Good morning, ladies and gentlemen, and welcome to Genworth Financial's First Quarter 2018 Earnings Conference Call. My name is Daniel, and I will be your coordinator today. At this time, all participants are in a 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 Q&A portion of today's call. I would now like to turn the presentation over to Tim Owen, Head of Investor Relations. Mr. Owen's, you may proceed.

Thank you, operator. Good morning, everyone, and thank you for joining Genworth's first quarter 2018 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 up the call 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 Reports on Form 10-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.

Good morning and thank you for joining today's earnings call. Since our fourth quarter earnings call, we have announced several updates with respect to the pending sale of Oceanwide, as well as made progress against our ongoing strategic initiatives. Today we will like to provide you with an update on these initiatives and review our strong first quarter results. I will start by providing a brief overview of our financial performance, and update on the pending transaction with Oceanwide. Kelly will then provide a more in-depth update on our first quarter results, and additional information on our holding company liquidity. Following our prepared remarks we'll open the call to questions. I am pleased with Genworth's strong first quarter operating performance. For the quarter adjusted operating income was $125 million or $0.25 per diluted share. Our mortgage insurance businesses had excellent results, with solid growth and strong capital levels in each of our global businesses. We also had very strong loss performance in our U.S. and Canada businesses. Starting with U.S. MI, first quarter adjusted operating income increased 52% year-over-year to $111 million, driven by insurance in force growth, strong loss performance and tax reform benefit. In Canada, excluding the impact of foreign currency, adjusted operating income increased 28% year-over-year to $49 million as we continue to experience a strong housing market and underlying economic conditions. And in Australia, excluding the impact of foreign currency, adjusted operating income increased 38% year-over-year to $19 million with higher earned premiums in the quarter due in part to the updated earnings curve pattern. Our life insurance segment faced continued headwinds, generating an operating loss of $5 million driven by long term care insurance losses. However, these challenges were partially offset by continued traction on our multi-year long term care insurance rate action plan that…

Thanks, Tom and good morning everyone. Today I will cover our first quarter results and the key drivers as well as provide some context around cash sources and uses at our holding company. Let's begin with this quarter's financial performance. We reported net income for the quarter of $112 million, and adjusted operating income of $125 million. Our overall results reflected continued strong loss performance in our U.S. and Canadian mortgage insurance businesses. Our U.S. life insurance business results were mixed with strong fixed annuity performance offset by losses in long term care and life insurance. Our overall results did benefit from the recently passed Tax Cuts and Jobs Act, which lowered our effective tax rate to 21% for most of our U.S. businesses, and to 27% and 30% for our businesses in Canada and Australia to more closely reflect local rates in those countries. This provided an overall after-tax earnings lift of approximately $15 million versus prior periods. The primary tax benefits come from our MI businesses with some additional tax expenses in U.S. life insurance and corporate. I will explain more when I discuss individual business results. While I do expect a benefit to recur in subsequent periods, the amount will vary due to changes in pre-tax income and our mix of income by our international businesses. Moving to our underwriting results for the quarter, we saw solid loss performance across all of our mortgage insurance businesses, reflecting steady economic growth, low unemployment levels, and strong housing trends in most regions. In U.S. MI, our first quarter loss ratio was 9%, which is down 13 points from the prior quarter and 8 points from the prior year. The improvement is driven by lower new delinquencies, seasonally higher cures and favorable aging. Incremental losses in the quarter from last…

We can now take our first question. It comes from Ryan Krueger of KBW. Please go ahead sir. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Hi, thanks. Good morning. First question on CFIUS, given the short-end review period this time, is it your expectation that they will make a final decision one way or another at the end of this review period?

Ryan, thanks for your question. The first thing I would say is, I think we're having productive conversations with CFIUS. And of course we're encouraged that they agreed to focus on the 45-day investigation period. I think the third-party U.S. data security provider has made a difference. But hard to tell where we'll end up. And at this point, obviously we can't give any assurances on where CFIUS will end up. We would hope that we will reach a conclusion by the end of this review period. But it is possible that it continues after that depending on where the conversations go. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Got it. And then on Delaware, was the value of GLAIC the only heated (30:25) agreement that there was from Delaware in terms of approving the merger or were there other issues you need to work out as well?

Yeah. Ryan, another key question. I would say that Delaware, Virginia, North Carolina, New York are all states that have to approve the transaction, generally have been supportive of the transaction because of the capital benefits, and Kelly and I talked about the $1.5 billion that we're going to repurpose from Oceanwide in the new capital plan, but I think they are supportive of the deal. It has always been an issue because we – and I gave the reasons that we wanted to do the un-stacking, but we felt that the right value given the future cash flows and dividend stream for GLAIC was $700 million. Delaware and their advisor saw it differently. And while we tried to get to a meaningful place to do the un-stacking, we ultimately, Oceanwide and Genworth concluded that it made more sense to move forward at this point to no longer pursue the un-stacking and go forward with the transaction without that. We now have to redo the Form A filings in the states, go back to all the regulators with the new structure of the deal, but I'm confident that Delaware and Virginia, and the other regulators are comfortable with the transaction, and without the un-stacking. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Thanks. And then one last one just on the comments that you have no intention to contribute additional capital to GLAIC, would that still be the case in a scenario where GLAIC's capital position deteriorates to the point that there was regulator intervention? Would it still be the position of the parent company that you would not put in additional capital in it in any circumstance?

We've had a lot of conversations with the regulators during the last three years to five years, and I think we've made it very clear, and I think they understand this that we've had a cumulative losses of $2.7 billion from the legacy books, we have $2.7 billion of capital in the companies, the life companies, and then that plus the future premium increases and good management of the in-force and the claims, we believe is sufficient to run the businesses going forward. And at this point given that and given the trends, and we are doing very well on our multi-year rate action plan as long as we stay on that, we think the capital ratios will be fine and above the minimums that you're talking about. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Great. Thank you.

Thank you, sir. We may now move along to our next question. It comes from Sean Dargan of Wells Fargo. Your line is open, sir. Please go ahead.

Thanks and good morning. I have a question about the per share deal price. So in 2016, the way this was presented was that Oceanwide would be paying $5.43 per share. But presumably they would be receiving some sort of economic benefit from the de-stacking for which they were contributing $525 million. So I'm wondering, has the per share offer changed, and has there been some material change to the proposed acquisition that needs approval from, I guess, the parties involved?

So Sean, there has been no change to the purchase price. It remains $5.43 per share and that has been consistent since we signed the deal. Both Oceanwide and Genworth felt that the dividend stream from GLAIC in the future was important to service the debt. However, given that we couldn't agree on what we think is the fair market value at $700 million, paying more than $700 million given our projections of the dividend stream didn't make sense. And so we have had ongoing discussions with Oceanwide, Kelly and I with Chairman LU and others. And I think we've come up with a new capital plan, and so the $1.5 billion, and I think the primary uses for that will be to reduce debt. But it can also be used to strengthen U.S. MI. There are opportunities in the U.S. MI and also in new business LTC. But the primary focus will be on the debt, and as I said, if we can get the debt down to the $2 billion range, then the debt service is significantly lower going forward, and the three MIs comfortably cover the debt service at a comfortable cash flow margin. And therefore, the dividend stream from GLAIC is needed. And so we were comfortable both Oceanwide and Genworth that the deal still makes sense for Oceanwide, and it's still a good deal for the value they're paying with no un-stacking.

Okay. And so that $1.5 billion that Oceanwide will contribute over time, that's roughly equal to the amount that they would have contributed in terms of debt retirement plus the consideration for de-stacking. Is that the way to think about it?

Well, so again the main reason that Genworth and Oceanwide felt it was important for Oceanwide to contribute capital was primarily focused on improving the ratings, particularly for U.S. MI. And so the original capital investment was $600 million to retire the 2018 debt, and $525 million is to the un-stacking. Obviously we're covering the debt through the secured term loan that Kelly and the team accomplished, and we're not doing the un-stacking. But we still need to focus on improving the ratings, and that has long term strategic value, significant value for Oceanwide. And so I think the way to look at it is, they're paying $2.7 billion for the company that goes to our shareholders. We think it's the best and most certain value for shareholders versus the other alternatives. And the $1.5 billion that they're investing to primarily improve the ratings, particularly at U.S. MI, which would help us compete in the marketplace and get back to the market share we'd like to be at, all of those things add value to the company. And so I think the way Oceanwide and Genworth look at it is, we're improving the long term value of the company, and that's worth it to Oceanwide to make those contributions.

Thank you.

Thank you, sir. We now move along to our next question. It comes from Tom Gallagher of Evercore. Your line is open, sir. Please go ahead.

Good morning. So Tom, I just want to be sure I understand the new situation with Delaware and exactly what they're going to be voting on from an approval standpoint. So is it fair to say whether it's implicit or explicit that any capital generated by the life and annuity business going forward is going to stay within the legal entities for their foreseeable future to potentially fund any future capital needs for long term care? Is that the right way, is that essentially what Delaware is going to be voting on? Because I would think they'd be fine with that, but I just want to make sure that I have that right.

Tom, that's a great question, and I think your hypothesis is right, that we're not going to do the un-stacking. So any cash – so GLAIC will still be 100% owned by GLIC. So any future dividends from GLAIC over time will remain in the life company families. And again, the $2.7 billion of capital that there are now, the capital generated from the life and annuity business plus the future premium increases will all be used to support the claims paying for all the products that we have. And I think the regulators are comfortable with that. And they also realized that while we needed GLAIC, if we are on our own to help with the debt service, the $3.6 billion debt that basically will have outstanding once we retire the 2018, that was an important stream. Now, because of the capital support from Oceanwide which we don't have without the deal, it's a big benefit for policyholders because now we don't need the GLAIC future cash flow, and it can be used as you suggested to support the life companies, and most importantly from a regulators' perspective, the policyholders. So that's why I think the regulators are comfortable with the deal, they have always been, and I think they will support moving forward with no un-stacking.

Okay. And would you say that, is there now a clear path to Delaware holding and hearing before the CFIUS makes a determination, or are they still waiting on CFIUS before, or are they just independent at this point in terms of the paths?

Another set of good questions, Tom. There's no connection between the CFIUS and the other regulators. They're all doing their own regulatory process. Obviously, whatever we decide with one regulator could affect other regulators. So you have to take that into account. But now what our legal teams are going to have to do working with the businesses is reform the deal to update and re-file the Form A filings that we've made to change the deal with no un-stacking and a different capital commitment. So we will be re-filing all of that. That probably will take several weeks. Once that goes in, I think Delaware and the other regulators will look at it. And then at some point, Delaware will make an announcement; hopefully set a hearing date, usually that's 30 days ahead. And so it's hard to say when we'll get through that process. Obviously, as you know, we extended the merger agreement date to July 1. So that's our current view as to when we think we can get the deal done.

Okay. And then just a few other quick ones from me. The commentary around the development expectations in the small loss for 2018 that were laid out for long term care, I went through, I got those points. Is that going to be a GAAP only issue, or do you expect that to have a similar negative impact for statutory and cash for 2018?

Great question, Tom. Regarding cash, I'm not really considering that because of the lack of dividends to the holding company, or as we think about it from a holding company perspective, this is Kelly by the way. And on the statutory side, we do expect small losses on the statutory side as well. One thing to remind you, when I mentioned this in my prepared remarks on long term care in New York, we do have an active re-filing with New York. We did put up additional cash flow testing reserves at year-end. And what we had guided to on that is, if the regulators approve that, we wouldn't have to put up our additional cash flow testing reserves associated with New York based on those facts.

Okay. Thanks. And then – sorry, one final one. Just given what's going on in Delaware in the life annuity and long term care situation, do you still feel really good that you won't have any coordination between the state and regulators over your other businesses limiting dividend flow to the holding companies? Like, do you still feel very good that they're unrelated, or is there some risk here that at some point there could be coordination among the states and restrict dividend flows?

I think that's a difficult question to answer. Obviously, the states do work together over time, but it's our intention that using the $1.5 billion capital plan that we're working on with Oceanwide will get the debt to a level in the $2 billion range. We may use some of that for other purposes. And at that level the three MIs comfortably cover the debt service by a comfortable margin. We hope from a rating perspective, that given the cash flow coverage, debt to leverage will get to a much better place that that will allow for upgrades to the companies. And then on the life side, the three companies together, I mean our plan is to have all of the future profits, capital generated by GLAIC or potentially GLIC and GLICNY, if we get the premium increases we need, all of that will remain in those life companies to be used to pay the claims for life annuity and long-term care. So from a regulatory perspective, I think this deal is a very strong deal, because we now don't need the cash flow from GLAIC to service the debt, because we have the capital plan that will help us manage it to level where the MIs alone provide enough cash flow for the company.

Yeah. And Tom, this is Kelly. The thing I would add to that as well is just you've got to look at the capital ratios within each of our three MI businesses. They're so incredibly strong, Australia at 185% versus our target of 132% to 144%, just got approved for $100 million share buyback given the fact that they had such strong capital levels; Canada knocking it out of the park there frankly, and U.S. MI with greater than $600 million over the current PMIERs standards. We're obviously watching what updates will occur to that, and we'll evaluate that, but we do expect to get a dividend out from U.S MI in 2018.

Okay. Thanks.

Thank you. We can now move along to our next question. It comes from Geoffrey Dunn of Dowling & Partners. Your line is open. Please go ahead, sir. Geoffrey Murray Dunn - Dowling & Partners Securities LLC: Thank you. Good morning. Tom, I just want to clarify, previously you said the deal price per share is not shifting, but you're still working on a plan with China Oceanwide. So is the plan still in process, but definitively you can say that that share price offer is not changing?

The share price is not changing, still remain at $5.43 per share. What we're working on is the $1.5 billion capital plan, and that will also require discussions with the rating agencies. We obviously want to maximize – both Genworth and Oceanwide want to maximize how we use that $1.5 billion to get the maximum benefit, hopefully upgrading the ratings. And the rating that's most important is U.S. MI because U.S. MI's rating because of the drag and connection with LTC is below where it would be on its own, and below where it is against its competitor. So I think both Oceanwide and Genworth see a significant opportunity to doing all we can. We're working with the rating agencies to make maximum benefit of that plan, and we hope to ultimately, that should, getting the debt down, cash flow coverage up, should help the rating of the parent, but also we think it will make a meaningful positive impact for U.S. MI, its rating over time. Geoffrey Murray Dunn - Dowling & Partners Securities LLC: Okay. And (47:47) out of this discussion today, can you discuss your decision to reduce but not fully match MGIC's new pricing on the BP (47:56) monthly side? And also do you think that there is an opportunity or demand in the market for black box pricing at more of the community and regional bank level?

Geoff, this is Kevin. I'll take that. I think the decision to make the pricing move that we did in the market was driven by a handful of things. Number one, we had realized significant benefits from the tax law changes, benefits that absolutely helped margins across the industry and across the space significantly. Over time, I think those – you just can't expect the margins we are earning on those books of business where it would be sustainable on a go-forward basis at that pricing. It will just attract additional capital to the space, into the marketplace and ultimately will be competed down. Our business is a very competitive business. We got to earn our loans that we win every single day. And therefore we have to be responsive to competitor change in the marketplace. We think because of where we started with the benefit from the taxes, the changes that we made over, following with our price increase, they largely align very similarly with where MGIC went. The only difference we did, we think, was to provide a little bit of additional refinement on the edges regarding a couple of sort of key risk drivers for our business and places where we were seeing in the amount of loans that were being delivered some increases in those risk attributes. So for us, we think it is both in the debt to income level, and the co-borrowers standard that we introduced into our rate cards, those more appropriately reflect what we expect the experience of those cohorts to be, and we thought that given that there was an opportunity for a re-filing at this point in time, it was important to get those out. And from my perspective it sort of leads into your second question, we did it in a transparent basis. We've been trying to be – to provide as much transparency to the market, to our customers, to the consumers, to the analyst community as possible around how we price our business. And so whether this market ultimately goes into sort of a two-tier type approach, where some of it is just straight transparent rate card, or some of it becomes a black box approach as you described it, I don't know where that's going to end up. But where we would like to air, and what our focus has been in both our public statements and in the way we're operating in the marketplace is to provide a clear transparent rate card that the lenders can deal with and operate with, and hopefully to provide, I guess, some continuity in the overall pricing in the marketplace. Geoffrey Murray Dunn - Dowling & Partners Securities LLC: Yeah. Thank you.

Thank you. We can now move along to our next question. It comes from Joshua Esterov of CreditSights. Your line is open. Please go ahead.

Yeah. Thank you very much. Good morning. Will the shift in strategy with regards to de-stacking of GLAIC require a new merger agreement with the new shareholder vote given that de-stacking was a precondition for deal closing? And tied to that since this does require a new Form A filings with state regulators, does that suggest you may need to re-file with CFIUS again in the future to reflect new deal terms?

Good questions. Based on advice from our counsel, we do not think the changes to the structure of the deal require a shareholder vote. And clearly, the change will impact all the Form A filings. And so for the state regulators, they'll have to consider the deal with the changes. And as I said, I feel confident that this is still a deal that the state regulators will be very comfortable with. The focus at CFIUS, and I can't really get into the specific process because it's confidential, but they're really not looking at the financial aspects of the deal. Their whole focus is on national security interests. And again, I'm not allowed to go into detail on that, but their whole focus is that, and we believe with the U.S. third-party data security firm that we have, that's made a meaningful difference with CFIUS, and so the issue there is those national security issues. So the un-stacking or no un-stacking or the change of the capital commitment is not part of anything that they are considering.

Got it. Thank you very much.

Thank you. We can now move along to our next question. It comes from Peter Troisi of Barclays. Your line is open. Please go ahead.

Thanks. Good morning. So you presented a plan for how you will address the 2020 and 2021 maturities based on the new capital plan. But that of course assumes that you receive all regulatory approvals for the acquisition. So if you're not successful in getting the regulatory approvals, can you just help us think about how you will address those maturities over the next couple of years and the cadence of asset sales and/or additional financings?

So Peter, that's a good question. It's one that we get asked a lot. I would say we're 100% focused on the Oceanwide deal. And I think we're going to do all we can to get it done. And I think things generally are moving in a good direction, particularly with the state regulators. We have obviously, and I said this in my comments, every time we extend the length of the deal, we just extended it to July 1, the board looks at this deal compared to the alternatives, and there are a number of alternatives that we're looking at. And so I think if we – and we believe this deal is the best deal in my personal opinion by significant margin, basically provides the best and most certain value. But if we're unable to receive regulatory approval and we can no longer move forward with this deal, we will look at those alternatives in the 10-K. I'll refer you to the language that we describe those considerations and what some of those alternatives are, some of which would be, to reduce the debt is asset sales, et cetera. So we have a plan B and C and D and which one of those we'd go for will depend on market conditions at that time. However, we're really 100% focused on getting this deal done. Basically, we think it's the best for particularly for stockholders, but for all of our stakeholders.

And Peter, this is Kelly. Another thing I'd like to add is the fact that we don't have a debt maturity due until June of 2020. We are not a forced seller in this market. We've got three strong MI businesses with good dividend capacity to meet our debt service. And to just add on to what Tom said, I don't think, I think we can optimize the value of Genworth for our shareholders by being patient and making sure that we're doing the right thing and looking at things very methodically given the market condition.

Okay. Thanks. Thanks for that. And maybe just one more from me. Holding company miscellaneous expenses look like they're about $90 million in the quarter. Is there any seasonality to that number? Looks like in the slide that you called out compensation benefits as a driver, so I'm wondering if compensation caused some seasonality in that $90 million expense this quarter.

Thanks for the question Peter. It's a great question. I did address it a little bit in my prepared remarks because first quarter of every year we generally have this phenomenon, what we see is outflows related to pension contributions, a variety of different employee benefit type things that occur in the first quarter that we didn't get reimbursed for the rest of the year. So in terms of thinking it on a go forward basis, probably about two-thirds of that amount or three-quarters of that amount was those employee benefit type costs. And then we would expect the net holdco other items to be modestly positive on balance for the remainder of the year.

Okay. Thanks. And that two-thirds to three-quarters that you mentioned, that'll be fully reimbursed later in the year?

Yes, it will.

Okay. Thanks, Kelly. That's all from me.

Sure.

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

Thank you very much, Daniel. I love your accent. And thanks to all of you for your time and questions today. In summary, Genworth continues to deliver strong financial and operating performance, particularly in the three MI platforms, and we're also working hard to close the transaction with Oceanwide as soon as possible, which as we've said we believe is in the best interest of our stockholders. We're focused on making progress towards the closing the transaction, and we'll continue to update you as often as we can. But thank you for your continued interest in Genworth and that will end the call.

That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.