Good morning, ladies and gentlemen, and welcome to Genworth Financial's Fourth Quarter 2022 Earnings Conference Call. My name is Jim, and I will be your coordinator today. [Operator Instructions]. I would now like to turn the presentation over to Sarah Crews, Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Genworth's Fourth Quarter 2022 Earnings Call. 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. The slide presentation that accompanies this call is available on the Investor Relations section of the Genworth website, investor.genworth.com. Our earnings release and financial supplement can also be found there, and we encourage you to review these materials. Following our prepared remarks, we will open the call up for a question-and-answer period. In addition to our speakers, Brian Haendiges, President of our U.S. Life Insurance segment; and Jerome Upton, Deputy Chief Financial Officer and Controller, will also 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 the SEC rules. Also, 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 President and CEO, Tom McInerney.

Thank you very much, Sarah. Good morning, everyone, and thank you for joining our fourth quarter earnings call. Before I review our strong fourth quarter and full year 2022 results, I want to acknowledge our outstanding progress against our strategic priorities throughout the year. I'm incredibly proud of these accomplishments particularly achieving our debt target, meeting the conditions to remove the government-sponsored enterprises or GSE restrictions that were placed on an act, returning capital to shareholders for the first time in over 13 years and receiving multiple ratings upgrades. These achievements have improved Genworth's financial strength and allowed us to enter 2023 with a greater level of flexibility to invest in growth and continue returning capital to our shareholders. To speak to each of these achievements a bit further. In May of last year, the Genworth Board authorized a new share repurchase program of up to $350 million. This is an important milestone reflecting our improved financial position, the Board's confidence in our strategy and our future and our commitment to our strategic priorities. Since the authorization, we've repurchased $64 million worth of outstanding shares at an average price of less than $4 per share. We were careful to restrict the level of repurchases in 2022 until we reduce the debt to $900 million and satisfy the conditions to remove the GSE capital restrictions. Having now accomplished both objectives, we plan to pick up the pace of share repurchases subject to market conditions and general share price. Throughout 2022, the holding company received credit ratings upgrades from each of the 3 major rating agencies, reflecting a substantial improvement in our credit profile. In September, Genworth achieved a critical milestone when we paid off our remaining senior notes due in 2024, marking the achievement of our long-term holding company debt target…

Thank you, Tom, and good morning, everyone. Before I begin my comments on the quarter, I'd like to thank Tom and the entire Genworth team for their partnership. I've had a really good run here over my 25 years with GE and Genworth, and I'm incredibly grateful for the opportunities I've had to work with so many talented people. I'm proud of my contributions to strengthening our financial foundation, and I'm excited to see what the team builds on that foundation. Now for the quarter. Genworth delivered another strong quarter, capping off an excellent year for the company. We further strengthened our balance sheet while investing in growth and returning capital to shareholders. We ended the year with liquidity above our cash target and lower leverage, reflecting our significant debt reduction throughout the year. As a result of our successful execution, we believe we have satisfied the financial conditions for removing the PMIERs capital restrictions placed on Enact by the GSEs, which in turn should lift these restrictions on Enact in the first quarter of 2023. As Tom mentioned, this will be a very positive development for Enact and Genworth as its majority owner since Enact will no longer be subject to more stringent capital requirements than its peers. Following Tom's high-level overview of full year and fourth quarter results, I will review our segment operating performance, including the results of our annual U.S. life insurance assumption review as well as our holding company liquidity position. Turning to Slide 7. Enact's insurance in force increased 10% year-over-year to a record $248 billion, driven by new insurance written and higher persistency. Primary new insurance written was down versus the prior year, a continuation of the trend we've seen has increased interest rates have resulted in lower mortgage originations. As Enact mentioned…

[Operator Instructions]. We'll take our first question from the line of Joshua Esterov at CreditSights.

Looks like you talk about repurchase a modest amount of the 2034 senior unsecured notes. And I'm wondering if that was simply opportunistic given the opportunity to retire at a discount? Or whether you have intentions to chip away at that balance over time. So now that you're within that your $1 billion total debt target, just curious about your appetite for continued debt reduction and whether that's the senior, the junior or what have you. Just curious where your heads are at with -- on that subject.

Thanks, Josh. Good question. I'll turn that one over to Dan.

Yes. Thanks, Josh. Great question. So just a reminder, in terms of where our priority would be if we were to buy back debt, there are covenants that restrict us from buying the 20 -- well, the 2066s -- so our focus would be on the 2034s up and until we get that below $100 million outstanding. But in terms of how we look at debt purchases today, I think our priority now that we're sitting on a fair amount of excess cash remains focused on the share buyback. We've got the debt down below now the level that we've set out a number of years ago. And so we're quite satisfied with the fact that we've got no debt coming due for another decade. But like we were in this quarter, we will look opportunistically with so little debt trading at this -- or so little debt left at this point. There is limited trading. So what I would expect would be that there may be opportunities as we move forward, but they will be similar to the fourth quarter at this point.

Our next question comes from Ryan Krueger at KBW.

On your LTC annual review. Can you give us a sense of to what extent you changed claim inflation assumptions?

We'll give that one to Brian Haendiges, who runs the legacy business.

So as Dan noted, we didn't make any changes to the assumptions or to our expected approvals in the future with our -- MYRAP program, our future increase program. We do look at all our assumptions in aggregate, as I think I mentioned last time and they look like they're holding up in aggregate. So we didn't see a need for a change. One of the things we looked at, of course, was inflation because it made headlines. And -- we did not see an indication that our benefit utilization has changed dramatically. If it does in the future, I think there's a natural offset over the long term with interest rates and that will help us out.

Ryan, any follow-up on that?

Yes. Can -- do you know -- can you give us any sort of metric around kind of what your claim utilization assumption is on the aggregate book, I guess, as a percentage of max daily benefit or something along those lines?

Well, maybe I'll let Brian do the details if he knows. But I would say, Ryan, that -- if you go back to last year, so we did the review in the fourth quarter of 2021, we did make a number of assumption changes that increase the amount that -- of premium increases that we needed to get through the -- MYRAP, we increased the MYRAP amount by around $4 billion, and a significant percentage of that was we changed the benefit utilization assumptions last year. And some view of future costs were part of that. So we did do I think, a good job last year. And as a result of what we did, we didn't change those. But Brian, if you want to comment on Ryan's question on sort of how we look at benefit utilization from a more granular perspective on the percentage of where we are. Obviously, it varies by the different product forms.

Yes. I don't have the details on that, Ryan, because it's different by nursing home, assisted living facility or home care. But what I will say is we've been tracking how we're doing against the long-term objective of reaching economic breakeven. And we've been looking for a good durable measure of that that's independent of where we are with assumptions in any given year. And if you look back to the end of 2020, we were about 64% of the way there using the assumptions we had at the time. At the end of 2021, we were about 69% of the way done. And at the end of 2022, we're about 78% of the way done. So we're kind of closing in on that end game where we're at or near economic breakeven. And so I think, yes, there are individual components, that if you look at the details and only look at that component, they may move around a little bit. But when you look at it in aggregate and how they interact with each other, we've been making constant progress over time.

Yes. I would -- lastly, I would say, Ryan, as both Dan and I talked about today, we had an outstanding year of -- in LTC premium annual approvals this year, $549 million. That was a very strong year, a record year for us. We've been averaging more over time in the $300 million, $350 million range. Last year was a record at a little over $400 million. Obviously, the $549 million is a significant addition on top of that. As I mentioned, I think, Dan, we -- there are -- in counting that, there are -- we haven't finished in all of those cases. As you know, there's an electronic system that is the ultimate filing. And so we do have some mechanics that we have to do on those. But its a very strong year. And as a big part of the reason that you see the percentage accomplished against the total we need being between 75% and 80% now is because of the very strong increases we've received from regulators in the last couple of years. And I would comment, there are regulators on the call that listen to this. And as you can imagine, Ryan, it's very challenging to ask for increases and continue to as increases on some of the older product forms. You can see this on Slide 14, we're up to over 400% cumulative increases, and that's over a series of increases. So I would say we're feeling very good about beginning to get near the end of what we had needed to do to accomplish, and we're not there yet. And we'll likely make some assumption changes going forward. That seems to be inedible as more claims come in. But we just feel very good about where we are. And I think the regulators are encouraged. I would say, 10 years ago, there were some regulators who thought, well, why bother because Genworth has so many challenges. But -- and credit to all of them, and I want to thank them because I think they really have stepped up. It's hard to grant these large increases. This is probably more premium increases done in LTC than any other industry. And I think they've -- that's been very helpful for us. It's the key way we manage the legacy book. So we feel just very good about where we are.

[Operator Instructions]. And we do have a follow-up from Ryan Krueger.

I guess I'll ask 1 more. Can I just -- I had 1 more question on long-term care. So I believe last year, you had a $28.7 billion cumulative premium rate increased assumption in LTC and now it's $30.3 billion, but the active life reserve margin remained unchanged. So it seems like there must have been some other offset. Can you help walk through that?

Brian, do you want to handle that one?

Yes. I think what happens is, so we did make some minor refinements and assumptions. As I said, we didn't make any that were big enough to change the request going forward. But when we make those changes, sometimes they have a positive effect in terms of the value that's either already been achieved or the value that will be achieved over time. And so one of those assumptions was because we've seen improved behavior from regulators that, that's likely to continue. And so that's had a positive impact.

And ladies and gentlemen, I will now turn the call back over to Mr. McInerney for his additional or closing comments.

Thank you very much, Jim, and thank you to all of you that joined the call today. We really appreciate it. In closing, we're very proud of Genworth's financial performance and the accomplishment of all the strategic objectives we've reviewed today. And we're pleased to have entered 2023 with greater financial flexibility. We are well positioned to continue to return capital to shareholders while investing in growth in our CareScout set of businesses. I would like to thank Dan again for his outstanding contributions to Genworth and to also recognize our incoming CFO and CIO, Jerome Upton and Kelly Saltzgaber. They were key deputies to Dan and have been key leaders that enabled us to successfully transform Genworth and achieve our financial investment objectives. I'm highly confident that they will continue to build on the great progress Genworth has made under Dan's leadership. Thank you for your questions, your interest and your support. And with that, I'll turn things back over to Jim to close the call.

Thank you, sir. Ladies and gentlemen, this does conclude Genworth Financial's fourth quarter conference call. Thank you for your participation. At this time, the call will end.