Good morning, ladies and gentlemen, and welcome to Genworth Financial's Second Quarter 2021 Earnings Conference Call. My name is Lauren, 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 today’s conference. As a reminder, this conference is being recorded for replay purposes. [Operator Instructions] 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, and thank you for joining Genworth's Second Quarter 2021 Earnings Call. Our speakers are remote this morning, so 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 what we reference 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 Dan Sheehan, our Chief Financial Officer and Chief Investment Officer. Due to applicable security law and publicity restrictions, our comments regarding preparations for an IPO of our U.S. Mortgage segment, Enact, will be limited to our prepared remarks. Following our prepared comments, we will open up the call for a question-and-answer period. In addition to our speakers, Rohit Gupta, Chief Executive Officer, Enact, 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 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, references to statuary results are estimates due to the timing of the filing of the statutory statements. And now I will turn the call over to our President and CEO, Tom McInerney.

Thank you, Tim. Good morning, everyone, and thank you for joining Genworth's second quarter earnings call. We reported a very strong operating performance in the second quarter, continuing the reasonable momentum across our businesses while making progress on our strategic plan to create long-term value. In Q2, Genworth delivered net income of 240 million and adjusted operating income of 194 million driven by continued strong performance in our U.S. Mortgage Insurance business, now known as Enact, as well as in our Long-Term Care insurance business. Enact reported very strong results with adjusted operating income of 135 million compared with 126 million in the prior quarter and an adjusted operating loss of three million in the prior year period. Relative to the prior quarter, Enact reported higher new insurance written, lower earned premiums and a 32% decrease in new delinquencies. Results reflect a loss ratio of 12%, which compares favorably to the prior quarter due to lower losses from new delinquencies and higher reserve strengthening in the prior quarter. U.S. Life Insurance reported adjusted operating income of 71 million for the quarter compared with 62 million in the prior quarter and an adjusted operating loss of five million in the prior year. Results were primarily driven by LTC insurance, which reported adjusted operating income of 98 million, reflecting higher earnings from in-force rate actions, including benefit reductions related to a legal settlement and higher net investment income versus both the prior quarter and prior year. We successfully managed capital levels during the second quarter, ending the quarter with a very strong PMIERs ratio of 165% in Enact or nearly two billion above published requirements and risk-based capital in our principal life insurance company, GLIC, of approximately 270%. Genworth also ended the second quarter with a very strong cash position of 842…

Thanks, Tom, and good morning, everyone. I'm pleased with the continued progress made during the quarter with strong earnings and capital ratios in our Enact U.S. Mortgage Insurance segment; strong results from our Long-Term Care Insurance business and increased liquidity at the holding company. We ended the quarter with more than 842 million in holding company cash. Subsequent to quarter end, we retired our remaining September 2021 debt of 513 million, which reduced parent company debt to approximately two billion, including the AXA liability. We reported net income available to Genworth shareholders for the quarter of $240 million and adjusted operating income of $194 million. Included in net income for the quarter was $46 million in non-operating items, mostly consisting of mark-to-market increases on limited partnerships in our investment portfolio. Turning to the Enact segment. The U.S. mortgage and housing market continues to demonstrate positive momentum characterized by a large origination market, increasing home prices and the continuation of decreasing new delinquencies from their pandemic-driven peak. Despite the challenges of low housing inventory and rising home prices, affordability remains favorable, supported by prevailing low interest rates. During the quarter, we estimate the originations market accelerated its transition to purchase originations, which is a positive trend for the private mortgage insurance industry as we experienced approximately four times higher penetration in purchase originations versus refinances. For the second quarter, Enact reported adjusted operating income of 135 million and a loss ratio of 12% compared to adjusted operating income of 126 million and a loss ratio of 22% in the prior quarter. The improvement in results was primarily driven by lower new delinquencies compared to the prior quarter. In addition, insurance in force grew approximately 10% versus the prior year, primarily driven by over 100 billion in new insurance written over the…

Ladies and gentlemen, we will now begin the Q&A portion of the call. [Operator Instructions]. We will take our first question from Don Espey with Shah Capital.

Hi good morning all. Two questions for Tom. Tom, in spite of all the fundamental improvements, Genworth's equity has been an just a perennial underperformer for so long now. What else needs to change to get sentiment on a more virtuous and deserved footing?

You know Don, I would say that we believe, the Board and I, and Dan, that the company is in a very strong position, we have made enormous progress over the last several years. We do think we are in a position with our debt at two billion at this point and looking forward to moving it towards our long-term target of one billion but we will be in a position to return capital to shareholders. And we think that is a very important part of getting the share price to where we think it is appropriate, given all the progress made. And I did say in my remarks, we think the intrinsic value of general shares is higher than where it is currently trading. It is up a little bit this morning, but we think there is quite a ways to go, and we are doing all we can. I listed the five priorities that we have. We think that is the right path, and we would hope to see the shares be closer to what we think is the value given all the steps we have done in the last several quarters to position the company well.

Okay. And just along the similar topic, why are the ratings agencies completely out of touch to your balance sheet improvements?

I will let Dan and maybe Rohit give you details. I would say I have been around a long time, over 40-years, and I would say rating agencies are very good at reducing ratings, but they do take longer, it seems than they should. Certainly, we believe the ratings are far below where they deserve to be because of all the balance sheet strengthening we have done. But I think they tend to be slower on the uptake. Dan, obviously spends a lot of time with the rating agencies for both the holding company and the subsidiaries. And Rohit obviously spends time with them regarding Enact. And Dan, Rohit are also on the call, if you want to add any comments to that, for Don, that would be great.

Yes. Thanks, Tom. I will just make a couple of comments. One is that we do have regular communications with them, and we are presenting them information ahead of when it comes out to the street. And so they are very well informed. I would argue it probably more a frequent visitor than most there in part because we think we have got a very good story to tell especially over the last few quarters. And the big debt wall that we had in 2021, we have addressed at this point, and we are in a very strong cash position to manage their challenges going forward. Generally, I think they have a very positive view of U.S. MI. But because we have limited sources of capital at the holding company, they have really been in a holding pattern waiting for the potential IPO of Enact. And despite the improvement they still have not been willing to move at this point. We continue to share our story and they will make their decisions independent of us. But we do believe we have kept them very well informed along the way. And certainly, they have been made and kept abreast of all the progress we have been making.

Yes. Don, the only thing I would add to Dan's comments and Tom's comments is that we are at BB+ for Cameco from S&P, BAA3 from Moody's and BBB- from Fitch. And we believe that our performance continues to be very strong as we recover from the pandemic. We delivered strong net operating income strong loss performance and a very strong balance sheet with 165% PMIERs sufficiency and $1.9 billion of buffer. So our focus is going to continue to be on our performance, and we believe that the ratings will come along with that. So we are focused on taking the right steps as Tom outlined, and we believe that would lead to the right ratings outcome. Our stand-alone rating for our business are comparable to our peers. So that is in the investment-grade range and then overall entity ratings would follow with performance.

Okay. Thanks all. Take care.

Thanks Don.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, I will now turn the call back over to Mr. McInerney for closing comments.

Lauren thank you very much, and thank you to all of you for joining the call today. We are excited about Genworth's next chapter, and we look forward to continuing to update you as we execute against our plan and our five key priorities that we outlined today. Thank you for your interest and support of Genworth. And with that, I will turn back the call over to Lauren.

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