in 2022, partially offset by the continued runoff of our in-force blocks. In 2021, we initially ceded $360 million of certain term life insurance premiums under a new reinsurance treaty as part of a life block transaction.

Universal and term universal life insurance

Net deposits decreased in 2022 compared to 2021 primarily attributable to lower renewals in 2022 and from the continued runoff of our in-force blocks.

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Fixed annuities

The following table sets forth selected operating performance measures regarding our fixed annuities business as of and for the dates indicated:

We no longer solicit sales of our traditional fixed annuity products; however, we continue to service our existing block of business.

Account value as of December 31, 2022 decreased compared to December 31, 2021 driven mostly by surrenders and benefits, which included the recapture of $373 million of certain single premium immediate annuity contracts by a third party in 2022. The decrease compared to December 31, 2021 was also attributable to unfavorable market performance, partially offset by interest credited in 2022.

Runoff segment

Trends and conditions

Results of our Runoff segment are affected primarily by investment performance, interest rate levels, net interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results of our Runoff segment can significantly impact our regulatory capital requirements, distributable earnings and liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate the impacts. In addition, we have used reinsurance to help mitigate volatility in our variable annuity results.

Equity market volatility and interest rate movements have caused fluctuations in the results of our variable annuity products and regulatory capital requirements. In the future, equity and interest rate market performance and volatility could result in additional gains or losses in these products although associated hedging activities are expected to partially mitigate these impacts.

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Segment results of operations

The following table sets forth the results of operations relating to our Runoff segment for the periods indicated: