Good morning, ladies and gentlemen, and welcome to Genworth Financial First Quarter 2020 Earnings Conference Call. My name is Jennifer and I will be your coordinator today. At this time, 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, this conference is being recorded for replay purposes. Also, we ask that you refrain from using cell phones, speakerphones, or handsets during the Q&A portion of today’s call. I would now like to turn the presentation over to Tim Owens, Vice President of Investor Relations. Mr. Owens, you may proceed.

Thank you, operator. Good morning, everyone, and thank you for joining Genworth’s first quarter 2020 earnings call. Due to the current environment, shelter-in-place and social distancing guidelines, all of our speakers this morning are at home. I would ask that you please excuse any sound quality or technical issues that may arise. 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 report on Form 10-K as filed with the SEC. This morning’s discussion also includes non-GAAP financial measures that we believe may be more 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 results of our Australia business, please note that all percentage changes exclude the impact of foreign exchange. Finally, references to statutory results are estimates due to the timing of the filing of the statutory statements. Now, I’ll turn the call over to our CEO, Tom McInerney.

Thanks Tim. Good morning, everyone, and thank you for joining our call. I hope all of you and your families are well and safe. Before, I get started. I would like to thank the healthcare workers, our first responders and the entire community of the essential workers for their heroic efforts during this pandemic. I'd also like to thank my Genworth colleagues for their outstanding efforts to serve our customers and policyholders without interruption under these extraordinary and difficult personal and professional circumstances. Genworth’s first priority since the beginning of the spread of the coronavirus has been to protect the health and wellbeing of our people. In early March, our view was that there would likely be federal and state government mandates around shelter-in-place and social distancing protocols as our nation navigated the spread of COVID-19. These signals prompted us to conduct a mandatory two-day work-from-home test on March 5th and 6th. This test illustrated our general readiness for a work-from-home scenario while providing us with an early view on areas we needed to improve to ensure Genworth service and operations are seamless. Some of our key learnings from this experience included the need for upgraded wireless connections for our employees at home as well as assistance in home office setup need. With the information learned through this test, Genworth was able to implement a work-from-home policy across our U.S. offices effective at the close of business on March 11th. To further support our employees, Genworth is providing additional financial, health and wellness resources including enhanced paid leave policies to assist employees in caring for themselves and their family members. We are also continuing to serve the communities in which we operate through financial contributions from the Genworth Foundation towards COVID-19 relief efforts that are addressing immediate community needs. Genworth…

Thanks, Tom, and good morning, everyone. Today, I will share some financial perspectives regarding current and potential future impacts from the COVID-19 virus on our businesses and our holding company liquidity, as well as discuss our first quarter financial results. To expand on Tom's comments, the COVID-19 virus and resulting macroeconomic impacts and regulatory responses are unparalleled with the ultimate impact still very much uncertain due to the unknown length of the pandemic, the speed and shape of the economic recovery, and the impact of future regulatory and governmental actions. These dynamics will impact all of our businesses going forward. Our enterprise, risk management, finance and actuarial teams are focused on modeling these uncertain events and being prepared to implement proactive contingency plans to maintain the financial health of our businesses. In our U.S. Mortgage Insurance business, we will be closely following delinquencies in the second quarter as we expect them to rise as a result of higher unemployment and government supported forbearance programs. It remains to be seen how these delinquencies cure as the economy restarts and if the pattern will be similar to experience with recent localized events, such as hurricanes Harvey and Irma. In these instances, delinquencies cured months later, following rebuilding and stimulus efforts. We do expect new insurance written or NIW for the second half of the year to decline versus the levels we saw in the first quarter with anticipated slowing of the purchase originations market only partially offset by refinancing activity as interest rates will likely remain low. We started the quarter in a strong capital position with actions we took over the last few years. We ended the quarter with over $1.1 billion of capital above the PMIERs minimum and approximately 77% of our risk in force covered by some level of…

Ladies and gentlemen, we will now begin the Q&A portion of the call. [Operator Instructions] We’ll go to our first question from Joshua Esterov with CreditSights.

Hello. Good morning. Thank you very much. My question was around the timing of the deal. So, in previous quarters when New York regulators were looking for a capital contribution in connection with the deal, the Genworth team mentioned that if a solution was in place fairly quickly, that Genworth and China Oceanwide could call the deal off. Now, with the ball seemingly into China Oceanwide’s court in terms of finalizing funding, how amenable are you to extending the deal beyond June 30, if necessary?

So, thank you very much for the question. It's a good question. And I'll take that one. The first thing I would say, and this is in the press release, both China Oceanwide and their Chairman and Genworth and I are fully committed to the transaction. We have all approvals at this point. Unfortunately, despite all those efforts, COVID-19 came. And given all the uncertainty, it's clearly a challenge I think for any deals under these circumstances. But, China Oceanwide continues to work with Hony Capital to arrange the $1.8 billion in funding. And so, we're focused on closing the deal. We hope to do that by -- as soon as possible, but by the end of the quarter. We'll just have to see how things develop. I think, both of us has shown over a long period of time commitment to the deal. And I think that's our focus at this point on both sides.

Thanks a lot. I appreciate that. And maybe one quick follow-up. Is most of the finalizing component for China Oceanwide, is that that related to the Hony funding commitment or is that for the remainder of the $900 million that needs to be funded from China Oceanwide?

So, I think, the funding within mainland China from China Oceanwide is in good shape. I think the focus at this point is working with Hony Capital. And as I mentioned, Hony Capital and Oceanwide have very good relationship. Oceanwide owns 17% of the founder owner of Hony, Legend Holdings. So, I think that's going well. But, obviously given all the uncertainty, it's taking more time. But, we still hope to be able to close by the end of the second quarter.

Thank you very much. Stay safe.

You too. Thanks.

We will go next to Mark Palmer with BTIG.

Yes. Thanks for taking my questions. You had alluded to China Oceanwide working with third parties on their funding plan. If you could just give a little bit more color in terms of what the role those third parties would potentially play, and why they're reaching out to them, beyond Hony Capital?

Mark, it's a good question, and I'll take that one again. They are making progress with Hony Capital. And as we said, they have a relationship there. But, they're also talking to other parties, just given all of the uncertainties, in case they need to rely on alternatives at this point. I think, the main focus is on Hony Capital and getting that funding plan finalized.

And also, you had mentioned that you now expect that the deal will not be closed until the end of June and have said that that gives you flexibility to explore other options. If you could just provide a little bit more color on what you meant by that?

So, Mark, another good question. When we extended the transaction from the end of March to the end of June, obviously, the COVID-19 issues were just developing, and that was in late March. But there was -- we had already gone to working remotely. So, we knew there were going to be challenges. And we did say -- we did ask, in the discussions with China Oceanwide, that given all the uncertainties because of COVID-19, it was prudent for Genworth to look at all the alternatives to the extent we are unable in the end to close the deal. And as part of that discussion, they agreed and this is part of the 14th waiver that we signed just before the end of March. It allows us to explore any other alternatives. And we talked about some of the plan B options some time ago, they're still there. As Kelly and I both said in our remarks, we're primarily focused on the $1.1 billion of debt due next year. So, most of the immediate focus on alternatives is around the refinancing of the $1.1 billion of debt assuming if the deal doesn't close and we don't get the $1.5 billion therefore and we have to look for -- look to refinance the debt that comes due next year.

We’ll go next to Robert Glover [ph] INTL FCStone.

Hi. My question has been answered. Thank you.

Thank you, Robert.

We’ll go next to Christopher Bolton, private investor.

As far as the rate action taken to-date that has been approved, would you say you are more confident that obligations for long term care policyholders in the older books of business are looking more secure than your projections, say three or four years ago?

Christopher, I’ll take that question as well. We have made, I would say tremendous progress in the last six or seven years since 2012. If you look at the original price for premiums and the premiums we need, there was a significant shortfall. As of the end of the first quarter, we had received since 2012 premium increases or benefit reductions that have a net present value benefit to Genworth of $12.7 billion. We have a little bit over $7 billion future premium increases and benefit reductions to go. A lot of that is on the newer blocks, what call our Choice 2 block, which were issued in the 2003 to 2010, '11, '12 period. And so, given where we are and what we have left, we would say we're 60% or so all the way through shoring up those books and bringing them closer to a breakeven with 7the level with the premium increases. So, I'd say, today versus where we were several years ago, which is the basis of your questions, I think we're in much better positioned. The other thing that's happening is -- that's happened over the last three to five years, partly because of the Penn Treaty insolvency and also I talked a little bit on in my prepared remarks about the Senior Health Insurance Company of Pennsylvania and their rehabilitation plan. I think, the regulators have been more open to providing significant premium increases, benefit reductions for all of the long term care insurance because of the shortfalls in the books. So, I do think, we're also working, all of us, including Genworth working well with regulators to shore up those legacy blocks of business. So, thanks for your question.

Okay. And as a follow-up to that, on the life side, the term and the universal life products, are policyholders, as far as your ability to meet claim obligations on the life side on your UL products, would you say that policyholders are in a stronger position to realize policy benefits with the transaction being closed, than without the transaction being closed, viewing or keeping in mind the fact that, while Genworth will remain an independent entity, it now goes to Chinese ownership.

Well, Christopher, I would say, we have thought all along that, our policy holders, life annuity, long term care, mortgages insurance customers in the U.S. and Australia are all advantaged significantly by the transaction because in addition to the purchase price, China Oceanwide is investing additional $1.5 billion of capital. A significant amount of that will go to strengthen the balance sheet, reduce the debt, get the debt to a place where we're very comfortable with where the debt will be after the investment of $1.5 billion. So, I think that strengthens the Company and therefore is an advantage -- a significant advantage of the deal for all policyholders. And I think the regulators also recognize that. And while we have committed as part of the deal to put capital into our main 49-state company, GLIC, $175 million and $100 million to GLICNY, and that will further strengthen them. But more broadly, I think the regulators also see the benefits of the transaction.

Ladies and gentlemen, we are out of time. And I will now turn the call back over to Dr. -- I'm sorry, Mr. McInerney, for closing comments.

Thank you very much, operator. And thank you to all of you for joining the call today. All of Americans, we all face unprecedented uncertainty and challenges due to COVID-19 pandemic. At Genworth, we are managing well working remotely. It's been a significant surprise to me that we've been able to both, protect our employees and their families and serve our customers well, despite all working remotely since the middle of March. We continue to work closely with the Oceanwide to close the transaction. They continue to on the funding plan and we are making progress. We are prepared for a wide variety of economic and business scenarios in our businesses, given the unprecedented volatility and uncertainty given the COVID-19. So, thank you all very much for your interest and support of Genworth. And at this point, I'll turn the call back over to the operator.

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