Good morning, ladies and gentlemen, and welcome to the Genworth Financial's Fourth Quarter 2012 Earnings Conference Call. My name is Shannon, and I will be your coordinator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. [Operator Instructions] I would now like to turn the presentation over to Georgette Nicholas, Senior Vice President of Investor Relations. Ms. Nicholas, you may proceed.

Thank you, operator. Good morning, and thank you for joining us today for Genworth's Fourth Quarter 2012 Earnings Call. Our press release, financial supplement and fourth quarter 2012 investor materials were released last evening. And this morning, additional information regarding our 2013 business goals was posted to our website. We encourage you to review all these materials. I would like to note that we have changed the financial presentation for divisions to align with the strategy announced in October 2012. We will now operate through 3 divisions: U.S. Life Insurance, Global Mortgage Insurance and Corporate and Other. There were no changes to the financial presentation for the segments, but the International Protection and Wealth Management segments are now part of the Corporate and Other division. Today, you will hear for the first time from our President and Chief Executive Officer, Tom McInerney, followed by Marty Klein, our Chief Financial Officer. Following our prepared comments, we will open the call up for a question-and-answer period. In addition to our speakers, Pat Kelleher, President and CEO of our U.S. Life Insurance Division; Kevin Schneider, President and CEO of our Global Mortgage Insurance Division; Jerome Upton, Chief Financial Officer of our Global Mortgage Insurance Division; Buck Stinson, President of insurance products for our U.S. Life Insurance Division; and Dan Sheehan, Chief Investment Officer, will be available to take your questions. With regard to forward-looking statements and the use of non-GAAP financial information, during the call this morning, we may make various 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 of our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, each as filed with the SEC. This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. In our financial supplement, earnings release and investor materials, non-GAAP measures have been reconciled to GAAP where required, in accordance with SEC rules. Also, when we talk about International Protection and International Mortgage Insurance results, please note that all percentage changes exclude the impact of foreign exchange. And finally, references to our statutory results are estimates for the quarter due to the timing of the filing of the statutory statements. And now I'll turn the earnings call over to our new CEO, Tom McInerney.

Thanks, Georgette, and good morning, everyone. Let me first say I'm very excited to be joining you today for my first Genworth earnings call. Having just joined the company about 1 month ago, I've been spending most of my time getting to know Genworth, its products and businesses and the management teams in each of the businesses. I am looking forward to working with the board and senior leadership to execute the strategy announced recently. This morning, I want to briefly cover 4 points: First, give you some perspectives about my decision to come to Genworth; second, comment on the strategy and priorities for the company; third, tell you what I'm most focused on as I start my tenure as CEO; and finally, offer a few comments regarding Genworth's fourth quarter results. I will then turn it over to Marty to review fourth quarter results and provide some detail around the specific financial goals for 2013. So I'll start with what influenced my decision to come to Genworth. From my roles in the insurance industry, I was familiar with and respected Genworth. After discussions with the board and others over many months, I recognized the turnaround opportunity the company had and wanted to be involved in that effort. Genworth has a diverse portfolio of businesses that provide valuable products and services to customers that impact our lives. There is strong demand for many of our products, which provides future growth potential for the company. We have a number of strengths that I believe we can further leverage, including our focus on the underserved middle market for life insurance, our leadership positions in mortgage insurance and long-term care, strong distribution relationships and our experienced and talented team of employees. As you, our shareholders, know, the last few years have been very…

Thanks, Tom, and good morning, everyone. Today, I'll provide an overview of results for the quarter. As we move into a new year, I'll also talk about our financial goals for 2013, as well as discuss how we did on our 2012 goals. Let's begin with fourth quarter results. We reported operating income of $167 million for the quarter and net income of $166 million. The results included $78 million favorable adjustment from the finalization of a new government guarantee framework in Canada. Overall in our businesses, we saw a generally stable performance in Global Mortgage Insurance and mixed results in U.S. Life. In Global Mortgage Insurance, excluding the $78 million adjustment for Canada, net operating income was $53 million compared to income of $56 million in the prior quarter. Let's discuss Canada first, where our operating earnings were $36 million for the quarter when excluding the $78 million adjustment. Unemployment improved slightly sequentially, and home prices were flat to the prior quarter. The loss ratio increased 1 point sequentially to 31%, while improvement in the Alberta region continues. Changes put into effect in July to the eligibility rules for government guarantee mortgages reduced the size of the high loan-to-value mortgage insurance market and, along with normal seasonal impact, drove our NIW in the quarter down 40%. We did complete several bulk transactions in the quarter of approximately $4.1 billion. We participate selectively in this market, and these transactions consist of low loan-to-value prime loans. As I mentioned earlier, our results included $78 million this quarter from a new Canadian government guarantee framework, which took effect on January 1, 2013. While there's no change in the 90% level of the government guarantee to the business under the new legislation, it does eliminate the government guarantee fund, along with its related…

[Operator Instructions] Our first question is from Sean Dargan of Macquarie.

My -- I have 2 questions. My first question is about long-term care. Given the reserve refinement and the reserve build reflecting new assumptions, it sounds like there have been a change in assumptions. Why was that not reflected in a debt charge?

This is Pat Kelleher. I'll take that. When you look at our reserves in long-term care, about 15% of the reserves or 50 -- or rather, sorry, $3 billion is our reserve for current open claims. And what we did in the third quarter of last year was we updated all of our experience studies and made adjustments, which in total were not material to the claims reserve balance reflecting our experience. Then in the current quarter, we looked at the relatively stable portfolio yields we have seen but anticipating some modest declines in the low -- in the current interest rate environment, we made a modest negative adjustment, reducing the interest rate that's used in the calculation of those reserves. So since it's a current claims or FAS 5 [ph] reserve, and it had just an impact in the current period, and we've taken into account all the costs of the currently open claims in future periods, it really had no impact.

Okay. And shifting to U.S. MI, how do we get from a loss of $26 million this quarter to breakeven or modestly profitable quarter? I mean, what quarter should we be thinking about, and how would we make that jump?

Sean, this is Kevin. I think we need to start with just a little bit of a caveat that speaks to -- there's a range of possible outcomes that could occur based on the continued uncertainty in the macroeconomic environment. So -- but with that said, if you go back to the trends that we identified really last February, when we begin talking about the improving performance and our expectations for this business, our trends largely remain in line with those expectations and continue to head towards the potential for really significant improvement in the overall U.S. MI earnings and a potential again for breakeven or a modest profitability in 1 or 2 quarters. When I start to more directly ask your -- address your timing question, I think about it this way. First off, we do have the benefit of seasonality in this business. And taking account the usual trends when -- in the seasonality delinquencies and cures, you could expect that, that would point towards that breakeven or return to profitability sometime in the first half of the year, either Q1 or Q2. At the same time we also have another dynamic that continues to play through our portfolio, and that is as the older books, the unprofitable legacy books of business, continue to burn out and the further you get into the year in that burnout dynamic, adding to that the benefit we continue to realize of incremental new well-priced and highly performing production, you get to a tipping point that conceivably could be more in the later part of the year, Q3 or Q4. So it's really -- and we're not going to do a pick-point right now, but that's really, I think, the dynamics that are at play. Continued burn-off of the books, continued addition of new profitable production, getting to a point, as I think Marty identified in the goals, where you could be at 40% to 45% range of new -- profitable new books of business in the overall portfolio, that starts to drive that tipping point later on in the year. And then lastly, just as an additional item and it doesn't really help in nailing down your question, but we also do benefit from some dividends from affiliate investments we have in our portfolio. And those come in Q1 and Q3, so again, could help drive it in the first quarter, it could also help drive it potentially in the latter part of the year.

Our next question is from Mark Palmer of BTIG.

Quick follow-up question on Australia. You mentioned in your comments that the flooding this year, at least the impact of the flooding, is not as bad as it had been in 2011. And I believe you said that it would impact an estimated less than 1% of the portfolio. Last year, as I recall, the issue really stemmed from one lender in particular. I want to get a sense of, with regard to the exposure in question, what the composition of that might be. Is it one lender, is it more than one lender, what more can you tell us about that?

Yes, Mark, first of all, just let me revisit Marty's directional comments on it. We -- our early assessment, it's going to be low to modest impact. When I -- when you look back on last year, the current flooding, compared to what we experienced in 2011, in Queensland is far smaller. It's really primarily isolated in the rural areas. Again, our master policy really specifically excludes physical damage, including floods. I mean, so when we talk about this range of output, we said it's really primarily linked to the economic impact to the environment. Stepping back from that, related to your question, it's really spread over all of the lenders that we have that we've done business in that area. It's not specifically just identified to one lender. We do have some lenders we do more business with than others. But at again, at this point in time, early assessment, still early, we'll update you as we continue to see the trend's development, but we expect a low to modest impact.

Okay. And one other question. With regard to the U.S. Mortgage Insurance business, we've seen the U.S. government pulling back from the mortgage insurance space or at least announcing that they intend to pull back. To what extent are you seeing that pullback translate into increased opportunities to write new business?

Yes, great question. And when you talk about the U.S. government, I'll specifically highlight we're talking about the FHA, which is the government's mortgage insurance arm. And just from a trend perspective, if you look at the way our penetration, which is mortgage insurance penetration, into the market has developed over the years -- or excuse me, over the year, we're really coming out of 2012 at a fairly high penetration rate, 8% overall. That's starting from a point going into the year that was about 5%. Our refinance penetration, which is usually lower than our purchase penetration, has almost doubled over the year as we've gone into the year. And our purchase penetration, which is really the bread and butter of our business, exited the year as an industry at almost 17%, sort of back to pre-go-go year type levels is the way I'd characterize it, sort of 2002 or 2003. So you see the government raising prices on the FHA's business. You see them getting more restrictive in terms of their underwriting policies, and that business is beginning to flow back into our markets. We hear it from our customers. You can see it in our production, even with sort of stabled share growth this quarter, my production was up on a BPQ [ph] basis about 9%. And then you compare that to where we were on a prior year basis, we're up over 50%. So the market is getting bigger, it's a market we think is an attractive market to play in, and we continue to be very disciplined in our pricing approach to going after that business.

Our next question is from Geoffrey Dunn of Dowling & Partners. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: A couple questions. First, on the MI side, can you qualify your '13 expectations for new default development with some commentary on how you think shares are going to trend? Because at the end of the day, kind of that change doesn't overly matter without kind of the impact on net new notices. So what you think cures are going to do relative to that 15% decline?

We gave you a range, I think, in -- of 15% to 20% new delinquency decline next year. That would -- that is a range that we think the overall business will perform within. We did a similar thing this year, targeting about a 20% decline, and that played out, I think, close to 23%. New -- as it relates to modifications and cures, I think they're going to go down. Directionally, they're going down. Number one, we have less inventory to deal with. And so you just -- just based upon the amount of inventory, delinquent inventory we have, it should go down. But as we continue to see some improvement in overall economic development, I think that's going to continue to help that as more jobs that will help with this healthcare line. So at the end of the day, I think although modifications will be down, they will be down and will continue to help support the overall new delinquency development, which we also think is going to be down. I think the trends are -- we don't expect any major falloff, Geoff, in our overall cure expectations. And it's really -- it's in line with the way we think about our overall reserves and the way we have them set. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: Okay. Also, the risk to capital this quarter, you only saw about a 0.6 increase sequentially. Outside of some modest realized gains in the P&L, were there any other balance sheet adjustments which aided that ratio this quarter?

Well, we got some -- a little bit of benefit from some deferred tax asset realization. And so that comes through the stat line, gives us a little bit of help there. And you mentioned that we did have some modest gains in terms of the overall portfolio, but nothing else, no other major drivers. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: Okay. And then starting the long-term care side, a couple questions Ryan asked me to pass on, related to the year-end, did you have any stat reserves as a result of your cash flow testing?

Yes. This is Pat, I'll take that. On long-term care, we've done a thorough review, loss recognition testing, and we're comfortable with the results there in terms of our provisions being adequate. We have completed the -- of course, the Q3 stat loss recognition testing. We're finishing up the process in Q4. And from my standpoint, where we are currently, we're comfortable that our reserves are adequate and that our capital position is strong and as stated. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: Okay. And his other question was, you gave the income statement impact from the low interest rate environment. Would you anticipate any kind of GAAP or stat balance sheet impacts from the same analysis?

In doing the work relating to loss recognition and cash flow testing, we're taking into account all of our experience, and we've reflected on the reserves where they should be on our balance sheet. I would say just to kind of add a little bit of clarity to the performance as we go forward, if I look at the quarterly performance over the last couple of years, I would say that we've had pretax margins on the long-term care business between 5% and 10% of premiums; some quarters larger, this quarter a little bit less. But on an annual run rate basis, the earnings level has been a little bit more stable, around $100 million in each of the last 2 years. And the important thing to recognize in terms of what Marty announced before in terms of the rate actions, on $2 billion worth of in-force annual premium, we're expecting at this point to get about $200 million to $300 million of additional premium through those rate actions over time, with only I guess 20% of it actually realized to-date based on approvals that we've got. When we look at the impact of that on our statements over time, it's probably important to recognize from a process perspective, the rate increases are implemented after notice on the next policyholder anniversary. So we're only seeing a portion of the approvals that we've gotten already and over the course of 2013, with the rest recognized in 2014. And given the size of these rate increases, we're offering a range of options that allow policyholders to elect to reduce benefit options. I'd say overall, most of the policyholders, it's been our experience that they would go along and pay the rate increase. Although this time, since it's larger, we would probably see more policyholders electing reduced benefits. So as a result, we'll see those increases coming into our results and strengthen our earnings on our balance sheet over time, with about $20 million to $30 million, as Marty said, of the impact being felt in the current year.

I would just add, Geoff -- it's Marty -- that as we show in the analysis on the impact of lower rates, that analysis is really just the impact on after-tax net spreads and does not include the impact of any DAC or reserve unlocks, which is a little bit harder and more speculative thing to model in this type of analysis given the number of factors involved.

Our next question is from Tom Gallagher of Crédit Suisse.

This is David Motemaden asking on behalf of Tom Gallagher. I see on Page 5 of the slide deck that you guys put out that stat earnings were $275 million for the year. Could you tease out how much of that is due to the life block transactions and the tax gains or the tax benefits that you had?

This is Pat, I'll take that. The stat earnings that we report on Page 5, I believe, are the Genworth Life Insurance companies' statutory earnings, which are really the earnings of the parent company and the group that generate the dividend capacity to the holding company. If you look at the stat earnings of I'll say all of the entities in the group, it would certainly have been larger than that in the current period. The one thing that I would say is, from the life block transaction perspective, we have a capital benefit of $175 million, but a significant portion of our capital benefits are not actually from the statutory earnings. So it would only be a portion of that, that would be reflected in the earnings of the U.S. entities. Does that help?

Yes. And then I think you guys had mentioned that you expected lower tax benefits in 2013. Just wondering how much that impacted 2012.

To give you an -- I can give you a general idea. When we did the life block transactions and the work that we did to generate and bring capital onto the statutory balance sheet, we were able to, through those transactions and our other operating results, utilize some previously non-admitted tax loss carry forwards in the statutory balance sheets. And when those are filed you can -- on our precise number, but you can look at those and see how that position changed, and that generally was directly accretive to our capital position and was part of our intended result.

Thank you. There being no further question, this will conclude Genworth's Fourth Quarter 2012 Earnings Call. Thank you for your participation. At this time, the call will end.