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GENWORTH FINANCIAL INC (GNW)·Q2 2025 Earnings Summary

Executive Summary

  • Adjusted operating income was $68M ($0.16 per diluted share), up sequentially from $51M in Q1 and driven by Enact; GAAP diluted EPS was $0.12 .
  • EPS significantly beat Wall Street’s S&P Global “Primary EPS” consensus of $0.02 for Q2 2025, with S&P-recorded actual Primary EPS at $0.16; revenue consensus was unavailable (S&P Global)*
  • Enact contributed $141M of adjusted operating income, supported by a $48M pre-tax reserve release and a 10% loss ratio; PMIERs sufficiency ratio remained 165% .
  • LTC posted a $(37)M adjusted operating loss on unfavorable actual-to-expected (lower terminations, higher utilization) and a $(50)M liability remeasurement loss; holding company cash rose to $248M and GNW repurchased $30M of stock in the quarter .
  • Catalysts: Enact now targets ~$400M of capital returns in 2025 (GNW expects ~$325M share), and AXA UK PPI judgment could ultimately yield ~$750M to GNW upon favorable appeal resolution timing .

What Went Well and What Went Wrong

  • What Went Well

    • Enact delivered strong results: $141M adjusted operating income, 10% loss ratio, $48M reserve release; PMIERs sufficiency ratio 165% ($1,961M above requirements) .
    • CareScout momentum: expanded Quality Network to consumers in all 50 states; launched fee-based Care Plans; ~804 quarterly matches and >90% home care coverage of age 65+ population .
    • Capital strength and returns: GLIC RBC estimated at 304%; holding company cash/liquids $248M; $30M buybacks at $7.01/share; Enact expected returns raised to ~$400M in 2025 .
    • Quote: “Genworth delivered solid second quarter results as we continued to execute against our strategic priorities … expansion of the CareScout Quality Network … launch of Care Plans …” – Tom McInerney, CEO .

  • What Went Wrong

    • LTC headwinds: $(37)M adjusted operating loss and $(50)M liability remeasurement loss driven by lower terminations and higher utilization; A-to-E losses expected to persist around ~$65M per quarter in 2025 .
    • Life insurance stayed negative on adjusted basis: $(20)M loss (improved sequentially vs Q1) and annuities (+$13M) partially offset .
    • Net investment losses of $(28)M weighed on GAAP results, driven by derivatives and credit loss allowance increases .
    • Analyst concerns: trajectory of LTC A-to-E volatility and timing/appeal risks around AXA proceeds (deployment and potential return risk) .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Revenues ($USD Billions)$1.769 $1.782 $1.786 $1.796
Net Income Available to Common ($USD Millions)$76 $(1) $54 $51
Diluted EPS (GAAP) ($USD)$0.17 $0.00 $0.13 $0.12
Adjusted Operating Income ($USD Millions)$125 $15 $51 $68
Adjusted Operating Diluted EPS ($USD)$0.28 $0.04 $0.12 $0.16
Weighted Avg Diluted Shares (Millions)440.7 431.0 422.9 417.5

Segment breakdown (Adjusted Operating Income):

Segment AOI ($USD Millions)Q2 2024Q4 2024Q1 2025Q2 2025
Enact$165 $137 $137 $141
Long-Term Care Insurance$(29) $(104) $(30) $(37)
Life & Annuities (Total)$(1) $5 $(33) $(7)
Corporate & Other$(10) $(23) $(23) $(29)

KPIs:

KPIQ2 2024Q4 2024Q1 2025Q2 2025
Enact Primary NIW ($USD Millions)$13,619 $13,266 $9,818 $13,254
Enact Loss Ratio (%)(7)% 10% 12% 10%
Enact PMIERs Sufficiency Ratio (%)169% 167% 165% 165%
Primary Insurance In-Force ($USD Billions)$269.8 $268.8 $268.4 $269.8
LTC Premiums ($USD Millions)$564 $587 $571 $578
LTC Net Investment Income ($USD Millions)$494 $499 $451 $516
LTC Liability Remeasurement (G/L, $USD Millions)$(43) $(117) $18 $(50)
GLIC Consolidated RBC Ratio (%)319% 306% 304% 304%
Holding Co. Cash & Liquid Assets ($USD Millions)$281 $294 $211 $248

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Enact total capital returns to shareholdersFY 2025~$350M ~$400M Raised
GNW expected Enact returns (share-based)FY 2025N/A~$325M to GNW (81% stake) New
GNW share repurchasesFY 2025N/A$100M–$150M New
CareScout Insurance investmentFY 2025$75M $85M Raised
CareScout Services investmentFY 2025N/A$45M–$50M New
AXA UK PPI recovery (subject to appeals)Event-drivenN/APotential ~$750M to GNW on favorable resolution New potential

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AXA UK PPI litigation/proceedsFY24 10-K/supplement context; no proceeds assumed Judgment in AXA’s favor; ~$680M awarded to AXA; GNW expects ~$750M on favorable appeals; payment due Aug 15 to AXA; proceeds to GNW after appeals Positive legal milestone; timing risk until appeals resolved
Capital returns (Enact)PMIERs strong; steady returns Enact raising FY25 returns to ~$400M; GNW expects ~$325M Increasing shareholder cash flows
Shareholder returns policyBuybacks executed; no recurring dividend FY25 buybacks $100–$150M; majority shareholder preference for buybacks vs dividend Continued focus on buybacks
CareScout expansionNetwork scaled to 50 states; setup for new LTC insurer Consumer access nationwide; Care Plans launched; 804 matches in Q2; insurance launch later this year with 29 approvals Execution momentum; fee-based growth building
LTC risk management (MYRAP, A-to-E)Annual assumption updates; A-to-E losses noted $(37)M AOI; $(50)M remeasurement loss; A-to-E ~$(65)M/quarter likely through 2025 Continued near-term headwinds
Spin-off feasibilityNot viable until RemainCo (CareScout) can pay dividends Reiterated: spin only viable post CareScout break-even (~5 years) Unchanged constraints
Investment portfolio (alts)Alternatives in place; targeted long-term returns ~7% yields on selective investments; alt program targeted ~12% with quarter-to-quarter variability Stable, long-term orientation

Management Commentary

  • “Enact continued its strong performance, driving meaningful capital returns that fueled our share repurchase program. CareScout … expansion … and the launch of Care Plans … We remain focused on building our growth platform while maintaining the self-sustainability of our legacy insurance companies and returning capital to shareholders.” – Tom McInerney .
  • “We continue to expect that we could see losses at this average level [~$65M quarterly A-to-E] throughout 2025 … quarterly fluctuations in U.S. GAAP results do not impact our cash flows, economic value, or how we manage the business.” – Jerome Upton .
  • “Based on our approximate 81% ownership position, we now expect to receive around $325 million from Enact for the full year.” – Jerome Upton .
  • “Just paying down the debt does not allow us to do the spin-off … RemainCo … none of those have positive cash flow that can be paid to the holding company … spin … will require CareScout businesses achieve break-even … around five years.” – Tom McInerney .

Q&A Highlights

  • AXA Appeals & Timing: UK appellate permission must be sought; payment order not stayed; payment goes to AXA by Aug 15; GNW’s share only after appeals resolved favorably .
  • Capital Deployment of Proceeds: Priority remains buybacks, CareScout investments, opportunistic debt repurchases; dividend initiation not preferred by majority of shareholders currently .
  • Spin-off Mechanics: Not viable until RemainCo generates distributable cash (post CareScout break-even) despite hypothetically paying down all debt .
  • LTC Reinsurance Recapture: Favorable arbitration outcome (Blue Cross Blue Shield of Nebraska); ~$26M pre-tax gain (paid ~$24M vs ~$50M GAAP reserve) .
  • Liquidity/Leverage: HoldCo cash buffer ~2x debt service; leverage ~20% (ex U.S. Life); interest coverage ~6x; comfortable positioning .

Estimates Context

MetricQ2 2024Q1 2025Q2 2025
Primary EPS Consensus Mean ($USD)0.12*0.21*0.02*
Primary EPS Actual (S&P “Primary”) ($USD)0.28*0.12*0.16*
EPS Beat/(Miss) vs ConsensusBeat*Miss*Beat*
Revenue Consensus Mean ($USD Billions)N/A*N/A*N/A*

Values retrieved from S&P Global.*
Notes: S&P’s “Primary EPS” for GNW aligns with the company’s adjusted operating EPS (non-GAAP) (e.g., $0.16 in Q2 2025), while GAAP diluted EPS was $0.12 . Revenue consensus was unavailable for these periods (S&P Global).*

Key Takeaways for Investors

  • Enact remains the earnings engine and cash-flow source; raised FY25 capital returns support continued buybacks and potential deleveraging .
  • Q2 EPS materially beat S&P consensus (on “Primary” EPS basis), aided by Enact reserve release and stable PMIERs; near-term earnings variability persists due to LTC A-to-E .
  • LTC headwinds likely continue in 2025; watch quarterly A-to-E and liability remeasurement trends, as well as MYRAP execution pace and benefit reduction uptake .
  • CareScout’s scaling (network access, Care Plans, insurance approvals) is building a capital-light growth platform; monitor product launch timing and unit economics .
  • AXA UK PPI ruling is a potential upside catalyst (approx. $750M) but timing/risk hinges on appellate process; cash arrives to GNW only after favorable resolution .
  • Policy stance favors buybacks over dividends at current valuation; a recurring dividend or spin-off is unlikely near term given RemainCo cash flow constraints .
  • Trading: Near term, stock may be sensitive to legal developments (AXA) and Enact capital returns; medium term, thesis hinges on Enact cash generation, disciplined buybacks, and CareScout execution .