Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - GENWORTH FINANCIAL INC | d239283d8k.htm |
Exhibit 99.1
Genworth Financial, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements and related notes are presented to show the effect on the historical condensed consolidated financial statements of Genworth Financial, Inc. (the “Company”) of the sale of Continental Life Insurance Company of Brentwood, Tennessee (“Continental”) and American Continental Insurance Company (“American Continental”), both indirect subsidiaries of the Company, to Aetna Inc. (“Aetna”) (the “Sale”) and the effects of the reinsurance transactions whereby Genworth Life Insurance Company (“GLIC”) and Genworth Life and Annuity Insurance Company (“GLAIC”), both indirect subsidiaries of the Company, ceded 100% of their Medicare supplement insurance to Aetna and Aetna ceded 100% of the long-term care insurance business of Continental to GLIC (the “Reinsurance Transactions”). As a result of these Reinsurance Transactions, all Medicare supplement insurance has either been sold or reinsured and all long-term care insurance held by Continental has been reinsured back to the Company. The Sale and the Reinsurance Transactions were effective on October 1, 2011.
The unaudited pro forma condensed consolidated balance sheet is based on the assumption that the Sale and the Reinsurance Transactions were both completed on June 30, 2011. The unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2011 and for the year ended December 31, 2010 are based on the assumption that the Sale and the Reinsurance Transactions were completed on January 1, 2010.
The unaudited pro forma financial statements as of and for the periods presented are for illustrative and informational purposes only and are not intended to represent, or be indicative of, what the Company’s results of operations or financial position would have been had the Sale and the Reinsurance Transactions been completed on the dates noted above. The unaudited pro forma condensed consolidated financial statements also should not be considered representative of the Company’s future results of operations or financial position.
The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable under the circumstances. Actual amounts could differ materially from these estimates. The pro forma results should be read in conjunction with the financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and Quarterly Report on Form 10-Q for the six months ended June 30, 2011.
1
GENWORTH FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2011
(Amounts in millions, except per share amounts)
| Historical | Disposition (a) | Adjustments | Pro Forma | |||||||||||||
| Assets |
||||||||||||||||
| Investments: |
||||||||||||||||
| Fixed maturity securities available-for-sale, at fair value |
$ | 56,221 | $ | (119 | ) | $ | — | $ | 56,102 | |||||||
| Equity securities available-for-sale, at fair value |
374 | — | — | 374 | ||||||||||||
| Commercial mortgage loans |
6,432 | — | — | 6,432 | ||||||||||||
| Restricted commercial mortgage loans related to securitization entities |
457 | — | — | 457 | ||||||||||||
| Policy loans |
1,542 | (1 | ) | — | 1,541 | |||||||||||
| Other invested assets |
3,301 | — | — | 3,301 | ||||||||||||
| Restricted other invested assets related to securitization entities ($378 at fair value) |
379 | — | — | 379 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total investments |
68,706 | (120 | ) | — | 68,586 | |||||||||||
| Cash and cash equivalents |
2,831 | (31 | ) | 251 | (b) | 3,051 | ||||||||||
| Accrued investment income |
693 | (1 | ) | — | 692 | |||||||||||
| Deferred acquisition costs |
7,362 | (56 | ) | (32 | ) (c) | 7,274 | ||||||||||
| Intangible assets |
692 | (22 | ) | — | 670 | |||||||||||
| Goodwill |
1,333 | (37 | ) | — | 1,296 | |||||||||||
| Reinsurance recoverable |
16,999 | (6 | ) | 24 | (c) | 17,017 | ||||||||||
| Other assets |
988 | (7 | ) | — | 981 | |||||||||||
| Deferred tax asset |
1,291 | — | — | 1,291 | ||||||||||||
| Separate account assets |
11,452 | — | — | 11,452 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 112,347 | $ | (280 | ) | $ | 243 | $ | 112,310 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities and stockholders’ equity |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Future policy benefits |
$ | 31,177 | $ | (55 | ) | $ | 3 | (c) | $ | 31,125 | ||||||
| Policyholder account balances |
26,115 | — | — | 26,115 | ||||||||||||
| Liability for policy and contract claims |
7,327 | (30 | ) | 2 | (c) | 7,299 | ||||||||||
| Unearned premiums |
4,563 | (15 | ) | — | 4,548 | |||||||||||
| Other liabilities ($145 other liabilities related to securitization entities) |
5,637 | (20 | ) | 39 | (d) | 5,656 | ||||||||||
| Borrowings related to securitization entities ($58 at fair value) |
452 | — | — | 452 | ||||||||||||
| Non-recourse funding obligations |
3,374 | — | — | 3,374 | ||||||||||||
| Long-term borrowings |
4,755 | — | — | 4,755 | ||||||||||||
| Deferred tax liability |
1,937 | 5 | — | 1,942 | ||||||||||||
| Separate account liabilities |
11,452 | — | — | 11,452 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
96,789 | (115 | ) | 44 | 96,718 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Commitments and contingencies |
||||||||||||||||
| Stockholders’ equity: |
||||||||||||||||
| Class A common stock, $0.001 par value; 1.5 billion shares authorized; 579 million shares issued and 491 million shares outstanding |
1 | — | — | 1 | ||||||||||||
| Additional paid-in capital |
12,110 | — | — | 12,110 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Accumulated other comprehensive income (loss): |
||||||||||||||||
| Net unrealized investment gains (losses): |
||||||||||||||||
| Net unrealized gains (losses) on securities not other-than-temporarily impaired |
352 | (2 | ) | — | 350 | |||||||||||
| Net unrealized gains (losses) on other–than-temporarily impaired securities |
(116 | ) | — | — | (116 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net unrealized investment gains (losses) |
236 | (2 | ) | — | 234 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivatives qualifying as hedges |
943 | — | — | 943 | ||||||||||||
| Foreign currency translation and other adjustments |
883 | — | — | 883 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total accumulated other comprehensive income (loss) |
2,062 | (2 | ) | — | 2,060 | |||||||||||
| Retained earnings |
2,959 | (163 | ) | 199 | 2,995 | |||||||||||
| Treasury stock, at cost (88 million shares) |
(2,700 | ) | — | — | (2,700 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Genworth Financial, Inc.’s stockholders’ equity |
14,432 | (165 | ) | 199 | 14,466 | |||||||||||
| Noncontrolling interests |
1,126 | — | — | 1,126 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total stockholders’ equity |
15,558 | (165 | ) | 199 | 15,592 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities and stockholders’ equity |
$ | 112,347 | $ | (280 | ) | $ | 243 | $ | 112,310 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
2
Genworth Financial, Inc.
Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet
(a) Adjustments reflect the disposition of the assets and liabilities of Continental and American Continental related to the sale to Aetna.
(b) Adjustment reflects the net proceeds received in connection with the sale of Continental and American Continental and the reinsurance transactions. Proceeds are net of expenses related to the Sale, including advisor fees and other incremental items, and the Company assumed these expenses were paid in cash on June 30, 2011.
(c) Adjustment reflects the reinsurance transactions related to the Medicare supplement insurance business of GLIC and GLAIC ceded to Aetna and the long-term care insurance business of Continental assumed by GLIC.
(d) Adjustment reflects the tax impact of the net gain related to the sale of Continental and American Continental and the reinsurance transactions.
3
GENWORTH FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 2011
(Amounts in millions, except per share amounts)
| Historical | Disposition (a) | Adjustments | Pro Forma | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 2,892 | $ | (132 | ) | $ | (35 | ) (b) | $ | 2,725 | ||||||
| Net investment income |
1,711 | (3 | ) | (1 | ) (b) | 1,707 | ||||||||||
| Net investment gains (losses) |
(68 | ) | — | — | (68 | ) | ||||||||||
| Insurance and investment product fees and other |
688 | — | — | 688 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
5,223 | (135 | ) | (36 | ) | 5,052 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
3,081 | (106 | ) | (26 | ) (b) | 2,949 | ||||||||||
| Interest credited |
405 | — | — | 405 | ||||||||||||
| Acquisition and operating expenses, net of deferrals |
1,014 | (18 | ) | (5 | ) (b) | 991 | ||||||||||
| Amortization of deferred acquisition costs and intangibles |
382 | (14 | ) | 1 | (b) | 369 | ||||||||||
| Interest expense |
261 | — | — | 261 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total benefits and expenses |
5,143 | (138 | ) | (30 | ) | 4,975 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
80 | 3 | (6 | ) | 77 | |||||||||||
| Provision (benefit) for income taxes |
24 | 1 | (2 | ) | 23 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
56 | 2 | (4 | ) | 54 | |||||||||||
| Less: net income attributable to noncontrolling interests |
70 | — | — | 70 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders |
$ | (14 | ) | $ | 2 | $ | (4 | ) | $ | (16 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share: |
||||||||||||||||
| Basic |
$ | (0.03 | ) | $ | (0.03 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | (0.03 | ) | $ | (0.03 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
490.4 | 490.4 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
490.4 | 490.4 | ||||||||||||||
|
|
|
|
|
|||||||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income
4
GENWORTH FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 2010
(Amounts in millions, except per share amounts)
| Historical | Disposition (a) | Adjustments | Pro Forma | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 5,854 | $ | (247 | ) | $ | (70 | ) (b) | $ | 5,537 | ||||||
| Net investment income |
3,266 | (6 | ) | (3 | ) (b) | 3,257 | ||||||||||
| Net investment gains (losses) |
(143 | ) | — | — | (143 | ) | ||||||||||
| Insurance and investment product fees and other |
1,112 | — | 85 | (c) | 1,197 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
10,089 | (253 | ) | 12 | 9,848 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
5,994 | (179 | ) | (50 | ) (b) | 5,765 | ||||||||||
| Interest credited |
841 | — | — | 841 | ||||||||||||
| Acquisition and operating expenses, net of deferrals |
1,965 | (36 | ) | (12 | ) (b) | 1,917 | ||||||||||
| Amortization of deferred acquisition costs and intangibles |
756 | (25 | ) | (4 | ) (b) | 727 | ||||||||||
| Interest expense |
457 | — | — | 457 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total benefits and expenses |
10,013 | (240 | ) | (66 | ) | 9,707 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
76 | (13 | ) | 78 | 141 | |||||||||||
| Provision (benefit) for income taxes |
(209 | ) | (4 | ) | 40 | (173 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
285 | (9 | ) | 38 | 314 | |||||||||||
| Less: net income attributable to noncontrolling interests |
143 | — | — | 143 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders |
$ | 142 | $ | (9 | ) | $ | 38 | $ | 171 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share: |
||||||||||||||||
| Basic |
$ | 0.29 | $ | 0.35 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 0.29 | $ | 0.35 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
489.3 | 489.3 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
493.9 | 493.9 | ||||||||||||||
|
|
|
|
|
|||||||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income
5
Genworth Financial, Inc.
Notes to Unaudited Pro Forma
Condensed Consolidated Statements of Income
(a) Adjustment reflects the elimination of revenues and expenses of Continental and American Continental from the Company’s historical results.
(b) Adjustment reflects the reinsurance transactions related to the Medicare supplement insurance business of GLIC and GLAIC ceded to Aetna and the long-term care insurance business of Continental assumed by GLIC.
(c) Adjustment reflects the pre-tax gain from the sale of the assets and liabilities of Continental and American Continental.
6