Welcome to Genworth Financial’s Third Quarter 2016 Earnings Conference Call. My name is Amy, and I will be your coordinator today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of this conference call. As a reminder, the conference is being recorded for replay purposes. Also, we ask that you refrain from using cell-phones, speaker phones or headsets during the question-and-answer portion of today’s call. I would now like to turn the presentation over to David Rosenbaum, Head of Investor Relations. Mr. Rosenbaum, you may proceed.

Thank you, operator. Good morning, everyone, and thank you for joining Genworth’s third quarter 2016 earnings call. Our press release and financial supplement were released last night, and this morning our earnings presentation was posted to our website, and will be referenced during our call. We encourage you to review all of these materials. Today, you will hear from our President and Chief Executive Officer, Tom McInerney; followed by Kelly Groh, 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, Kevin Schneider, Chief Operating Officer; and Dan Sheehan, Chief Investment Officer, will be available to take your questions. 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 notes regarding forward-looking statements in our earnings release and related presentation, as well as the Risk Factors of our most recent Annual Report on Form10-K 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 the results of our international businesses, please note that all percentage changes exclude the impact of foreign exchange; and finally, references to statutory results are estimates, due to the timing of the filing of the statutory statements. And now I’ll turn the call over to our CEO, Tom McInerney.

Thank you, David, and good morning, everyone. I will start today’s call by providing a brief recap and update on the China Oceanwide transaction. Kelly will then discuss this quarter’s results, including the charges we disclosed on October 23. As you know, almost two weeks ago, we announced our agreement to sell all of Genworth’s outstanding shares to China Oceanwide for $5.43 per share. Our board believes that this transaction creates greater and more certain shareholder value than our current business plan or other strategic alternatives. Management and the Board believe the completion of this transaction is in the best interest of all Genworth stockholders. As I outlined at the time of the announcement, the transaction has been structured with the intention of increasing the likelihood of obtaining regulatory approvals. Before we announced this transaction, we engaged with key regulators, in some cases in several occasions, in order to both convey our strategic rationale for and financial implications of the deal, as well as to preview Genworth’s preliminary third quarter charges. During these discussions we solicited feedback from certain of our regulators, including Delaware on the terms and structure of the transaction. Our Board and China Oceanwide consider these regulators’ perspectives, which resulted in China Oceanwide’s commitment to contribute $1.1 billion of cash to Genworth, in addition to the purchase price paid to stockholders. This investment is intended to address the 2018 debt at or before its maturity, support the U.S. life insurance businesses by facilitating the unstacking of GLAIC and improve Genworth’s overall financial strength and flexibility. In light of the third quarter charges, we believe the fully unstacking is only achievable with China Oceanwide’s capital contribution combined with Genworth’s previous capital commitment. Our regulators understand that the full unstacking is essential to completion of the transaction, as well…

Thanks, Tom, and good morning, everyone. Today, I will cover our third quarter results and the key drivers. Let’s begin with this quarter’s financial performance. We reported a net loss for the quarter of $380 million and a net operating loss of $405 million. Our results include $548 million after tax of unfavorable items related to our annual review of LTC claim reserves as well as an estimate for deferred tax charges. Although we reported a net loss overall, we saw continued strong earnings performance in our U.S. mortgage insurance business, driven by loss ratio results below our annual target as well as strong top line growth. Loss performance in our Canada mortgage insurance business was solid and we also reported good life insurance results. Focusing on our underwriting results for the quarter, we saw solid loss performance across most of our mortgage platforms. Beginning with Canada, the third quarter loss ratio increased 4 points from the prior quarter to 24% reflecting an increase in new delinquencies, net of cures, driven by oil producing regions. Year-to-date performance has been good with the loss ratio of 23%, which is below full-year expectations of 25% to 35%. Given these results, we would expect to end the year in the bottom-half of this range. In Australia, the loss ratio by the quarter was 42%, up 6 points sequentially, driven by aging pressure from the commodity producing regions. We continue to see elevated losses in the Queensland and Western Australia mining regions, and are taking proactive steps to help mitigate potential future claims. On a year-to-date basis, the loss ratio of 35% is at the top-end of our anticipated total year range of 25% to 35%. Given this performance, we now expect we will end the year at around the top-end of this range.…

Ladies and gentlemen, at this time we will begin the Q/A portion of the call. [Operator Instructions] And first off, we have Sean Dargan with Wells Fargo Securities. Please go ahead.

Hi, thank you. I have two questions, not related to the acquisition. One for Kevin, I believe USMI, the Genworth’s USMI business is the only legacy MI in the marketplace now that does not have investment-grade financial strength ratings. You had a noticeable pickup in new insurance written. I’m just wondering how your lender counterparties in the GSEs assess you as a counterparty. I know your PMIERs capital is improving, but just given concerns around the HoldCo, are you getting any pushback from lenders and is it affecting your ability to do business?

Yes, Sean, thank you. I think our U.S. Mortgage Insurance sales team competes every day to provide the highest service levels to our distribution partners. And over the last probably five or six quarters we’ve been operating in the 15% to 16% share level. We’re down modestly, as Kelly said, this quarter, primarily due to reducing some single premium lender paid business. However, I think you hit it right on. Our lenders, when they evaluate us as a counterparty look at both our PMIERs sufficiency, which is probably one of the highest in the industries. I think that’s helped us with our distribution partner, but they also look at our financial strength rating as well. So overall to this point, we continue to have success in the market. We think the proposed announcement of our transaction has the potential to help us stabilize and improve our ratings over time. That’s one of the things we’re excited about. And at this point in time, we continue to be able to go out and win business every day. And we’ll continue to monitor that going forward. But I do think our PMIERs sufficiency has been a big additional strength in terms of our lenders’ evaluation of us as a counterparty.

Okay. Thanks. And then I have one question for Kelly. I saw that the BLAIC repatriation was completed. Does that mean that the capital maintenance agreement between BLAIC and Genworth International Holdings is severed and should we think of that it as meaning that that’s the final link that separates LTC from HoldCo as far as the bondholders are concerned?

Thanks, Sean, for the question. All of the capital maintenance agreements related to BLAIC have been severed, so there is no longer any parental support for any of that business.

Okay. Thank you.

And from Compass Point we have Ken Billingsley.

Good morning, thanks for taking my question. I want to just follow up on the long-term care side, when you talked about the disabled life reserves. When you are in discussions with China Oceanwide, are they comfortable with the process of what happens as you’re doing your fourth quarter review for active life reserves and the negative impact margins are going to have when their valuing the capital position of the company and the reserve strength?

Ken, this is Tom. Thanks for your question. What I would say on that is that China Oceanwide did a lengthy due diligence over a period of about nine months. And so, obviously, they focused on all the businesses, but clearly spent a lot of time on our long term care insurance business, reserves, DLR, the active life reserve, our premium increase plan, et cetera. They had several outside advisors. So I believe they’re comfortable with where we are in the LTC business. Obviously, they are aware of all of our challenges. And so I think they’ve had a full briefing on all of that. And obviously, in the course of the last several weeks when Kelly and our team finished the review, we discussed all of that with China Oceanwide. So they are up to speed on our long term care insurance business.

And based on comments that you had earlier regarding just your discussion with various regulators, you highlighted Delaware. And it appears that the Delaware may be a linchpin in the unstacking process here. And people are going to be watching that closely. And you said you had extensive discussions with the regulator there. But Ms. Stewart lost her bid for reelection. So have you been talking with the candidates already? And if you haven’t, do you think that’s going to delay the processes, is trying to get a complicated unstacking structure and getting them up to speed on that, could that delay the timing of the deal?

So, Ken, we have had discussions with all of the relevant regulators. We obviously have spent quite a bit of time with Delaware, because Delaware ultimately is the key regulator, not the only regulator, but the key regulator on the unstacking of GLAIC. And as we said, we’re working with China Oceanwide to structure the transaction to increase the probability of regulatory approval including the 100% unstacking. And I think we both remain confident and that based on our discussions. In terms of the Delaware insurance department, I think we’ve had very close relationships and good relationships with Delaware for a longtime. Over the course, the last 20 years, there have been a number of changes in the Commissioner. In Delaware, it is elected, Commissioners have retired. But generally the staff, who ultimately are the key people who work on all of the analytical work including on this transaction, they have generally stayed in place, and I would expect that going forward. And so whoever wins next week, I think will - in our judgment will be heavily reliant on the existing staff who are ones that have been following and working with us on the LTC business for a long time.

Okay. And the final question just on your 4Q reserve and just on the comment again made earlier was about the margins for the ALR review. Actually, I believe the commentary was that expected to be negative, but negative to the point that would require an actual charge or just reducing of margins?

Ken, it’s Kelly Groh. Let me address that. I think the comments that I said is we anticipate the updated claims reserve assumptions that we updated in the third quarter would have a material negative impact on our margins. But we do expect fiduciary rate actions plans and other management actions can help mitigate that. The work is underway. The net impact of all of the items as well as the other assumptions that have to be updated in the fourth quarter is not complete yet. One of the things we mentioned on the last quarter or on the last call in the 24th is the fact that some of these assumption updates impacted reimbursement block more than the indemnity blocks and, see, indemnity block has very little margin. That would be the one that would most likely have a charge. But given the fact that these assumption updates really impacted reimbursement, it’s probably less likely to impact to the [PI block] [ph], but again the work is still underway.

Kelly, one thing I would add, this is Tom. It’s good question that you have. If you go to Page 10 of our earnings summary you will see the progress we made in the third quarter on the LTC premium rate increase. So if you add the first three quarters together, we’ve had 76 approvals, effects about $585 million of additional premium increases at around– it’s a little under 30%. So we are doing very well on that. And one of the things that we are able to do on the whole ALR review process is based on the new claim assumptions, higher claim expectations that will reduce the margin as Kelly said, but we are able to mitigate that with premium increases. So we will adjust our five-year premium increase plan with the regulators and go back and talk with all of them about that. So we haven’t done all that work yet. And that will all be done in the fourth quarter. But I don’t think you have to look at both sides of that.

All right. Thank you for taking my questions.

Next we have Ryan Krueger with KBW. Please go ahead.

Hi, thanks, good morning. My first question was a follow-up. I guess, I understand the offsets from the rate increases certainly. But thinking your prior year ALR assumptions you already assumed quite a large amount of rate increases over the next 15 years, do you think, I guess, at some point a practical limit to how much you can assume for rate increases in the margin testing?

Ryan, it’s a good question. And based on how statutory accounting and the regulatory process works, we are able to seek premium increases or benefit reductions that are actuarially justified. And so, as a result of the claim review, we are now projecting a higher future claims that does change the amount that is actuarially justified. And so, we would expect to seek additional premium increases based on that. And also, I’ve said this in prior quarters. I think that Penn Treaty insolvency, that liquidation is about to occur. I believe it’s still at the court. And I do think that the learning from the regulators from that is, well, it’s politically difficult for them to grant large rate increases. But an even more significant problem for them are by not allowing these actuarially justified premium increases, which they’re supposed to grant, it can lead to significant problems. And I believe that in talking to a lot of the regulators in the NIAC. And of course the insurance companies, the insurance industry has to fund the state guarantee fund assessment. So I do think there is recognition of that. They do need to grant to all of the players with all blocks of LTC business, the actuarially justified premium increases. So I think they’ll continue to do that.

Okay, thanks. And then on GLAIC, Kelly, do you have a - can you give us a rough sense of what the normalized statutory earnings power of that entity would be at this point, given the little difficulty you get, given some of the transactions you’ve done the last few years?

Yes. One thing you need to keep in context with that is a part of our unstacking plan. There is going to be a variety of intercompany reinsurance plans to isolate the long term care business within GLIC and GLIC NEE [ph], and have the annuity and life business in GLAIC. We haven’t provided an update on that. If you look at the historical pattern of dividends from GLAIC, we’ve had about $340 million worth of dividends over the last three years. We would anticipate with stable life and annuity business there to be kind of normal earnings generation, but we have not provided that forecast yet.

Okay, understood. Thanks.

Ladies and gentlemen, we have time for one final question. From Barclays, we have Peter Troisi. Please go ahead, sir.

Thanks. The intercompany tax payments came in at $194 million this quarter. I think that was higher than what was mentioned on the call last quarter? And so, now that all the NOLs at the LifeCo has been utilized, can you help us think about kind of the run-rate of intercompany tax payments to the HoldCo going forward?

Yes. Thanks for the question, Peter. The way I think about the intercompany tax payments, there is a few things you just have to keep in mind with them. I would anticipate they would be positive. But given our view on the long-term care, incremental claims, they’ll be lower than we’ve seen in historical periods. The last two quarters have really benefited from some transactions associated with the intercompany payments. If you saw the $194 million that we received this quarter was benefited by about 175-ish related to the River Lake I and River Lake II transaction and the reinsurance of that to Protective Life. So we are not going to give an entity-by-entity estimation, but as we think about it - just think about it is as lower, but likely somewhat positive.

Okay. Thanks.

Ladies and gentlemen, I will now turn the call back to Mr. McInerney for closing comments.

Thank you, Amy, and thanks all of you for your time and questions today. While the charges in the quarter led to disappointing overall results, we are pleased with the performance of mortgage insurance businesses and our life insurance business in the quarter. The Board and the Management Team will continue to focus on improving the company’s operations and financial results. And moving forward, we will keep stockholders updated on our progress on the China Oceanwide transaction as appropriate, I’ll remind you, we expect to file the proxy for the deal over the 30 or 40 days. With that, I want to thank you again for your continued interest in Genworth and being on the call today.

Ladies and gentlemen, this concludes Genworth Financial Third Quarter Earnings Conference Call. Thank you for your participation. At this time the call will end.