Good morning, ladies and gentlemen, and welcome to Genworth Financial's fourth quarter earnings conference call. My name is [Melissa] and I will be your coordinator today. (Operator Instructions) I would now like to turn the presentation over to Alicia Charity, Vice President, Investor Relations. Ms. Charity, you may proceed.

Thank you. Welcome go Genworth Financial's fourth quarter 2008 earnings conference call. Our press release and financial supplement were both released last night and are posted on our website. In addition, we posted some additional information on our investment portfolio that we thought would be helpful as well. This morning you'll first hear from Mike Fraizer, our Chairman and CEO, followed by Pat Kelleher, our Chief Financial Officer, and then Ron Joelson, our Chief Investment Officer, who joined Genworth in December. Because we are covering more detail on our investment portfolio today, you can expect the call to run a little bit longer than usual. Following our prepared comments we will open up the call for questions and answers. Also on the call today are Pam Schutz, Executive Vice President of our Retirement and Protection segment, Tom Mann, Executive Vice President of our International segment, and Kevin Schneider, Senior Vice President of U.S. Mortgage Insurance. With regard to forward-looking statements and the use of non-GAAP financial information, some of the statements we make during the call may contain forward-looking statements. Our actual results may differ materially from such statements. We advise you to read the cautionary note regarding forward-looking statements in our earnings release and the Risk Factors section of our most recent quarterly report Form 10-Q, filed with the SEC in November. This morning's discussion may also include non-GAAP financial measures that we believe may be meaningful to investors. In our financial supplement and earnings release, non-GAAP measures have been reconciled to GAAP where required, in accordance with SEC rules. And finally, when we talk about our International segment results, please note that all percentage changes exclude the impact of foreign exchange. And with that, let me turn the call over to Mike Fraizer.

Thanks, Alicia, and thanks, everyone, for your time today. Genworth had a tough fourth quarter in a very difficult and unprecedented operating environment. The disappointing parts are clear from our earnings release and included investment performance in certain areas, Retirement and Protection segment results, and U.S. Mortgage Insurance delinquency and loss trends. At the same time, we demonstrated significant progress across a number of areas that has improved our position and path go forward. Most importantly, we ended the quarter in a stronger capital and liquidity position than in the third quarter as a result of these actions. In addition, we have a clear path for retiring maturing 2009 debt with $400 million already repurchased and no further maturities until 2011. We completed rapid focusing and streamlining of our business platforms for the conditions we see, which also generate significant cost savings, and we implemented aggressive risk mitigation strategies with meaningful financial benefits ranging from locking in gains from interest rates floors to toughened product and underwriting standards to reduced mortgage insurance exposures in key parts of the U.S. and Europe portfolio. Let there be no mistake. We have taken decisive steps, gotten a lot of things behind us, positioned ourselves to handle what we believe will be equally challenging or even worse market conditions over the next 12 to 18 months, and are focused on serving our policyholders and rebuilding value for our shareholders. Today I will discuss three areas with you, including our business segments and how we're positioning these, how we are strategically managing capital and liquidity, and how we approach and think about strategic options for additional capital flexibility. Next, Pat Kelleher will walk through important aspects of the quarter and how we see 2009. Ron Joelson, who took over as our CIO in December, will…

Thanks, Mike. Genworth made great progress on capital and liquidity in the fourth quarter and, while the challenging environment did take its toll on earnings, here again we took decisive action to manage against ongoing headwinds. The more than 50 basis points of improvement we estimate in our RBC ratio since last quarter to the 420% to 450% range at year end positions the life companies very well. We expect to be able to cover potential additional impairments in 2009 and even to comfortably absorb another decline in the S&P 500 Index, for example, to the 700 level, by year end. With our current RBC levels, we believe we can stay within our targeted ratio of 350% or higher through 2009 with continued us of reinsurance and capital projects. This morning I will focus on three areas - results in the quarter, how we are positioning Genworth for the future, and some perspectives on outlook for 2009. Starting with the quarter, our International segment had the strongest performance of the group with $124 million of net operating earnings. This was down from the prior year quarter due mostly to unfavorable foreign exchange of $30 million and a $13 million change in net benefit last year from an annual year end update to the International premium recognition calculation. Results in our U.S. segments clearly were unsatisfactory. U.S. Mortgage Insurance reflected difficult housing market conditions. In Retirement and Protection, extreme volatility led to significant write-offs of deferred acquisition costs and goodwill in our retirement income business, driving the segment earnings negative overall. The goodwill charge totaled $238 million and [DAC] acceleration in both fee-based and spread-based retirement income lines was $59 million. Results in the quarter also included good mortality in life insurance, an improved loss ratio in long-term care, and positive…

Thank you, Pat. Genworth's investment portfolio has been impacted by economic uncertainty, frozen credit markets and spread widening. We are managing investment assets under the assumption that the recession will be deep and prolonged, though we hold out the possibility of improvement late in 2009 or early 2010. Throughout 2008 we have invested with an eye toward intensively managing liquidity and capital as Mike and Pat have noted. Accordingly, we're focused on risk reduction and portfolio diversification. We're also selectively taking advantage of some attractive investment opportunities, especially the wide spreads in investment grade corporates. This morning I'll cover four areas - investment income, more detail on impairments and unrealized losses in the fourth quarter, asset classes where we focus a great deal of time and attention, and finally how we're defensively positioning the portfolio given this current economic environment. Starting with net investment income, NII declined about $400 million pre-tax to $3.7 billion from the prior year; however, this was primarily from floating rate assets and the earnings impact was partially mitigated by a reduction in interest credited on floating rate liabilities. We also had $114 million of lower limited partnership income in 2008 on a pre-tax basis as our equity in these investments decreased. Yields on our core fixed income portfolio have been stable throughout 2008, averaging about 5.8% with little volatility quarter to quarter. We define this core portfolio as excluding floating rate assets, limited partnerships, mortgage prepayments, and the excess cash balances we are currently holding. As Alicia mentioned, we posted some investment slides on our website and one shows a reconciliation of the net investment income from core fixed and these variable income assets. Looking ahead, we would expect core yield to remain relatively stable. Turning to impairments, these totaled $529 million in the quarter.…

Thank you. (Operator Instructions) Your first question comes from Edward Spehar - BAS-ML.

I had a few quick questions. I guess the first is, Mike, you mentioned the possibility of bringing cash down and investing longer, and I'm just wondering why would you bring cash balances down right now? Where the stock is trading, it's clearly not about earnings, so how do you balance that versus just the comfort, maybe, that's provided by a higher cash balance? And then on the statutory side, is there any ongoing statutory earnings impact from the realization of this derivative gain? And maybe you could give us some indication of what the preliminary stat operating earnings for '08, and is there any reason to think that that will change materially in '09 - again, that's operating, not net.

Let me provide a perspective and then hand it over to Pat for some more specifics. I think we've been very clear and I'll try to always emphasize that we will always manage this business in this type of environment first for capital and liquidity. And we built strong capital positions or stronger capital positions, as you've seen, and excellent liquidity. And we will maintain that; no doubt about that. And we'll be prudent and thoughtful about it. It's just, when we do look at results, we do have some opportunities, we think, to gradually reinvest some excess cash levels, but we're going to do that always with prudence in mind. So with that as a backdrop, Pat, do you want to pick up and provide some more specifics, please?

Yes, I will, Mike. A big portion of our cash position, about $4.5 billion, is in the U.S. life companies. And here we're holding cash for two reasons - first, a portion of the cash will be used for funding agreements that are maturing throughout 2009 and second, we've increased our cash position to ensure flexibility to meet policyholder needs for cash withdrawals as the economy slows and as markets decline. And in this context, I should note that our lapses at the end of the year and heading into 2009 for both the single premium deferred annuities and the guaranteed investment contracts were less than planned and they're trending lower. And as a result, we're being cautious, but we're currently planning to redeploy some of the current cash holdings. Now, another big cash position is in our International companies; we have about $1.7 billion of cash. And these International companies don't have, I'll say, deposit-like or cash value products. Here we're holding some excess cash primarily as a result of portfolio repositioning that's in progress as we move away from lower investment grade quality to higher quality given the slowing global environment. So there we think there's an appropriate opportunity to redeploy some of the cash and that's part of the plan that we have in place. Now getting to the derivative gain, what I would say is as part of the normal risk management program that we have in place here, we identify and pursue hedging strategies where appropriate. In 2008, Genworth developed the view that the economic downturn may well be more significant than we previously estimated and it might lead to significant declines in interest rates which could impact our capital position, so we put the floors in place to hedge this risk. Interest rates subsequently fell faster and steeper than we modeled, and as rates moderated, we modified the program, effectively to lock in gains and significantly reduce the sensitivity of the position to future moves in rates. That increased our surplus significantly because those are income-producing derivatives and we would expect to manage that position going forward and over a period of time that will come in - it's already in our surplus and it will eventually work through the operating earnings in our reports. If I look at statutory earnings for 2008, I can only really give you preliminary information. We did have, I would say, a large reserve build relating to our VA business, but if we normalize for this, our U.S. life company statutory operating earnings would be about $400 million. Does that address your question, Ed?

Yes, Pat, just can you maybe give us any indication, barring a major change in the equity market, is that a kind of run rate to expect for the life companies to continue?

The run rate that we would expect, probably I'd have to say ignoring the variable annuity reserves because that will be volatile coming through the next year, is about $400 million.

And that's just the life company, right, U.S. Life?

Just the life companies.

Your next question comes from Steven Schwartz - Raymond James.

Pat, just to follow up, the hedging [gain] that you had that went to your surplus, your point here is that you took the gain, you're no more risky than you were, you feel comfortable with that?

That's correct.

Pat, there was some type of refinement to LTC. Can you talk about that?

I'd like to ask Buck Stinson to explain that to you.

Steven, the reserve refinement that you saw in the fourth quarter was the result of an upgrade in our actuarial valuation systems and those changes provided the business with a more refined calculation on the valuation factors for our claim reserves. And that resulted in a bump in earnings there of about $10 million in the fourth quarter.

And then finally, there is a statement in the press release talking about how 80% of the delinquencies were sold through the GSEs, something to that extent. What is the importance of that statement? Is that to suggest that that's what could be affected if cramdown legislation were to come through?

Steven, the purpose of the statement was just to identify how much of the business that we had insured ultimately ended up with the GSEs compared to business that might still be in originators or investors portfolios and private MBS. Cramdown, the implication of cramdown, isn't really too clear to understand where that might impact across either of those different places, but it's certainly a large percentage of all the business that we do associated with the GSEs. So anything that would impact or improve delinquencies relative to the GSEs or other modification programs that Fannie Mae or Freddie Mac might be doing, that's 80% of our portfolio that would be subject to that.

Your next question comes from Andrew Kligerman - UBS.

My first question is around the reinsurance that you mentioned. If I recall correctly, you did over $100 million, as you had reported, the third quarter into the fourth, and you expected to do another $500 million. Could you give us a little color on how much capital you freed up on reinsurance and in what areas you were able to do so?

Over the course of the fourth quarter we completed virtually all of the capital projects that we had out there that created what I'll call capital capacity, which is a combination of increase in available capital as well as reductions in required capital, of about $700 to $750 million. The types of transactions we did were two, I'll say, traditional reinsurance transactions and two securitization-type reinsurance transactions in which you utilize letters of credit. And all these transactions relate to our life product lines, and the character of them is such that their risks transfer, but they're also financing oriented.

And is there any capacity to do more of that if need be next year or in '09 rather and what are your intentions around that?

We would plan to use reinsurance as part of our ongoing capital and risk management program going forward just the same way that we have this year.

But nothing specific? Because last you had specifics outlined. This year no?

We have plans in place, but at this time I don't have specifics that I'm prepared to share with you.

And then on the fixed annuity book, you've got about $12 billion in assets. I think I see about $730 plus million of surrenders in the quarter. Certainly not that and certainly not even close to some of the panic some people were predicting, so a relatively very good performance. So you mentioned on the call that these surrenders actually mitigated toward the end of the year. Could you give us a little color around that? How much did it mitigate toward the end of the year relative to the beginning of the fourth quarter? What do you see happening going on in '09 in that book?

Let me just give you a general perspective and turn it over to Pam. First, it didn't go up significantly. I think that's the first point. A second point is when there are times of uncertainty, it's up to us to communicate about the realities and strengths of the business and be balanced and we did that with our distribution and the distribution then takes that word on, and I think that was very effectively done by our team. So then we've seen them really come back, even that modest move, really come back down to quite normal levels. Pam, maybe provide some more color, please.

Yes. Given the challenging market environment and what we have learned consumers need for cash, fixed annuities were slightly elevated in October and November. But I want to remind everybody that this was not outside of our normal range for a two-year period. And then they have trended down in December and even more so in January.

We think we're in good shape there, Andrew.

And then lastly, with regard to RBC, I just want to make sure I'm hearing and reading that right. There's a phrase in the press release and I think it was stated on the call as well - anticipate maintaining its RBC at or above the 350% level. When you state that do you mean that you just don't see it getting that low or do you anticipate actually toward the end of the year migrating toward that 350% level down from the much higher level you're standing at at the end of the year?

In our capital planning we look at the expectations for performance next year and we take into account worse than expected results in terms of the different factors that influence our capital position going forward given the environment that we're in. And as we do that and we look at the management actions that we would take in managing the business and capital positions going forward through that period, we feel comfortable that we're on track, managing two levels at or over the 350% target level.

But Pat, you don't necessarily expect to go to the 350% or you do?

No, we're not making a point forecast, just a way to think about it, Andrew. We run the business to be at or above 350%. That is where we think we will come in at the end of '09. But let's all understand that we have an uncertain economic and investment environment, and you've heard all types of companies talk about that in the industry. So we've created a nice - what we think is buffer - to handle those uncertainties and still run the company comfortably in the range that we want to for our products, our distribution and our ratings.

Your next question comes from Thomas Gallagher - Credit Suisse.

Mike, my first question, just on strategic alternatives for U.S. MI, can you talk a bit about the way you're thinking about that business? Is it possible to still potentially spin that off? What would that do to capitalization or just overall what are you thinking about U.S. MI right now?

Well, great question. Let me just share a few key perspectives that you may find helpful. First, given the rapidly changing market conditions, we did not identify any immediate attractive or viable strategic alternatives, though various groups continued to identify cooperation concepts with us in areas like new business reinsurance, so those discussions certainly continue. In addition, there remain some open areas, like the potential availability of TARP funds to insurance companies or even the MI industry specifically. So we continue to believe we have the best mortgage insurance platform in the business and certainly have been a leader in shifting the business model to a lower risk profile with much higher returns for those new vintages of business. With that in mind, our current priority is to run the business as a viable part of the company with strong risk management and mitigation practices, but importantly - importantly - keep it self-contained from a capital management perspective. And overall, when you look at the focus in managing our total business portfolio going forward, certainly it would continue to be on seeking the path that delivers the best value for shareholders. So we update our board periodically on our assessment and we would, of course, likely announce any formal conclusions when they occur.

So, Mike, bottom line is no plans to have that business consume any capital from other parts, meaning no need to downstream. Capital should be self-containing from a capital standpoint while you're considering potential alternatives. Is that fair to say?

That's correct, no plan to do so.

The next question I just, just to follow up with Pat, on these interest rate gains on the interest rate floors, should we think about this that you had interest rate floors in place to defend against sort of an extreme interest rate environment where minimum contractual guarantees suddenly started becoming exercisable or probably more in the money to customers and now you're sold those. So is your book now more vulnerable if, in fact, we do go into a much lower interest rate environment or have you put hedges back in place?

The way I would think about it is, yes, in fact, that's what we did. We looked at the possibility and probability of steep declines in interest rates which would remain in place over an extended period of time and how would we protect Genworth's capital position and provide for strong claims paying capability in that environment. And, in fact, the environment changed. Those hedges increased in value by more than we had anticipated and therefore, as a result of that better than-expected performance, at least in terms of hedge effectiveness, we locked in a significant gain. And as we manage the position going forward what we've effectively done is modified it such that it isn't really that sensitive to changes in interest rates at all because we have what we need to cover the event that we were planning for. Does that address your question?

Sure. I just wanted to make sure you still had a similar size hedge now in place; that, in fact, if we do experience a long-term decline in interest rates that you would still be protected.

We are indeed.

And then last question, so on the $700 million of debt due in 2Q, I believe you have $860 million of cash at the holding company, so it looks like that's covered. Are there any other obligations we should think about at the holding company that might be triggered upon any ratings actions or otherwise?

We feel very good about the cash position at the holding company. We're in a position really to retire the maturing debt and to service normal ongoing obligations which at this point are primarily debt service costs.

Your next question comes from Darin Arita - Deutsche Bank Securities.

I had a question on the dividends from the non-U.S. subsidiaries. Out of the $400 million in 2009, how much of that is a drawdown on the excess capital of the non-U.S. subsidiaries versus the ongoing dividend capacity of these entities?

Yes, we have dividends scheduled from the non-U.S. subsidiaries and essentially a significant portion of that is the insurance companies, which are really in a holding company status in Bermuda sitting over the top of the International operations. Most of the dividends that we are drawing are from those entities where we've kept substantial capital in excess of regulatory requirements and to a lesser extent we have sources of dividends from other subsidiaries.

As you think about the Canadian and Australian mortgage insurance subsidiaries and also the payment protection or lifestyle protection business, the growth is slowing there. So if we think about 2009 and beyond, to what degree are those earnings really excess capital generation that you could pay as dividends?

I believe that in our International businesses, given that we ended the year with stronger capital positions than we had forecast earlier in the year - and given that markets are slowing and new business growth is following that pattern - that we're very well positioned looking forward in terms of generating earnings and dividend capacity in those operations.

In terms of the structured investments and the impairment process, can you talk about how that impairment process works when you base it on ratings, whether it's on current or original ratings?

Yes, I can do that. What we do is what's called a continuous evaluation of the types of securities that go into 99/20 testing. There's two approaches that can be used and the other approach is one where when you purchase a security the rating at that point in time is what determines whether or not that security is subject to 99/20 testing. With our approach what happens is we reevaluate that decision at every quarter end or the end of every financial reporting period and if at that point in time we consider the security is of other than high quality, then we add that to our 99/20 impairment testing pool, which in this environment makes for a more comprehensive 99/20 examination of your cash flows and we believe it generally results in a more conservative approach in evaluation of OTTI.

I guess, though, if you're looking at - what I'm trying to understand is if you're looking at the ratings versus looking at the cash flows why is it that putting it into the current rating generates an impairment whereas looking at the cash flow by itself did not?

It's really more a question of identifying which securities we then apply the 99/20 test. So we identify all structured securities that are not of high quality, so lower than double A minus, based on those current ratings. And so we either choose those or we look at any security that may be of high quality but where the price has declined more than 40% and we would also test those under 99/20. So we go beyond the quality rating and we also look at the market value decline.

Your next question comes from [Ann Masik] - Rose Grove Capital.

Good morning. Thanks for the disclosure on your hybrid investment in the U.K. Can you give a broader idea of what your exposure is to the rest of Europe as well as the U.S., please.

I can give you a little bit more color. We have about $1.2 billion of total European bank hybrid exposure, so of that amount it's $415 million that relates to the U.K., and of that U.K. amount $230 million represent Tier 1 capital. And we're defining Tier 1 as the preferred stock, debt in perpetuity, subordinated, anything where the coupon deferral is non-cumulative.

And in the U.S?

And by the way, that $1.2 billion is non-U.S.

So it's all non-U.S. It goes beyond Europe.

Correct.

Okay, got it. And then the U.S., you have exposure there too, as well?

Yes. At this point we're not disclosing that.

Your next question comes from Mark Finkelstein - Fox-Pitt Kelton.

Sorry to beat a dead horse here, but I'm still a little bit confused on what was locked in and what the volatility on the interest rate hedges will be going forward. I guess maybe a way to tackle it is if rates were to kind of spike up, how much of that 445 should we think about as potentially reversing and how much would we think about permanently in [stack] capital?

We've changed the position such that it really doesn't change very much if rates spike up. So to be, I'll say, conservative, let's say it would move between 90% and 110% within a foreseeable range if rates move up and then down. So it's really pretty much levelized in terms of sensitivity to interest rates, although it does act in such a way that, as we manage it, if rates go significantly down, we will be tilting and shifting that position to protect our downside.

And then just thinking about life insurance a little bit, is there anything that we should think about in terms of sales going forward and managing statutory strain in light of kind of where we are with credit markets and where you are with your capital position? How should we think about life sales in that context?

Let me just go back to the strategy because the strategy is to focus on where we have strengths and where we've had the deepest customer relationships and differentiation, and that's very much around what we've said and called mainstream life. So how do you think about that? That's term life under a million dollar face. In fact, if you look at our typical average policy size, it's roughly in the $250,000 space. That's a piece of the market, too, where we get to leverage our technology capabilities and underwriting expertise. Secondly, as in universal life, we can go bigger than that - in other words, it's sort of $5 million and under - though once again if you look at a lot of our sweet spot, a lot of our sweet spot, again, is in the under $1 million level. So we're really first focused on saying in a very competitive market that has had a lot of different approaches to it, let's focus where it's best and in fact that focus fits with where we want to deploy capital.

So in those areas you're not putting the brakes on the production as long as it meets pricing criteria?

You're keeping it focused in those sweet spots and, of course, as Pat talked about earlier, one of the great things that we've had for years - this is not just new - is we've had reinsurance partners and reinsurance partners who, frankly, value our very disciplined underwriting and the good mortality performance that we've had, so that also brings capacity to you as well. Pam, any other color on that?

Yes, just, as Mike pointed out, in the smaller bands we are more competitive in the market, below $1 million in term and particularly $250,000 and below and in UL up to $5 million. I want to say that what we have built there is a service and fulfillment model to make going after that market for our producers and distributors more profitable.

Your next question comes from Colin Devine - Citigroup.

I was wondering, Mike, if you could talk a little bit about the strategic direction going forward? I recall at the analysts meeting about a year ago you felt that the market didn't understand you and had it wrong and clearly the stock's done what it's done. Why do you continue to believe it's viable to run this multi-strategy approach, combining morg insurance with a traditional life and annuity business?

Well, first let's step back, Colin. We've seen a big shift obviously in the markets on multiple fronts. We've seen them shift from economic perspectives and we've also seen them shift specifically in the financial markets. So you're right to point out we have to deal with those realities and, in fact, every company has to deal with those realities. The first thing is we have the mix of businesses that we have and that is certainly the case given our history. And what we've tried to do and, I think, done thoughtfully, is focus them - further focus them - for the type of environment we see today and we see going ahead. You've heard that as far as how we've done that in the specialty model in Retirement and Protection; also in International, focusing on the biggest platforms. And then certainly it's been almost a two-year focusing process in U.S. Mortgage Insurance. Now over time we will see how the business portfolio plays out and certainly that can have a shift in mix over a multi-year period. I mean, over a multi-year period you would certainly expect to see the Retirement and Protection, the lifestyle protection component, to go up, and I'd expect some housing exposures to go down. So we'll deal with those strategic issues over time, but right now we're focused on running the best business platforms we can while we manage capital, profitability, liquidity, and risk management in a thoughtful manner.

But then you're saying that you still believe that this mortgage insurance, credit insurance, traditional life strategy is the way to go? I mean, the company's a reflection of your strategy, Mike, and the stock price is, frankly, a reflection of that. And what I'm hearing is you remain fully committed to this strategy. If that's incorrect, please clarify.

Well, we're not having a whole strategic investor day right now as a context, and I look forward to doing that as we move through a little later in 2009 and get some market clarity. I am suggesting that I think your point about looking at housing risks and life, retirement, and protection risks have to be different. And over time I would see certainly shifting the mix of the company with much greater percentage of Retirement and Protection and lifestyle protection mix in the company and lesser exposure to housing markets. Now what I'm not doing is making a specific declaration on timing on that, but clearly there are various strategic alternatives over time that one might consider in looking at that.

Your next question comes from Scott Frost - HSBC.

I wanted to go over something here, make sure I understood it. It looks like when you talk about your bank facilities, again, roughly $750 million available, leaving $1.250 billion drawn on the two facilities. Is that correct and, if so, what's the plan for repaying that debt outstanding? And could you remind us of any major covenants on the facility? Are there any ratings? You've talked about this earlier, but are there any ratings or regulatory capital triggers? Are there significant debt tests and/or [mac] clause?

Okay, you've asked several different questions there. I'm going to hand it off to Pat to walk through some of the specifics, but first of all, as you point out, we did make a draw in November and that draw also lowered actually our cost of funding because it's lower than the debt that we started buying back and will continue to buy back and we don't have any current plans to further access those very attractive lines.

I understand that. What I asked, though, was, with all due respect, I count $1.250 billion drawn on the two facilities. Is that correct? And what's the plan for paying that down?

No, that's not correct.

Okay.

We drew just over $900 million on those facilities and that was it. And as I said, we had just a little over $740 million still not drawn on those facilities. Now those facilities go out through 2012 and they're, as I said, at a much lower cost, one, than the debt they replaced and, two, than certainly any debt that you see in the markets today, so we will pay those off over time. So as you get out in the 2011 - 2012 timeframe from normal operating performance and cash flows that will come up to the holding company, that's how those lines will be retired. Now your second part of that question was could we expand on specifics around the line, so Pat, could I turn that over to you, please?

Yes, for the second part of the question, we do have one financial covenant. It's a consolidated minimum net worth requirement and we're currently well in excess of that requirement in terms of our year end position and consolidated minimum net worth. We also have a couple of restrictions which essentially require that we don't make, I'll say, significant and material changes to the character of the company and the earnings streams by divesting, for example, a business segment, and essentially change the company into something different than it was underwritten at the time that we agreed to the terms of the liquidity facility.

Can I have a follow up for TARP funds? How likely do you think it is that TARP funds are going to be made available to insurers generally, assuming that you become, as other companies have, bank or thrift holding companies, and how do you imagine that would work? Do you think that the support would come at the whole co versus the out co level and why?

Let me give you three perspectives. Certainly I think when you're looking at the overall financial system, including insurers in the dialogue is appropriate given their important role in buying a great portion of the bonds, as an example, in the U.S. and being, therefore, part of the capital flow system. So there's clearly that case. Who knows exactly what will be available? And I know there are discussions about that there might be announcements today or additional announcements this week about an overall plan. We'll all have to see what that entails. So I'm not going to handicap that as I tried to allude to earlier in the remarks. If there is a scenario where you have TARP funds - and again, our capital strategies, let me be clear, are not going to be dependent on that as a path because of the other levers that I've talked about you're going to look at those funds and, of course, directing any funds towards U.S. businesses, whether those funds are supportive of giving additional flexibility in life companies or supporting additional growth there or whether those funds are supportive of U.S. Mortgage Insurance entities in supporting housing because housing's a very important public policy issue for the entire country right now and, in fact, I think that's part of the case for the MI industry. And then certainly it's part of our business mix so you would expect, if there were such funds and it made sense to go down that option, that some of those funds would end up there and then some could be retained at the holding company for future decisions. Where you wouldn't have funds go, of course, is outside the U.S.

Your next question comes from Suneet Kamath - Sanford Bernstein.

I just wanted to follow up on TARP and then I'll have another question. Per my read of the situation, it seems like Genworth is the only life insurance company that's not been approved by the OTS and I apologize if you've covered this earlier in your comments. I'm just wondering what is going on there and then are there any deadlines in terms of having to receive approval? I think there were some of those in the past. I'm just wondering if we should really be concerned that you appear to be sort of an outlier here?

Well, I'll give you two or three perspectives that might be helpful here. First of all, there are a number of companies active in this area and, of course, that creates a certain amount of work in review processes and a high amount of demand. Second is every company has to be looked at with its business mix, and we do have a different business mix, specifically the mortgage insurance component would be a different part that is not typical in other situations and therefore one has to share information and explain that specifically. Third is the OTS did apply for an extension well in advance of the due date that was initially established in mid-January, and I think you noted there was a change in administration, a change in participants in the executive branch, so there's a transition period that we felt the impact of. So the OTS has been clear that they've continued their work. We continue to work actively with them, give them information as now we move forward and you have a new administration in place, and that's how we're taking this forward and that's how we've communicated. So I think that's what you've seen. And I understand that it's difficult sort of looking outside and not having those specifics to say what is transpiring here.

And then my second question relates to the variable annuity business where I think you said you're going to be opportunistic going forward. If I think back to some of your past investor days, you've used a tag line - and I don't mean to put words in your mouth - but, you know, Genworth tries to anticipate where markets are going. And as I think about the variable annuity business, especially the new business opportunities, it just seems to me that there is a huge opportunity here for the life insurance industry and I think that's been addressed by other companies in their comments, so I'm just wondering what you're seeing in that product that will perhaps cause you to be more opportunistic as opposed to more aggressive? We've seen some price increases in the market. Is your view that perhaps the price increases that we've seen are still not appropriate to generate a decent return or what's going on there?

Let me start off with outlining our strategy, which we talked about this morning. It is really one of focus and we have refined our strategy to be more of a specialist, so let me just summarize. We are looking to grow long-term care and related products to long-term care. We are excited about our main street strategy in life insurance in the lower bands. And we will continue to grow our wealth management strategy. With respect to annuities, as we've said, we do expect to sell less in 2009 than we have in the past - and this would be all annuities - and this is based on our risk, our capital management strategy as well as where we see the market in 2009. Having said all that, we are continuing to sell variable annuities and we do see annuities in general as an important part of a retirement income solution for consumers. Our variable annuity strategy, just to walk you back through that, we've been very thoughtful about our product designs, requiring balance fund allocations in our variable annuity; we have hedging. We do hedging on our withdrawal benefits as well as starting in August of last year we have coinsurance on our new business. We are looking at new product designs which will balance commercial appeal as well as meeting our risk and capital strategies for the variable annuity line. And as we get closer to that we will share what those designs are.

If I could just follow up, Pam, I'm just wondering how much of this decision to be opportunistic in VAs is a function of the importance of third-party distribution and the fact that your ratings and rating outlook are generally below some of the other, bigger players in the space? That's really what I'm trying to get at.

Yes, I think it's a combination. It's a combination of our capital strategy for 2009, our risk appetite, as well as where we see the market and our distribution and leveraging what we do best in long-term care and in life and in wealth management.

And I'm just going to add to that we look forward to going out with our distribution and conveying the capital and liquidity progress that we've made here now that we're out of the quiet period. We think that should be a positive.

Your last question comes from Eric Berg - Barclays Capital.

With respect to the rescission in the December quarter of the bulk deal that you're saying included an element of either misrepresentation or other fraud, to what extent were the earnings in the December quarter in Mortgage Insurance affected by your challenging or your cancellation of that contract, and should we consider this to be a closed matter or is it reasonable to presume that this is going to have to be litigated and we'll just have to see whether there'll be ongoing obligations under this bulk deal?

As we reported in the second quarter of the year, we had filed an arbitration proceeding regarding those bulk transactions seeking really a declaration of our rights to rescind the coverage, which we did on a pool-wide basis in December. The results of our performance in the quarter as a result was basically frozen - just think about it sort of frozen, suspended in time. We didn't realize any material benefits from a reduction in those losses. What you'll see is that we did take down our risk in force, so it did impact our risk in force level relative to our bulk business and had therefore a little bit of an impact on our risk-to-capital levels. Your second question was is this a closed issue. And, as I mentioned, when we did the poolwide rescission we amended our arbitration demand and would imagine we'll continue to work with the other party to try and resolve it.

The second question relates to triple X and the series of securitizations that you have done over the years. To the extent that there are declines in asset values that have occurred inside those trusts, to what extent is their recourse to Genworth and to what extent might the corporation have to place additional assets into those trusts?

The programs that we have put together, I think I accurately described them as non-recourse programs, and we designed those such they would be self-sustaining and accordingly we feel very comfortable with the way that they're working at this time. We would like to see less declines in those assets, but hopefully that will change over time as well.

Ladies and gentlemen, this concludes Genworth Financial's fourth quarter earnings conference call. Thank you for your participation. At this time the call will end.