Please standby, we are about to begin. Good morning, ladies and gentlemen. And welcome to Genworth Financial’s First Quarter 2023 Earnings Conference Call. My name is Jess, 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 cellphones, speakerphones or headsets during the Q&A portion of today’s call. I would now like to turn the presentation over to Sarah Crews, Director of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to Genworth’s first quarter 2023 earnings call. 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. Speaking today will be Tom McInerney, President and Chief Executive Officer; and Jerome Upton, Chief Financial Officer. 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 Business; and Kelly Saltzgaber, Chief Investment Officer, will also be available to take your questions. During the call this morning, we may make various forward-looking statements. our actual results 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 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 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 will turn the call over to our President and CEO, Tom McInerney.

Thank you, Sarah. Good morning, everyone, and thank you for joining the call. I want to welcome Jerome and Kelly to the first call on their official capacity. So Jerome as Chief Financial Officer and Kelly as Chief Investment Officer. Genworth reported strong first quarter results, reflecting a successful start to the year, despite a challenging economic environment marked by persistent inflation, high interest rates and volatility in the banking sector. As a reminder, this is the first quarter we are reporting results under the new GAAP accounting standard for long-duration targeted improvements or LDTI, with the first quarter of 2022 recast for comparability. As we have been saying time, the new accounting standard will result in more volatility in our quarterly GAAP results going forward as we will be required to re-measure many aspects of our long tailed insurance liabilities on a quarterly basis. LDTI requires the insurer to evaluate assumptions regularly and treats unprofitable block cohorts differently than profitable cohorts. Macroeconomic variables like quarterly interest rates or quarterly cost inflation and actual experience will vary significantly over the 30-year, 40-year duration of LTC liabilities. Therefore, volatility quarter-to-quarter should be expected. Over the long run, U.S. GAAP and statutory accounting results will ultimately be substantially similar. While we continue to report Genworth’s results in compliance with our GAAP reporting requirements, we manage the U.S. Life companies on a statutory accounting basis, because that is how the State Insurance Departments regulate Genworth and the Life Insurance industry. Jerome will discuss the LDTI accounting standard and its impact on our GAAP results in more detail. Results in the first quarter were led by Enact, which reported adjusted operating income of $143 million and ended the quarter with $250 billion of insurance in force. Enact and Genworth achieved a significant milestone on…

Thank you, Tom, and good morning, everyone. I am pleased to join my first earnings call as CFO of Genworth. I look forward to building on the great progress Genworth has made and continuing to work alongside Tom and the team to achieve our goals and deliver value to our shareholders. Before discussing the results, I will highlight changes to our segment reporting and provide an update on our adoption of the new GAAP accounting standard, long-duration targeted improvements or LDTI. Effective January 1st, we changed our operating segments to better align with how we currently manage the business. The operating segments are, Enact Mortgage Insurance, Long-Term Care Insurance and Life and Annuities. In addition, we have Corporate and Other, which primarily includes our Holding Company Debt, Public Company Operating Expenses and CareScout. Regarding LDTI, it is important to remember that this new GAAP accounting standard only applies to our Long-Term Care Insurance and Life and Annuities segments. It does not impact Enact or Corporate and Other. This accounting change is non-economic and does not impact our cash flows strategy, statutory accounting or capital levels or any of our capital management activities. With the adoption of LDTI, we have recast financial results for the Long-Term Care Insurance and Life and Annuities segments for the first quarter of 2022, as well as the 2022 balance sheet and reported the first quarter of 2023 under the new guidance. We are targeting to provide re-casted financials for the remaining quarters of 2022 by the time of our second quarter earnings announcement in early August. Turning to the quarter, I want to address the recent banking turmoil the market has experienced. As Tom mentioned, Genworth has no exposure to Silicon Valley Bank or Signature Bank. We have overall limited exposure to regional banks and…

Thank you. [Operator Instructions] We will go first Brett Osetec with KBW. Your line is open, sir. Please go ahead.

Hey. Good morning. So I just wanted to get your guys take on what you would think the GAAP operating Long-Term Care earnings can kind of be going forward, would you expect to be kind of within the same quarterly run rate you got this quarter? Just any way to think about that going forward? Thanks.

So, Brett, good question. I would say, it’s very hard to predict GAAP earnings under LDTI, because there are these adjustments for -- when the actual to expected are different and there’s a different treatment of the profitable cohorts versus the unprofitable any 50-50 between the two. But Jerome, I’d turn it to you, you are the expert on LDTI, you and your team and any further flavor for Brett, I do think it’s a good question, but it’s just hard, I think, to give a good answer. We -- I think maybe statutory will be a little bit more consistent. So, Jerome, anything you want to add.

So, thank you, Tom, and good morning, Brett. Thank you for your question. I would say and agree with Tom sentiment. It’s -- we cannot provide guidance on this front. I will highlight to you that our earnings are going to be volatile. They are going to be driven by these cap cohorts that are roughly 50% of our book. They are unprofitable and as ADEs [ph] actual to expected come through, we are going to have to book that immediately in earnings. So it’s going to create volatility. And the other thing that I will highlight is, we are not going to see benefit reductions coming through the P&L. That’s already incorporated into our accounting model, but you will see the settlement costs coming through. So as we roll out and continue with our PCS I and II, and then ultimately roll out our Choice II legal settlement, you will see the settlement costs come through. But not all of the in-force rate actions, particularly related to the benefit reduction. So I can’t give you guidance. It’s very hard to predict. I think the best we can do is what we shared in my prepared remarks is that U.S. GAAP is going to be significantly less in statutory, the profits from a statutory basis, and we are very pleased with the statutory earnings and Long-Term Care of $138 million.

Got it. Thanks. And then just as a follow-up, you guys meaningfully stepped up the pace of buybacks this year. How are you guys, I guess, thinking about sources of holding company cash balance going for the year, I know you guys talked about you expect $175 million to $200 million in intercompany tax payments and you have $170 million left on the buyback authorization. I am just wondering if like all that’s going to go to the buyback, how much you guys are thinking about perhaps contributing to growth in CareScout as well? Thanks.

Yeah. So, Brett, another great question and let me take that. So our sources of cash, and Jerome covered these in his remarks, so -- and Enact confirmed on their call earlier this morning that they expect total cash flow to shareholders to be $250 million and so our share 81 -- roughly 81.5% is $200 million. So that’s for the year and we got some of that in the first quarter. So but $200 million in total. And then Jerome gave you guidance on the tax payments. And again, just to reemphasize why I think statutory earnings are much more important than GAAP earnings is statutory earnings are very close to tax earnings. And so we are expecting, based on the tax earnings and statutory tax earnings and Enact and U.S. Life for tax payments going forward of you gave you the range, $175 million to $200 million. I think it was -- so think of that as $50 million a quarter. So that’s sort of the inflows. And then we -- the investment in 2023 in CareScout. We told you this last quarter is around $30 million and then we told you that the interest expenses here will be about $60 million. So $90 million between the interest payments and the CareScout investment and then the balance existing cash plus the cash from Enact, the tax payments, I think, give us -- we assume a pretty significant amount of cash for the year. I would expect that the remaining $170 million, I wouldn’t be surprised, if we pretty close to exhausting that by the end of this year. I mean, we will see things can happen, and obviously, as we get closer to that point, our intention -- management’s intention is to discuss our new authorization -- repurchase authorization for the -- with the Board.

Got it. Thank you.

All right. thank you.

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

All right. I guess there were not a lot of questions today. We do know there were some competing calls. So I do want to thank all of you for joining the call today, and Brett, thanks for your questions. I think they are very good ones. We are very pleased with where we are, good performance, we think the first quarter, I mean, obviously, Enact had a strong quarter and because we manage the Life company on past two earnings at $192 million pretax statutory income, we think we had a very good first quarter for the Life companies. We are excited to execute on our plans, including in CareScout for the rest of the year. I think we are well positioned to continue returning capital to shareholders and we talked with Brett about that. And while we are, at the same time, investing in sustainable Long-Term Care growth and CareScout, I kind of size that for you. So thank you for your interest and support of Genworth. And with that, I will turn the call back to Jess.

Thank you. Ladies and gentlemen, that will conclude today’s earnings call. We appreciate your participation. You may disconnect at this time.