Good morning, ladies and gentlemen, and welcome to the Genworth Financial's Third Quarter 2024 Earnings Conference Call. My name is Lisa and I'll be your coordinator today. At this time, all participants are in 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 cellphones, speakerphones, or headsets during the Q&A portion of today's call. I'll now turn the call over to Brian Johnson, Senior Vice President of Financial Planning and Analysis. Please go ahead, sir.

Thank you and good morning. Welcome to Genworth's third quarter 2024 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, Jamala Arland, President and CEO 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 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 investor materials, non-GAAP measures have been reconciled to GAAP where required in accordance with 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, Brian. Good morning everyone and thank you for joining our third quarter earnings call. In the quarter, we continue to execute against our strategy that is driving long-term growth and shareholder value. Before I review our strategic progress, I will start with our financial performance on Slide 3. Genworth reported net income of $85 million or $0.19 per share and adjusted operating income of $48 million, $0.11 per share, and app continued to lead its performance, contributing $148 million to adjusted operating income. We're very pleased with NAC's operational strength capital levels and consistent shareholder distributions. On a statutory accounting basis, the U.S. life insurance companies reported an estimated pre-tax loss of $18 million, driven by unfavorable mortality and higher new claims as well as lower benefit from legal settlements. Complete statutory results will be available when we file our third quarter statutory statements later this month. Our liquidity position remains strong. We ended the quarter with cash and liquid assets of $369 million inclusive of approximately $162 million in advanced cash payments. Jerome will cover our financial performance by segment in more detail shortly. Throughout the quarter, we advanced each of Genworth's three strategic priorities as detailed on Slide 4. Our first priority is to create shareholder value through Inc's growing market value and returns. We remain very pleased with our approximately 81% ownership of Enact, which has contributed approximately $819 million in capital to Genworth since its IPO, including $81 million in the third quarter. Since its IPO, Enact has delivered a total shareholder return of 95% as of November 4th, which relative to the S&P 500's total return of 34% over the same period of time, reflects the significant value Enact has created for Genworth shareholders. Consistent and significant cash flows from Enact enabled Genworth…

Thank you, Tom, and good morning, everyone. I'm pleased with Enact's continued strong operating performance the progress on our MYRAP, our debt optimization, and the capital returns we delivered in the quarter. I'll first discuss Genworth's financial results and drivers in more detail. Then I'll provide a preview of our U.S. Life fourth quarter assumption review process, followed by an update on our investment portfolio and holding company liquidity before we open the call for Q&A. As shown on Slide 6, third quarter adjusted operating income was $48 million, driven primarily by Enact. Our long-term care insurance segment reported an adjusted operating loss of $46 million. This was driven by a liability remeasurement loss from actual to expected experience, partially offset by favorable cash flow assumption updates related to IFA approval amounts. As a reminder, actual to expected experience drives GAAP results in LTC and fluctuates quarterly, including from seasonal mortality trends. For the full year, we continue to expect the liability remeasurement loss from actual to expected experience. Going forward, we expect continued GAAP earnings volatility in LTC as short-term results deviate from long-term assumptions. The strong results from Enact were also partially offset by adjusted operating losses of $27 million in life and annuities and $27 million in corporate and other. Within life and annuities, life insurance posted an adjusted operating loss of $40 million, driven by unfavorable mortality. This was partially offset by adjusted operating income of $6 million from fixed annuities and $7 million from variable annuities. Corporate and other reported a $27 million loss driven by interest expense on holding company debt and growth investments in CareScout. Sequentially, Corporate and other was primarily impacted by the timing of tax-related items. Now, taking a closer look Enact's performance on Slide 7. Enact delivered another strong quarter…

Ladies and gentlemen, we will now begin the Q&A portion of the call. [Operator Instructions] And our first question comes from Brett Osetec with KBW.

Hey good morning. My first one is on the AXA Santander lawsuit. I think the case is still set for March of next year, but if there is a positive ruling for you guys there, could you just comment on the potential use of proceeds?

Well, Brett, thank you very much for the question. So, yes, the trial data is still set for March 2025, it is possible there could be a settlement before them, but that's the March date. To the extent that we win that case, and we've been saying for a long time, we think we like our side of -- or the access side of that lawsuit. And I think the focus for any proceeds would be to continue to do what we've been doing, return capital to shareholder through the share repurchase program. I think you'd see us step up that in the play. We'll continue where there's good opportunities, a good pricing to buy back the debt. And then obviously, we want to continue to invest in CareScout services business, which, as both Jerome and I talked about, is doing very well, gaining very good momentum and then also investing in the new CareScout Insurance business when we launched the first product sometime next year. Jerome, I don't know if you want to add anything to that?.

I think you covered it well, Tom.

Okay, great. Thanks. And then for my follow-up, I was just hoping you guys could give a little more color on how the CareScout revenue model will work beyond potential savings on LTC claims?

Yes. So basically, maybe just to try to make it simple, Brett, it's a good question. But as I said in my remarks, the annual cost for Home Care is about $75,000 a year. So, let's say, roughly a little over 6,000 a month. And our we're doing very well on the discounts, I think 90% are in the 20% range. So, if you just say the savings through the discount on the good policy so $1000 a month, $250 of that goes to CareScout services because they've built and maintained the network and then $750 of the $1,000 a month savings is retained by terms of lower claim costs. So, that's the basic model.

Okay, great.

Thanks Brett.

And we'll move to our next question from Joshua Esterov with CreditSights.

Hello. Good morning. Thank you for taking the time. I've got two questions on CareScout. The first one is maybe more of a clarifying question. And that's -- how do you define coverage percentage in your presentation material? Is that as straightforward as you have just at least one care provider in the ZIP code where age 65 plus are located? And then separately, before I hop back into the queue, how do either the insurer or the policyholder become aware that there are services available to them at potentially lower prices, especially with regards to non-general policyholders?

Those are great questions, Josh. And so the first one, in terms of CareScout, we look at the coverage by ZIP Code. And so depending -- obviously, you would expect in those ZIP codes in bigger cities, there will be several providers in the network in that area. As you get to the more rural areas, I mentioned we were in 49 states. The one state we're not fully in yet is Wyoming. Obviously, it's a more rural state. . So, there obviously are ZIP codes that are -- where they're less populated and therefore, there are less 65-plus year-olds less Genworth policyholders. So on those ZIP codes, it would probably more typical that you might only have one, maybe two providers. So, that's basically how it works. And the second part of the question was touch points with insurers and policyholder. Yes. So touch points with insurance and policyholders. For our policyholders, we obviously communicate with them regularly, and we have been since we started the journey with CareScout services have been telling them about the network. When someone files a claim, obviously, we work to assess the claim determine if coverage applies. And then through that process, which takes on average 20 to 30 days. We'll talk about who are the providers in the network the discounts they provide, and that's out done. The last several months were with the click policyholders. We've been doing more than 100 per month of masses between the policyholder going on claim in the network. For the direct-to-consumer, from a broader perspective, we'll be marketing that this network is available in these states. Most of the providers are below the median cost of care in the state or the ZIP code and we credential for quality on 20 different dimensions. So, I think our whole value proposition there is we're taking all of the time and effort to find a provider away from the person needing care or typically their family. And at the same time, whatever the rate would be per hour for Home Care. Again, generally, we're getting significant discounts, 20% is sort of been where we've been out for most of the policyholders. Obviously, for the direct-to-consumer, where they don't have insurance, the savings are very significant since they're paying. So, we're very optimistic going forward. We got to first complete the network. We said by the end of the year, we want to be at 85% coverage. That's -- for practical purposes, that's pretty full coverage. There are always going to be, whether it's Wyoming or Montana, Idaho, other states like that, where we'll take time to fill in the gaps. So we think at 85%. That will be pretty much effective nationwide coverage -- and once we have that, we'll then begin to accelerate our marketing plans to let consumers in general know that the network is available.

Appreciate that. Thanks.

Thank you, Josh.

We'll move to our next question from Douglas Smith [ph] with Everest Group.

Good morning. I'd also like to focus on CareScout for a moment from understanding better how the entity impacts the parent company as opposed to what's going on in the ring-fenced insurance entities. I assume all the expenses of CareScout and the parent company level and trying to understand currently but the offsetting revenue might be? And kind of what the P&L looks like, if you will, on a standalone basis?

So, Jerome, do you want to want to talk about that?

So, Doug, thanks for your question. I would start out by saying, and Tom highlighted in his prepared remarks, that we are investing $35 million in the CareScout services business. That is all contained in the corporate and other segment at this point in time. So that you will see coming through. And that's why we've highlighted the $35 million for you, so you can understand the investment we're making. We are going after a very large market, as Tom highlighted. So we're optimistic about what we're doing there. So expenses are in corporate and other. On the revenue side, CareScout services when they are saving our GLIC policyholders money because the providers are signing up for 90% or signing up for like a 20% discount. CareScout Services would get 25% of that, and that would come in the corporate and other as well. So it's mostly contained in the corporate and other segment.

And are there material revenues incorporate other offsetting a significant portion of that expense run rate?

So, there are revenues coming through on the assessment side, which is a service that is provided to GLIC However, when you have those assessments and they come through from GLIC and consolidation, we eliminate that revenue. There are some matches that are being made where there's a fee stream coming through from the Glick policyholders. But at this point in time, given the newness of the business, those revenue streams are pretty small.

And the $35 million run rate would be net of whatever that offsetting revenue might be.

That is correct.

And then if CareScout did initiate an insurance product. Would that be inside or outside of the ring-fenced insurance entities?

Another good question. That will be outside. So basically, think of -- you have the parent holding company, and it owns an app and Enact and the legacy life companies. And then separately, so a sister entity would be CareScout Inc., call that the holding company of CareScout. And then underneath that holding company will be CareScout services. That's the service business, and it's a fee business, not very capital intensive. And as you've mentioned, Doug, the ultimately will be the revenues from our share of the discounts, whether it's a Genworth policyholder, other insurers, policyholders, and we're talking to several other closed block LTC players on allowing their policyholders to use the network and take advantage of the discount. And then when we go to consumers, it'll be the same type of model that whatever that monthly savings is for home care, as I said, that's around $1,000 a month will negotiate a fee for CareScout services. But obviously, a significant part of that $1,000 a month savings will accrue to the benefit of the policyholder they have insurance and if they don't, then they're paying the cost, and so they'll get the significant part, the majority part of the discount. So, clearly, the goal is to have as many matches where we brought a policyholder, a consumer with a provider and 25% that goes to CareScout Services, obviously, in order to cover -- you can do the math, if we're saving -- if it's $250 a month out of the $1,000, typically our claims are a couple of years plus or minus. So it's about -- for the CareScout services share of that would be $250 a month so basically $3,000 a year. So you can calculate how many matches you need, whether they're our policyholders, other insurance policyholders or consumers in order to cover that $35 million investment. So it's a scale business. we're still completing the network. It usually takes about 90 days after you have a state or a ZIP code cover where you start to get batches. So we're very optimistic that this will ultimately be a very good business for us, given that we've got 70 million baby boomers and the oldest of those that are 78. This year in two years, there'll be they'll start to turn 80, almost 10,000 a day will 280 and early 80s is when the peak claim years are.

Doug, can I just add Doug, the 1 thing that I think are implied would be implied in both my comments and Tom's comments around CareScout Services is we are saving claims, there's claim savings coming through for the GLIC policyholders. And I think we articulated on the slide over time, we expect that to be meaningful to $1 billion to $1.5 billion. So, while we're building scale, we are going to be saving the GLIC policyholders money and like money. And that's $1 billion to $1.5 billion.

Okay. Thank you.

Thank you, Doug. Good questions.

And our next question comes from Joshua Esterov with CreditSights.

Hey guys. Thank you again for taking another one for me. In your prepared remarks on the fourth quarter LTC reserve review, -- you may note that you expect GLIC reserve margin to remain positive. Can you please remind us either where that margin is currently or where it was the last time you provided an update?

Jamala, do you want to take that one? .

Yes. Thank you for your question, Joshua. When we did our cash flow testing, our statutory review of margin at year-end 2023. We were in the $0.5 billion to $1 billion range of that margin, and we do expect to maintain our statutory margin for GLIC in that same range this year.

Understood. Thank you.

And ladies and gentlemen, it appears that there are no questions at this time. I will now turn the call back over to Mr. McInerney for closing comments. .

Thank you very much, Lisa. I want to again thank Brad, Josh, and Doug for their questions. I think there are questions that a lot of our investors have. So, it was a good opportunity for us to elaborate a little bit more on that. We're very pleased with where we are. Obviously, and that continues to perform extremely well. solid earnings, good return on capital through their regular dividends to us as well as on the share buybacks. So we're pleased with that. The three priorities we talked about. We're making good progress on that, which is an addition to expanding the value of Enact for our shareholders. We're also making good progress with our legacy LTC business in terms of the MYRAP, very, very good results. And then finally, as we talked about and had some questions on, we're really scaling up the CareScout business. And we're very -- looking very forward to significant growth in that business in 2025 and beyond. So, with that, Lisa, I'll turn the call back to you to end the call.

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