Genworth Financial, Inc. Class A Stock

Good morning, ladies and gentlemen, and welcome to Genworth Financial's Second Quarter 2026 Earnings Conference Call. My name is Cynthia, and I will be your coordinator today. [Operator Instructions] As a reminder, the conference is being recorded for replay purposes.

I would now like to turn the presentation over to Christine Jewell, Head of Investor Relations. Please proceed.

Thank you, and good morning. Welcome to Genworth's Second Quarter 2026 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 Jerome Upton, Interim President and Chief Executive Officer and Chief Financial Officer. Following our prepared remarks, we will open the call for questions.

In addition to Jerome, Jamala Arland, President and CEO of our Closed Block Insurance business; Greg Karawan, General Counsel; Kelly Saltzgaber, Chief Investment Officer; Samir Shah, CEO of CareScout; and Angela Simmons, CFO of our Closed Block Insurance business will also be available to take your questions.

Together, the leadership team on today's call brings deep institutional knowledge with an average tenure at Genworth of nearly 20 years. During this morning's call, 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.

Today'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. Additionally, reference to statutory results are estimates due to the timing of the statutory filings.

And now I'll turn the call over to Jerome.

Thank you, Christine, and good morning, everyone. Thank you for taking the time to join our second quarter earnings call. Before turning to our results, I want to acknowledge Tom's leave of absence for medical reasons, which we announced last month. On behalf of the Board and our leadership team, we continue to wish Tom well and appreciate the support that has been shown over the last several weeks. We understand that you may have additional questions, but we ask that you would hold them for now. We will share any material developments, including any time lines as and when appropriate.

I have been serving as Interim President and CEO since that announcement while continuing in my role as Chief Financial Officer. Genworth has a deep and experienced leadership team that has been actively engaged with Tom and our Board in the development of our strategy. The Board remains confident in our strategic direction and the ability of our leadership team to execute against our objectives. I am grateful for the support of our Board and leadership team as well as all of our colleagues in Genworth as we focus on advancing our existing strategy and delivering for our policyholders and shareholders.

I will now share a brief overview of our second quarter results. Enact once again generated strong shareholder value. We advanced our long-term growth strategy through CareScout, and we further strengthened the self-sustainability of our Closed Block.

Genworth reported net income of $47 million or $0.12 per share, with adjusted operating income, excluding the Closed Block of $112 million or $0.29 per share. Our results this quarter were led by continued strong performance from Enact with adjusted operating income of $143 million.

Turning to Slide 5. I will highlight our progress against each of Genworth's 3 strategic priorities during the second quarter. First, we continue to create shareholder value through Enact's growing book value and capital returns. Our approximate 81% ownership stake in Enact remains a key source of cash flows to Genworth and helps fuel our disciplined approach to capital allocation.

Our balanced capital allocation strategy includes returning capital to shareholders through share repurchases while also investing in our long-term growth opportunities through CareScout. This approach enables us to drive near-term shareholder value while still positioning the company for sustainable long-term growth.

During the second quarter, we received $103 million in capital returns from Enact. Supported by the strong cash flows, we continue to execute on our share repurchase program. Since the initial authorization of our buyback program in May of 2022, we have bought back approximately $922 million worth of shares at an average price of $6.48 per share through July 31. We believe these repurchases have created meaningful long-term value for shareholders while allowing us to continue investing in CareScout, which brings me to our next strategic priority.

Turning to Slide 6. We continue to drive growth through CareScout, which represents a significant long-term opportunity given the growing demand for aging care, including from 70 million baby boomers now age 62 to 80. We are building a comprehensive aging care platform designed to help people understand, find and fund the quality long-term care they need.

We will do this in 3 ways: first, by providing access to a suite of integrated solutions across the aging journey. Second, through expert guidance informed by our data and decades of claims experience. And third, technology-enabled human connection, delivering that expertise through trained advisers who provide personalized local support and helping families navigate what is often a complex, fragmented and emotional process. We are integrating these capabilities across the platform to deliver a seamless experience and build a scalable business for long-term growth.

Beginning with CareScout Services on Slide 7. We continue to expand the CareScout network at an impressive pace. In the first quarter, we added our first senior living communities to the network, marking an important step in broadening access beyond home care and expanding options available to consumers in the marketplace. As of the end of the second quarter, the network now includes more than 1,100 home care locations, and we continue to integrate senior living communities, targeting at least 2,000 in the network by the end of this year.

Across major markets, the network now includes local advisers, aging care experts who help guide families in their search for high-quality senior living communities. Once engaged, they provide personalized guidance, helping families navigate what can be a complex and important decision. So far this year, we've doubled the number of local advisers with representation in 26 states as of the end of the quarter.

Together with our nationwide network of nurses, these local advisers provide families with access to both expert guidance and clinical expertise. As a reminder, our revenue model for senior living communities differs from our home care model with CareScout earning a onetime placement fee upon a successful move-in, consistent with how the broader industry operates.

This complements our existing home care preferred pricing model and contributes to a more diversified and scalable stream of revenue. We facilitated approximately 1,450 matches between care seekers and providers in the second quarter, bringing total matches for the first half of the year to approximately 2,950, over double the number of matches achieved in the first half of 2025. Beyond the end of the quarter, matches have been strong and well ahead of matches in the prior year.

We've also made strong progress expanding CareScout's match footprint beyond our existing policyholder base, bolstered by senior living matches. As the network continues to scale and brand awareness grows, we expect to drive increased traction across the platform. We also expect a higher share of Genworth's policyholders to utilize network providers and benefit from more efficient care coordination by our team, helping to stretch their benefit dollars further while also generating claim savings for our Closed Block over time.

We are continuing to expand our offerings to employers and select affinity groups. This represents an opportunity to introduce more consumers to the CareScout brand, broaden access to our services and generate additional fee-based revenues over time.

Turning to CareScout Insurance on Slide 8. We are pleased with the progress we have made towards launching our Care Assurance Worksite product, a version of our inaugural stand-alone long-term care product that will be available through employers. The Worksite product is approved and ready for a third quarter launch in at least 34 states, expanding Care Assurance into an important new distribution channel.

We also continue to make progress seeking approvals in additional states. The worksite insurance offering combines long-term care cost protection with immediate access to CareScout's ecosystem of aging care, helping policyholders and their families confidently navigate care needs through care planning, care navigation, caregiver support and the CareScout quality network.

This combination is differentiated in the marketplace as it helps customers prepare for their own future care needs while providing immediate resources that can support parents or other family members navigating care decisions today. As with our stand-alone Care Assurance product, the worksite offering is priced and structured for the long term. We remain focused on disciplined growth, appropriate risk management and delivering a strong customer value proposition while driving returns for our shareholders.

Our third strategic priority is actively managing our self-sustaining customer-centric Closed Block of LTC, life and annuity products. This business is being managed with a focus on ensuring long-term sustainability, maintaining capital discipline and delivering supportive policyholder experiences.

Our multi-year rate action plan or MYRAP remains our most effective lever for maintaining that sustainability. In the second quarter, we secured $46 million of gross incremental premium approvals compared with $41 million in the prior year. We also received an additional $27 million of approvals in July. We continue to work with regulators to finalize pending rate increase request, but the timing of approvals can be difficult to predict.

We expect full year 2026 premium approvals and benefit reductions to be broadly in line with 2025 levels, contributing approximately $1 billion of value on a net present value basis. As we enter the later stages of MYRAP, we expect the relative impact of benefit reductions to increase while the relative impact of premium increases declines. This reflects the shrinking runway of future premium from Genworth policyholders as the Closed Block ages. We remain focused on executing this program with discipline to ensure the long-term self-sustainability of the Closed Block.

I'd now like to walk through our second quarter financial results in further detail, beginning on Slide 9. Adjusted operating income, excluding the Closed Block, was $112 million, driven by strong performance in Enact, partially offset by a loss in Corporate & Other. As a reminder, results of our Closed Block segment are reported separately in our disclosures.

Enact delivered another strong quarter of performance with adjusted operating income of $143 million to Genworth. Results included a pretax reserve release of $37 million, reflective of continued strong cure performance and loss mitigation activities. Results are up versus the prior quarter from seasonally lower losses and the prior year, reflecting higher net investment income, partially offset by the lower reserve release. In Corporate & Other, we reported an adjusted operating loss of $31 million for the quarter, reflecting debt service costs and a growing CareScout business.

Our Closed Block segment reported an adjusted operating loss of $110 million. This was driven by liability remeasurement loss related to the actual variances from expected experience or A/E of $127 million pretax, primarily in LTC. Our A/E loss experience in the first half of 2026 has trended above the level implied by our full year expectation of approximately $300 million. While results can vary quarter-to-quarter, if these trends continue, the full year A/E losses could be higher than that level. As a reminder, these GAAP fluctuations do not impact our cash flows, economic value or how we manage the business.

Now taking a closer look at Enact's performance beginning on Slide 10. New insurance written of $15 billion in the quarter was seasonally higher than the prior quarter, an increase versus the prior year as a result of a larger estimated market size. Primary insurance in force increased 2% year-over-year to $274 billion, supported by new insurance written and continued elevated persistency. Earned premiums were $245 million in the quarter, up versus the prior quarter and in line with the prior year.

As shown on Slide 11, Enact's favorable $37 million pretax reserve release drove a loss ratio of 14%. Enact's estimated PMIERs sufficiency ratio remained strong at 161% or approximately $1.9 billion above requirements. Genworth's share of Enact's book value, including AOCI, was $4.4 billion at the end of the second quarter compared to $4.3 billion at the end of the first quarter. Enact has continued to deliver significant capital returns to Genworth. As I noted earlier, Enact returned $103 million of capital to Genworth during the quarter.

Enact's strong balance sheet, disciplined underwriting and financial flexibility position it to navigate a dynamic macroeconomic environment and continue creating shareholder value.

Turning to our Closed Block on Slide 12. We continue to proactively manage and reduce LTC risk through prudent in-force management, including benefit reductions and premium rate increases. As of the end of the second quarter, we had achieved an aggregate approximately $34.8 billion of benefit reductions and premium increases on a net present value basis since 2012. As part of our MYRAP, we offer a suite of options to help policyholders manage premium increases while maintaining meaningful coverage. These benefit solutions enable us to reduce our exposure to certain higher cost features such as 5% compound benefit inflation options and large benefit pools.

Cumulatively, about 62% of policyholders offered a benefit reduction have elected to take one, lowering our long-term risk. These initiatives have helped reduce our exposure to the riskiest LTC policy features. Notably, our exposure to the 5% compound benefit inflation option has decreased to approximately 35%, down from 57% in 2014 and the percentage of our policies with lifetime benefits has decreased to 11% from 24% in 2014.

We remain committed to managing the Closed Block as a closed system, leveraging existing reserves and capital to cover future claims. We will not inject capital into these companies. And given the long-tail nature of our LTC insurance policies with peak claim years still over a decade away, we also do not expect capital returns.

Turning to Slide 13. Our investment portfolio remains resilient and is conservatively positioned. The majority of our assets are in investment-grade fixed maturities held to support our long-duration liabilities. New money yields continue to exceed those on sales and maturities with cash in our life insurance companies being invested at yields of approximately 6.2% this quarter.

Our alternative assets program is largely comprised of diversified private equity investments and has targeted returns of approximately 12%, although fluctuations from quarter-to-quarter are expected. In the second quarter, realizations rebounded from a slow start to the year and helped drive higher investment income. We remain committed to growing our alternative assets portfolio within regulatory limitations due to its robust track record of returns, diversification benefits and natural fit with long-term liabilities.

Next, turning to the holding company on Slide 14. We ended the quarter with $215 million in cash and liquid assets. When evaluating holding company liquidity for capital allocation purposes and calculating the buffer to our debt service target, we excluded approximately $81 million of cash held for future obligations at the end of the quarter, including advance cash payments from our subsidiaries. Our liquidity remains supported by recurring capital returns from Enact and our disciplined approach to capital deployment.

Moving to capital allocation on Slide 15. Our priorities remain unchanged. We will continue to invest in long-term growth through CareScout, return cash to shareholders through our share repurchase program when our share price trades below intrinsic value and opportunistically retire debt.

During the quarter, we repurchased $62 million of shares at an average price of $8.74 per share and an additional $4 million in July. We also retired $10 million of principal debt in the quarter at a discount, bringing our holding company debt to $768 million. We maintain a disciplined capital structure with a cash interest coverage ratio on debt service of approximately 9x.

I will now turn to our outlook for 2026 and provide an update on the guidance we previously shared. On its earnings call this morning, Enact's shared that it now expects to return approximately $550 million to $600 million of capital to its shareholders in 2026. Based on our approximate 81% ownership position, we now expect to receive between $445 million and $485 million from Enact for the full year.

Second, we continue to create value for shareholders through our share repurchase program. For the full year 2026, we now expect to allocate between $225 million and $250 million to share repurchases. As we have said before, this range may vary based on market conditions, business performance, holding company cash and our share price.

Third, turning to CareScout Services. We remain focused on growing matches toward our previously discussed 2026 target of approximately 7,500 compared with 3,255 in 2025. We continue to make good progress and expect continued growth as we expand the CareScout network, integrate additional senior living communities and increase consumer engagement. However, current match volumes are pacing below the level that would be required to reach the full year target.

CareScout Services generated $6 million of revenue in the second quarter, and a total of $12 million during the first half of the year. We continue to expect revenue in this business of $25 million for the full year. We also continue to expect investment of approximately $50 million to $55 million in CareScout Services during 2026.

These investments will support the continued expansion of our technology platform, the addition of new products and growth across consumer and B2B channels. We are also deepening carrier partnerships and enhancing operational infrastructure to support higher volumes, recurring revenue and long-term scalability.

For CareScout Insurance, we currently do not anticipate any additional capital investment in 2026 following our initial $85 million investment made in 2025 to support the launch of the business. We have made good progress overall with CareScout and remain confident in its continued growth in 2026. As we have noted previously, scaling these businesses and achieving breakeven will take time.

I will now provide an update on the AXA litigation. The appeal hearing occurred in July. We continue to expect the Court of Appeal to reach a decision within approximately 3 to 6 months following the hearing. If the judgment is ultimately upheld and all appeals are favorably resolved, we expect to recover a total sum of approximately $750 million, subject to exchange rates at that time. We do not expect to pay taxes on this recovery.

As we previously said, recoveries are not factored into our current capital allocation plans. If proceeds are received, we will deploy them in line with our existing priorities: investing in CareScout, returning capital to shareholders and reducing debt.

In closing, we are pleased with the progress we made against our priorities and with our financial performance in the second quarter. Enact continues to deliver strong performance and capital returns. CareScout is expanding its network, products and distribution capabilities as we build a comprehensive aging care platform. At the same time, we continue to actively manage our Closed Block and maintain our disciplined and balanced approach to capital allocation.

Our focus remains on driving long-term shareholder value through Enact and CareScout, returning capital to shareholders, maintaining financial flexibility and proactively managing our liabilities and risk. I also want to recognize our leadership team and colleagues for their continued focus and execution over the past several weeks. Their commitment to our policyholders, customers and shareholders gives me confidence in our ability to execute against our priorities.

Now let's open up the line for questions.

[Operator Instructions] We will take our first question from Ryan Krueger with KBW.

First, I wanted to extend our best wishes to Tom. In terms of our question, I guess, on the AXA/Santander hearing, can you give us just any -- are you able to provide any color on kind of your takeaway and view of how the hearing went in July as it's a bit difficult admittedly to follow it from here sometimes.

So Ryan, first of all, this is Jerome, and thank you for your sentiments expressed to Tom. I am going to ask Greg Karawan, who's here with me to answer your question around AXA and the July appellate court process.

Thanks, Jerome, and thanks for your question, Ryan. The only color commentary I can give you is that I think AXA's lawyers did an excellent job. But having been in this business for 40 -- almost 40 years, I know one thing for certain, and that's litigation is inherently uncertain. So we're not going to speculate on the outcome, but we were pleased with the way the hearing went.

And a follow-up just on the potential use of proceeds, if successful. I know you mentioned the same priorities you've been executing on. But would you see any need or desire to accelerate the amount of either debt reduction or investment into CareScout? Or should we expect those to continue along a similar path regardless and then most of the incremental proceeds, if successful, could be used more for share repurchase?

Well, Ryan, thanks for the question. I would just say, first of all, you observed that we did up our share buyback guidance to $225 million to $250 million. So that's number one. Number two, I know that you understand and know that any proceeds from AXA are not currently baked into our cash plan as a result of the uncertainty that Greg just highlighted.

I would always go back to the capital allocation process that we use, and that is fund growth at an appropriate return. We would always look to return capital. And if we see shares trading below intrinsic value, then we'll use share buybacks, which has been predominant -- our predominant return of capital and then opportunistically retire debt. And related to accelerating anything, if I don't have the cash, it's kind of hard to put the cash to work, and I know that you understand that.

[Operator Instructions] It appears that there are no questions at this time. Ladies and gentlemen, I will now turn the call back over to Mr. Upton for closing comments.

Thank you, Cynthia. Thanks to all who joined the call today. Before we conclude, I wanted to reiterate my confidence in Genworth's direction and in the strength and depth of our leadership team. We remain focused on delivering for our policyholders, our customers and our shareholders, advancing CareScout, creating value through Enact and maintaining a disciplined approach to capital allocation.

Thank you for your continued interest and investment in Genworth. We look forward to speaking with you again next quarter.

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

Good morning, ladies and gentlemen, and welcome to Genworth Financial's First Quarter 2026 Earnings Conference Call. My name is Jess, and I will be your coordinator today. [Operator Instructions] As a reminder, the conference is being recorded for replay purposes. [Operator Instructions] I would now like to turn the presentation over to Christine Jewell, Head of Investor Relations. Please proceed.

Thank you, and good morning. Welcome to Genworth's First Quarter 2026 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 Thomas McInerney, President and Chief Executive Officer; and Jerome Upton, Chief Financial Officer.

Following our prepared remarks, we will open the call for questions. In addition to our speakers, Jamala Arland, President and CEO of our Closed Block Insurance business; Greg Karawan, General Counsel; Kelly Saltzgaber, Chief Investment Officer; and Samir Shah, CEO of CareScout, will also be available to take your questions.

During this morning's call, 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.

Today'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. Additionally, references to statutory results are estimates due to the timing of the statutory filings.

And now I'll turn the call over to our President and CEO, Tom McInerney.

Thank you, Christine, and thank you all for taking the time to join our first quarter earnings call this morning. In the first quarter, we continue to execute across our strategic priorities, Enact once again generated strong shareholder value. We advanced our long-term growth strategy through CareScout, and we further strengthened the self-sustainability of our Closed Block.

Before turning to our results, I'd like to briefly address an update to how we present and evaluate our core operating earnings. As we've discussed, our Closed Block legacy insurance products are separate from our other business lines and self-sustained. And the quarter-to-quarter GAAP volatility does not reflect the underlying economics or how the business is strategically positioned for the long term.

As a result, going forward, we will report Genworth's consolidated adjusted operating income, excluding the Closed Block. We believe this view of our operating performance better aligns with our strategy and capital allocation framework, driving current and future shareholder returns through Enact and long-term growth opportunities with CareScout.

We will continue to report the adjusted operating income for the Closed Block separately in our disclosures. For the first quarter, Genworth has reported net income of $47 million with adjusted operating income, excluding the Closed Block of $109 million. Our results this quarter were led by continued strong performance from Enact with adjusted operating income of $140 million. The holding company ended the quarter with a solid liquidity position, holding $166 million of cash and liquid assets.

Turning to our strategic priorities. I'm pleased with our progress as we execute with discipline across the businesses. First, we continue to create shareholder value through Enact's growing market value and capital returns. Our approximately 81% ownership stake in Enact remains a key source of cash flows to Genworth and helps fuel our disciplined approach to capital allocation.

This strategy includes returning capital to shareholders through share repurchases while also investing in our long-term growth opportunities through CareScout. This balanced approach enables us to drive near-term value while still positioning the company for sustainable long-term growth.

In the first quarter, we received $99 million in total capital returns from Enact. Supported by these strong cash flows, we continue to execute on our share repurchase program. Since the initial authorization of our current buyback program, we have bought back a total of $875 million worth of shares at an average price of $6.38 as of April 30.

Turning to our next strategic priority. We continue to drive growth through CareScout, which represents a significant long-term opportunity given the growing demand for aging care, including from 70 million baby boomers now aged 62 to 80 in 2026. We are building a comprehensive aging platform designed to help people understand, find and fund the quality of long-term care they need, all in one place.

We do this in 3 ways: First, comprehensive solutions, providing access to a full suite of services across the aging journey from care planning and guidance to finding providers to funding care. Second, expert guidance, leveraging our data, technology and decades of claims experience to match individuals with the right care provider options and help them make informed decisions with confidence.

And third, technology-enabled human connection, delivering that expertise through trained advisers who provide personalized local support and helping families navigate what is often a complex, fragmented and emotional process. Under Samir Shah's leadership, we are integrating these capabilities across the platform to deliver a seamless experience and build a capital-light, scalable business for long-term growth.

During the first quarter, we continued to expand the CareScout Quality Network or CQN, at an impressive pace across both home care and senior living communities. In the first quarter, we added our first senior living communities to the network. This development marks another important step in broadening access beyond home care and expanding options available to consumers in the marketplace.

As we continue to integrate senior living communities from our acquisition of Seniorly, we are building a more comprehensive network that can support people across different stages of the aging journey. By the end of 2026, we anticipate having more than 1,000 home care locations and approximately 2,000 senior living communities as part of the CQN. As a reminder, our revenue model for senior living communities differs from our home care model with CareScout earning a one-time placement fee upon a successful move-in consistent with how the broader industry operates.

Over time, we expect this to complement our existing home care discount model and contribute to a more diversified, scalable and substantial stream of revenue in the business. In Home Care, our network now covers approximately 97% of the U.S. population aged 65 and older. We continue to see strong interest for more providers every day as we expand into additional markets and strengthen coverage in geographies with high demand.

As the network grows, we remain focused on optimizing coverage and pricing efficiency while ensuring quality, consistency and long-term scalability. We facilitated approximately 1,500 matches between care seekers and providers in the first quarter, reflecting strong sequential and year-over-year growth. This was driven in part by the expansion beyond home care matches and into senior living communities.

The Q1 figure includes our first direct-to-consumer matches, which we're making in both home care and senior living communities. While quarterly pacing may vary, we are building momentum and remain on track toward our previously discussed target of approximately 7,500 matches in 2026 compared to 3,255 matches in 2025.

As our network continues to scale and brand awareness grows, we expect to drive increased traction across the platform. We also expect a higher share of Genworth policyholders to utilize CQN providers and benefit from more efficient care coordination by our team, helping to stretch their benefit dollars further while generating claim savings for our Closed Block over time.

We also continue to work with other insurance carriers managing closed LTC blocks to leverage the CareScout Quality Network. Integrating other LTC insurance carriers, along with select affinity groups represents an important opportunity to introduce more consumers to the CareScout brand, extend our platform beyond Genworth and generate additional fee-based revenues over time.

In parallel, we are scaling our fee-for-service offerings that generate recurring revenue streams and create additional pathways for CareScout's growth. Overall, we continue to expect $25 million of CareScout service revenues in 2026, and we are making steady progress towards that goal.

Turning to CareScout Insurance. We continue to build out our differentiated product offerings and expand our distribution capabilities. Our new Care Assurance product is clearly differentiated in the LTC insurance market by giving customers and their families access to a more holistic aging experience through our services business, including access to the CareScout Quality Network, wellness support tools and care planning services. We believe this integrated approach provides a distinct advantage in a market that remains fragmented and very underserved relative to the growing demand for long-term care over time.

Looking ahead, we plan to launch our Care Assurance worksite product later this year. The worksite channel will broaden access through employers and associations. We're also developing additional offerings, including hybrid LTC insurance products with innovative designs that pair a minimum LTC benefit with low-cost fixed income and equity accounts designed for accumulation. Hybrid products offer a broader set of funding solutions designed to meet evolving customer needs and solve critical gaps in retirement income and retirement security in the marketplace.

As the U.S. population ages, CareScout will continue to broaden its capabilities with a focus on ensuring families can more easily access the support, guidance and resources they need to navigate the complexities of aging.

Turning to our third priority. We continue to actively manage our self-sustaining customer-centric Closed Block of LTC Life and Annuity products. This business is being managed with a focus on delivering high-quality policyholder experiences, maintaining capital discipline and ensuring long-term sustainability as we position Genworth for growth through CareScout.

Our Multi-Year Rate Action Plan or MYRAP remains our most effective lever for maintaining that sustainability. In the first quarter, we secured $5 million of gross incremental premium approvals. We have built on this progress in the second quarter, already achieving another $45 million. As we enter the later stages of the MYRAP program, we expect premium approvals to be lower and benefit reductions to be higher because the future premium runway is shortened as Genworth policyholders age, as shown on Appendix Slide 20.

That said, we expect full year 2026 premium approvals and benefit reductions to be broadly in line with 2025 levels, contributing approximately $1 billion of economic value on a net present value basis. Since the program began in 2012, we have achieved approximately $34.5 billion in net present value through a combination of premium increases and benefit reductions. We remain focused on executing this program with discipline to ensure the long-term self-sustainability of the Closed Block.

Next, I'll provide a brief update on the AXA litigation. The appeal hearing is scheduled for July 21 through 23. We expect the Court of Appeal to reach a decision within approximately 3 to 6 months of that hearing. If the judgment is ultimately upheld and all appeals are favorably resolved, we expect to recover a total sum of approximately $750 million, subject to exchange rates at that time. We do not expect to pay taxes on this recovery.

As we've said previously, any potential recoveries are not factored into our capital allocation plans. If proceeds are received, we will deploy them in line with our existing priorities, investing in CareScout, returning capital to shareholders and reducing debt.

Before I turn it over to Jerome, I'd like to briefly address the current macroeconomic backdrop. We continue to closely monitor an uncertain and dynamic external environment, including uneven consumer spending and the potential for higher inflation and interest rates. We believe Genworth is well positioned to navigate a range of market conditions in 2026 and beyond, Enact continues to operate from a position of strength, supported by disciplined underwriting and a strong capital position and provides Genworth with strong free cash flow.

We continue to integrate new technology and operational capabilities across the organization, enabled by artificial intelligence. We have several AI and agentic initiatives underway with key partners focused on improving efficiencies in claim management, enhancing the policyholder and customer service experience and supporting more scalable growth across CareScout. Even as we advance these capabilities, our approach remains grounded in the tech-enabled human-centered support our policyholders rely on throughout the aging journey.

In closing, we're pleased with the progress we've made in the first quarter across our strategic priorities, supported by another quarter of strong performance from Enact. As we move towards the midway point of the year, we remain focused on disciplined execution and building long-term value for our shareholders. And with that, I'll turn the call over to Jerome.

Thank you, Tom, and good morning, everyone. We entered 2026 with strong momentum, and as Tom highlighted, continue to execute against our strategic priorities while enhancing our financial flexibility and positioning the company for long-term success.

Enact's first quarter results reflected continued strategic and operational strength, underpinned by its strong balance sheet and liquidity profile that continue to create value and fuel our capital allocation priorities. We also made further progress scaling CareScout and strengthening the self-sustainability of our Closed Block.

I will begin with an overview of our first quarter financial results and key drivers, followed by a discussion of our investment portfolio and holding company liquidity. I will then cover our capital allocation priorities and provide an update on our guidance for 2026 before we open the call for Q&A.

Starting with the financial results on Slide 9. As Tom mentioned, going forward, we are updating the presentation of our consolidated earnings to exclude results from our Closed Block segment to better align with our strategy and capital allocation framework, managing the Closed Block on a stand-alone basis. We will continue to report the adjusted operating income for the Closed Block separately in our disclosures.

First quarter adjusted operating income, excluding the Closed Block, was $109 million, driven by strong performance in Enact, partially offset by losses in Corporate and Other. Enact delivered another strong quarter of performance with adjusted operating income of $140 million to Genworth.

Results included a pretax reserve release of $39 million, reflective of continued strong cure performance. Results were down versus the prior quarter, reflecting a lower reserve release and up versus the prior year, reflecting increased investment income and favorable expenses. In Corporate and Other, we reported an adjusted operating loss of $31 million for the quarter, reflecting continued investment in CareScout and ongoing holding company debt service. The prior quarter included a benefit from favorable tax-related items.

Our Closed Block segment reported an adjusted operating loss of $32 million. This was driven by a liability remeasurement loss related to the actual variances from expected experience or A/E of $36 million pretax, primarily in LTC. Our results in LTC were favorably impacted by net insurance recoveries in the quarter of $65 million pretax.

Mortality in both LTC and life insurance was seasonally higher sequentially but lower than the prior year. While results can vary quarter-to-quarter, we expect to see A/E losses in the range of approximately $300 million for the full year 2026. As a reminder, these GAAP fluctuations do not impact our cash flows, economic value or how we manage the business.

Now taking a closer look at Enact's performance underlying its strong financial results beginning on Slide 10. New insurance written of $13 billion in the quarter decreased versus the prior quarter, primarily based on seasonal trends, but increased versus the prior year as a result of lower interest rates early in the quarter.

Primary insurance in-force increased year-over-year to $272 billion, supported by the growth in new insurance written and continued elevated persistency. Earned premiums in the quarter were $243 million, down slightly versus the prior quarter and prior year.

As shown on Slide 11, Enact's favorable $39 million pretax reserve release drove a loss ratio of 15%. Enact's estimated PMIERs sufficiency ratio remained strong at 162% or approximately $1.9 billion above requirements. Genworth's share of Enact's book value, including AOCI, was $4.3 billion at the end of the first quarter, down slightly from $4.4 billion at year-end 2025, driven by movements in the market value of the investment portfolio as a result of increased interest rates.

While maintaining its strong balance sheet, Enact has continued to deliver significant capital returns to Genworth. We received $99 million from Enact in the first quarter. Looking ahead, Enact remains well positioned to navigate the current macroeconomic environment, supported by its strong balance sheet and disciplined underwriting.

Turning to our Closed Block segment on Slide 12. We continue to proactively manage and reduce LTC risk and improve self-sustainability through prudent in-force management, including benefit reductions and premium rate increases. As of the end of the first quarter, we had achieved approximately $34.5 billion of benefit reductions and premium increases on a net present value basis since 2012.

As part of our multiyear rate action plan, we offer a suite of options to help policyholders manage premium increases while maintaining meaningful coverage. These benefit solutions enable us to reduce our exposure to certain higher cost features such as 5% compound benefit inflation options and large benefit pools.

Cumulatively, about 61% of policyholders offered a benefit reduction have elected to take one, lowering our long-term risk. These initiatives have helped reduce our exposure to the riskiest LTC policy features. Notably, our exposure to the 5% compound benefit inflation option has decreased below 36%, down from 57% in 2014, and the percentage of our policies with lifetime benefits has decreased to 11%.

We remain committed to managing GLIC and its subsidiaries as a closed system, leveraging their existing reserves and capital to cover future claims. We will not inject capital into these companies. And given the long-tail nature of our LTC insurance policies with peak claim years still over a decade away, we also do not expect capital returns.

Turning to Slide 13. Our investment portfolio remains resilient and is conservatively positioned. The majority of our assets are in investment-grade fixed maturities held to support our long-duration liabilities. New money yields continue to exceed those on sales and maturities with cash in our life insurance companies being invested at yields of approximately 6.3% for the quarter.

Our alternative assets program is largely comprised of diversified private equity investments and has targeted returns of approximately 12%. Quarterly realizations fluctuate with first quarter transactions affected by geopolitical tensions. We remain committed to growing our alternative assets portfolio within regulatory limitations due to its robust track record of returns, diversification benefits and natural fit with long-term liabilities.

Next, turning to the holding company on Slide 14. We ended the quarter with $166 million in cash and liquid assets. When evaluating holding company liquidity for the purpose of capital allocation and calculating the buffer to our debt service target, we excluded approximately $50 million of cash held for future obligations, including advanced cash payments from our subsidiaries.

Moving to capital allocation on Slide 15. Our priorities remain unchanged. We will continue to invest in long-term growth through CareScout, return cash to shareholders through our share repurchase program when our share price trades below intrinsic value and opportunistically retire debt.

During the quarter, we repurchased $66 million of shares at an average price of $8.61 per share. We repurchased an additional $19 million through April 30. We also retired approximately $5 million of principal debt in the quarter, bringing our holding company debt down to $778 million. We maintain a disciplined capital structure with a cash interest coverage ratio on debt service of approximately 9x.

I'll now turn to our outlook for 2026 and provide an update on the guidance we shared in February on our fourth quarter earnings call. As Enact announced yesterday, it has increased its quarterly dividend and continues to expect to return approximately $500 million of capital to its shareholders in 2026. Based on our approximate 81% ownership position, we continue to expect to receive around $405 million from Enact for the full year.

Second, we continue to create value for our shareholders through our share repurchase program. For the full year 2026, we now expect to allocate between $195 million and $225 million to share repurchases. As we have said before, this range may vary depending on market conditions, business performance, holding company cash and our share price.

Third, turning to CareScout. As Tom indicated, in the services business, we continue to target approximately 7,500 matches in 2026, including matches across both home care providers and senior living communities. CareScout Services generated $6 million in revenue in the first quarter, and we continue to expect revenue in this business of $25 million for the full year.

We plan to invest approximately $50 million to $55 million in services in 2026, as we continue scaling the business and expanding its reach. These investments will support the continued build-out of our technology platform, the addition of new products and care settings and growth across both consumer and B2B channels. We are also deepening carrier partnerships and enhancing operational infrastructure to support higher volumes, recurring revenue and long-term scalability.

For insurance, we currently do not expect any additional investments in 2026 following our $85 million investment to launch our inaugural product last year. As we expand our product suite, grow our distribution network and sales levels and refine our operating platform, we'll make appropriate investments in the business. We have made good progress overall with CareScout and remain confident in its continued growth in 2026. As we have noted previously, scaling these businesses and achieving breakeven will take time.

In closing, we are delivering on our strategic priorities and enhancing financial flexibility while proactively managing our liabilities and risk. Our focus remains on driving durable growth through Enact and CareScout, which serve as the foundation of our long-term value creation strategy. At the same time, we are strengthening the self-sustainability of our Closed Block, maintaining our commitment to return capital to shareholders through share repurchases and opportunistically retiring debt. These actions position Genworth to deliver long-term value for our shareholders. Now let's open up the line for questions.

[Operator Instructions] We'll go first to a question from Joshua Esterov with CreditSights.

So modest decline in the estimated RBC ratio at GLIC at quarter end. And I know you folks have been adamant for years that no capital contributions to life entities are planned. But I'm wondering if there's like a specific RBC ratio level in which you'd either be forced or considered to contribute capital or alternatively, if there's a lever you can pull to bolster RBC in the life units to the extent it becomes necessary without capital contribution?

Thank you for your question, Josh. Our target is to have RBC at 250% or more. And so we're very comfortable with where we are. Obviously, there -- the RBC did go down in the first quarter because of the statutory loss. But that's where we have quite a bit of room. There's no requirement from a regulatory perspective. I mean, we're well above at almost 3x required capital, what the regulators require.

Tom, can I just add. So Josh, thanks for the question. Look, we felt some pressure in the first quarter, as Tom indicated, 289%, still a good ratio. We did see mortality. It went up in the first quarter, but it certainly wasn't at the level that we would have expected. And I think obviously, that impacted LTC, but I believe that was felt across the industry as well. And we also saw some life pressure from our post-level term block coming through and some reserve build. We do not expect that to continue.

So what I would highlight to you is we're going to continue to execute our strategy. And that strategy is and our statutory results are premised upon our ability to get the multiyear rate action plan, which, as Tom highlighted, has been very successful. Our benefit solutions and our Live Well | Age Well program as well as our CareScout Quality Network. So we are active in achieving those benefits, and those will be key drivers of our RBC and our statutory results going forward.

And if you don't mind, maybe I can sneak in one more here and pivot a little bit. And I appreciate the color on the commentary you gave earlier on the investment portfolio front. But wondering if maybe you can give a little bit more detail or color on the private credit portfolio. Maybe even just at a high level, some of the characteristics either from a ratings or asset class or sector basis? And maybe you can just briefly tell us how you perhaps source the investments or any of the partnerships you might have to bolster your private credit capabilities.

Sure. Thanks for the question. Kelly Saltzgaber is on the call, so we'll ask Kelly to comment.

Yes. Thanks, Josh, for the question. So private credit has been referred to in the media, really, as referring to what we call direct lending or middle market loans, which are private loans to small companies. And we have very minimal exposure there. We have about 1% of our portfolio is in middle market loans. And we access that market through a well-regarded and experienced external manager through a separately managed account.

And our direct lending portfolio is only -- it actually has no exposure to what is classified as the software category. And so very different from what you're reading about with some of the BDCs. Now we have other private investments. We have been in the private placement market for decades and that's an investment-grade portfolio.

We also have recently started accessing private asset-based finance, also primarily through external managers, and that's an investment-grade mandate. So an average rating of A or BBB. And we also access the private equity market through -- mainly through advisers that are very experienced in the space, including Neuberger and JPMorgan. So I'd say our private exposure is almost exclusively investment grade with the exception of the 1% in middle market loans, which I mentioned.

[Operator Instructions] It appears there are no questions at this time. Ladies and gentlemen, I will now turn the call back over to Mr. McInerney for closing comments.

Thank you all very much for joining the call today and for your continued support and interest in Genworth. At this point, I'll turn the call back over to Jess to have her close it.

Thank you, sir. Ladies and gentlemen, that will conclude the call. We thank you for your participation. You may disconnect at this time.

Good morning, ladies and gentlemen, and welcome to Genworth Financial's Fourth Quarter 2025 Earnings Conference Call. My name is Lisa, and I'll be your coordinator today. [Operator Instructions]. As a reminder, the conference is being recorded for replay purposes. [Operator Instructions]. I would now like to turn the call over to Christine Jewell, Head of Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Genworth's Fourth Quarter 2025 Earnings Call. The slide presentation that accompanies this call is available on the Investor Relations section of the Genworth's 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 Thomas McInerney, President and Chief Executive Officer; and Jerome Upton, Chief Financial Officer. Following our prepared remarks, we will open the call for questions. In addition to our speakers, Jamala Arland, President and CEO of our Closed Block Insurance business; Gregory Karawan, General Counsel; Kelly Salsgaber, Chief Investment Officer; and Samir Shah, CEO of CareScout Services, will also be available to take your questions.

During this morning's call, 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. Today'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. Additionally, references to statutory results are estimates due to the timing of the statutory filings.

And now I'll turn the call over to our President and CEO, Tom McInerney.

Thank you, Christine. And thank you for taking the time to join our fourth quarter earnings call this morning. Genworth reported net income of $2 million with adjusted operating income of $8 million. This quarter's results were driven primarily by strong performance from Enact, which contributed $146 million to Genworth's adjusted operating income partially offset by a loss of $114 million in our Closed Block, primarily from LTC. Our estimated pretax statutory income for our U.S. Life Insurance companies was approximately $71 million for the full year including unfavorable impacts to annuities from equity market and interest rate movements.

We will provide full statutory results in our annual filings later this month. Genworth ended the quarter with a healthy liquidity position holding $234 million of cash and liquid assets. We also continue to advance our strategic priorities in 2025. First, we continue to create shareholder value through Enact's growing market value and capital returns. Our approximately 81% ownership taken Enact remains a key source of cash to Genworth with $407 million received in 2025 and fueling our share repurchases and investments in CareScout.

Supported by the strong cash flows, we continue to execute our share repurchase strategy throughout the fourth quarter making progress on our $350 million authorization announced in September. In 2025, we repurchased $245 million of shares. Since May 2022, we have repurchased approximately $828 million of stock as of February 20, reducing shares outstanding by about 24% from 511 million to 388 million. These share repurchases create meaningful long-term value for shareholders by deploying capital at prices we believe represent a discount to Genworth intrinsic value.

Turning to our second strategic priority. CareScout represented our long-term growth strategy and our vision for how agent care should work in the future. We are building an innovative, consumer-focused platform that helps people understand, find and fund the quality long-term care they need while creating a capital-light, scalable, data-driven business for the future. CareScout is designed to engage families across the aging journey from navigating care decisions today to preparing for future needs. Our services business often begins with adult children, helping their parents find care many of whom will become the next generation of long-term care insurance customers.

Our insurance products are being built with that in mind, combining financial protection with access to personalized services when customers and their family members need them the most. This integrated approach allows us to support families in moments of urgency while building long-term relationships and recurring revenue streams. Underpinning it all is continued investment in technology and AI. We are leveraging and plan to continue exploring additional capabilities for AI-enabled tools and automation to improve human-centered customer service at scale in order to strengthen underwriting risk management and enable more efficient capital deployment and product development and marketing.

Together, these and other capabilities will position CareScout to lead in a large and growing addressable market and to redefine how long-term care is delivered over time.

Let's begin with a closer look at CareScout Services, where we made significant progress in 2025, maintaining a rapid pace of network expansion. CareScout Quality Network now includes roughly 790 home care providers with more than 1,000 locations nationwide, covering 97% of the U.S. population aged 65 and older. Each provider on the network must meet CareScout's rigorous credentialing standards, ensuring quality and consistency for people who rely on our services.

The team executed well in the fourth quarter facilitating 925 matches between LTC policyholders and home care providers in our network. We ended the year with 3,255 matches nationwide, well above our original target of 2,500 and in our updated estimate of 3,000 and representing a 3x increase versus 2024. In the fourth quarter, we closed the acquisition of Seniorly a leading platform with a large network of senior living communities that helps families with care planning and placement. Integration is progressing well and is expanding our reach into the direct-to-consumer market. Seniorly's team has brought deep industry and consumer experience, accelerating our efforts to scale beyond Genworth's pre-existing policyholder base and add senior living options to our network. Credentialing of major national senior living providers is underway and is expected to be complete by the end of 2026.

In Care Plans, our fee-for-service offering that delivers personalized guidance. We continue to see momentum with consumers and B2B audiences. Notably, we now have the ability to deliver care plans, both in person and virtually on a nationwide basis. Care Plans are built on our proven and growing assessment capability, enabling faster and more consistent care recommendations at scale. We continue to expand partnerships with employee assistance programs and carriers with referral volumes exceeding our expectations in 2025. Assessment volumes continue to grow and are expected to scale over time, supported by strong operational execution and cost discipline. Care Plans and assessments enable recurring fee-for-service revenue opportunities, supported by increased capabilities due to expanded distribution across carrier, employer and EAP partnerships.

In 2026, we will continue to expand the range of services CareScout offers and the number of customers we serve. As the CareScout Quality Network continues to expand and brand awareness grows, we will drive increased traction with consumers. We also expect more of Genworth's long-term care claimants to choose CQN providers stretching policyholders' dollars further while generating claim savings for Genworth over time.

Turning to the Insurance business. We successfully launched Care Assurance, CareScout's inaugural stand-alone LTC insurance product in the fourth quarter. Car Assurance is now live in 40 states with 4 more pending approval. The launch of Care Assurance reestablishes our presence in the long-term care insurance market and lays the foundation for disciplined, scalable growth. We are actively engaging with partners to broaden our distribution channels and plan to launch worksite and association group offerings later this year.

Importantly, Care assurance has been designed and priced for the long term, reflecting the evolution of the market and a more conservative and durable product structure aligned with today's LTC environment. Car Assurance will be differentiated through a variety of additional services, which create a whole list of care experience for our customers and their families, such as access to the CQN, wellness support tools and care planning services. This is a unique offering in today's market, blending coverage and services in a way others don't.

To support sales, we're actively educating and equipping distributors to position Care Assurance effectively with our clients. While we expect adoption to build gradually, we are confident this product will create significant value for consumers and distribution partners elect. From services to insurance CareScout is building a human-centered tech-enabled platform to simplify and dignify the agent journey. Our approach combines AI and digital technology with a human touch, and reflects our deep expertise in delivering high-quality, personalized support for long-term care decisions. As we expand in the new care settings, products and customer segments, will continue to grow organically while evaluating select inorganic add-on opportunities like Seniorly.

Turning to our third strategic priority. We continue to actively manage our self-sustaining customer-centric LTC, Life and Annuity legacy business. Notably, this business is now focused exclusively on serving existing policyholders with no new sales and is being managed as a closed block. Our priorities here are clear. We aim to deliver a high-quality policyholder experience maintain capital discipline and ensure long-term sustainable risk management. We are also leveraging AI and digital technology to drive more efficient and lower cost processes around customer service and operating performance. Jerome will provide additional detail on the resegmentation of our closed block later in the call. Genworth secured $100 million of gross incremental LTC premium approvals in the fourth quarter and $209 million for the full year in 2025 with average premium increases of 35.6% and 38%, respectively. We are in the 13th year of a multiyear rate action plan which has achieved $34.5 billion in net present value since 2012, driven primarily by benefit reductions and premium increases.

The MYRAP continues to be our most effective lever for stabilizing our closed block of business.

Next, I'll provide a brief update on the AXA litigation. As shared on our second quarter earnings call, the U.K. High Court issued a favorable judgment in July, Santander was granted permission in October to appeal the claim on which AXA prevailed, and AXA was recently granted permission to cross appeal with respect to 1 of the claims, which was denied. The hearing on the appeal has now been set for July 21 through 23 of this year, and we expect the court of appeal to reach a decision within approximately 3 to 6 months of the hearing. If the ruling has upheld, we expect our total recoveries to be approximately $750 million, subject to exchange rates at the time. We do not expect to pay taxes on this recovery and recoveries are not factored into our capital allocation plans, but if and when received would be deployed in line with our priorities, investing in CareScout, returning capital to shareholders and reducing debt.

Before I turn it over to Jerome, I'd like to briefly reflect on the broader LTC environment. Recent federal budget debates have underscored a growing bipartisan focus on health care affordability and the long-term sustainability of public programs like Medicaid, particularly as the U.S. population ages. The very high LTC-related costs continue to be a meaningful part of that conversation. As demand continues to rise much faster than available resources, families are being asked to navigate an increasingly complex care landscape for their loved ones. This dynamic reinforces our conviction that the future of LTC and will require not only flexible insurance and financing options, but also greater transparency, coordination, accessibility and support services for policyholders and their families.

We are designing CareScout to help aging Americans and their families understand, find and from the long-term care they need as the nearly 70 million baby boomers continue to age, CareScout was served as a complete solution in a very fragmented market built for the realities of today and in the future.

Now let me turn the call over to Jerome to walk you through our financials and business trends in more detail.

Thank you, Tom, and good morning, everyone. I am pleased with our strong performance in 2025. We continue to advance our strategic priorities and further position the company for long-term success. Our disciplined capital allocation balance returning capital to shareholders reinvesting in opportunities that support long-term growth through CareScout and continuing to strengthen our financial flexibility. Enact delivered another quarter of strong performance supported by a strong balance sheet and capital and liquidity positions with returns that enabled our own capital allocation priorities. At the same time, we continue to make meaningful progress advancing CareScout and enhance the self-sustainability of our Closed Block.

I will begin this morning's discussion with our fourth quarter and full year financial results, followed by an update on our annual assumption reviews before covering our investment portfolio and an update on our holding company liquidity. Finally, I will share some guidance for 2026 before we open the call for Q&A.

Before I cover the financial results in more detail, I would like to discuss the resegmentation we completed in the quarter to report our long-term care, life and annuity businesses under a new Closed Block segment. With the launch of our new CareScout Care Assurance product, we formally cease LTC sales in Genworth Life Insurance Company or GLIC. In recent years, there was very limited business being issued from GLIC. And now that new policies will be issued from CareScout, this new presentation better aligns with the way we run the business, including our continued commitment to manage these entities as a closed system.

This is a presentation change only and does not change the economics of long-term care, life and annuity products. We will continue to provide a breakdown of our results by product within the new Closed Block segment.

Now turning to the financial results on Slide 9. Fourth quarter adjusted operating income was $8 million, driven by strong performance in Enact, offset by losses in our closed block in corporate and other. Enact delivered another strong performance in the quarter with adjusted operating income of $146 million to Genworth. The net reserve release of $60 million was higher than the prior quarter and prior year reflecting continued strong pure performance.

Our Closed Block reported an adjusted operating loss of $114 million. This was driven by LTC with an adjusted operating loss of $159 million as a result of a liability remeasurement loss related to the actual variances from expected experience or A/E as well as the net unfavorable impact of assumption updates. The unfavorable LTC A/E of $124 million pretax was driven primarily by higher claims and lower terminations in the CAP cohorts.

Life Insurance and Annuities reported adjusted operating income of $13 million and $32 million, respectively, both reflecting the favorable impacts of assumption updates. In Corporate and Other, we reported an adjusted operating loss of $24 million for the fourth quarter, reflecting continued investment in CareScout and ongoing holding company debt service partially offset by favorable tax items.

Turning to our full year results on Slide 10. Adjusted operating income for 2025 was $144 million, driven by an Enact. 2025 was another year of strong execution and value creation at Enact with adjusted operating income to Genworth of $558 million. Genworth share of Enact book value, including AOCI, has increased to $4.4 billion at year-end 2025, up from $4.1 billion at year-end 2024. These results underscore Enact's continued contribution to Genworth's earnings and value. Our Closed Block segment reported an adjusted operating loss of $317 million in 2025. In LTC, the adjusted operating loss of $326 million was primarily driven by a remeasurement loss, including unfavorable A/E and cash flow assumption updates in the CAP cohorts.

In Life, the adjusted operating loss of $66 million for the year reflected continued block runoff, partially offset by a favorable impact from assumption updates. Annuities income of $75 million was driven by favorable assumption updates and spread income, though lower than the prior year as the block runs off. Since adopting LDTI, the Closed Block has experienced A/E losses driven by short-term experience relative to long-term assumptions. In 2025, these losses averaged $75 million per quarter and we could continue to see losses at this level in 2026.

However, results may vary with seasonal trends around the $75 million average as we typically experience net favorable impacts from higher mortality in the first quarter that trend worse through the remainder of the year. As a reminder, fluctuations in our U.S. GAAP financial results do not impact actual cash flows long-term economics or the way we manage the closed block. Rounding out the full year performance, Corporate and Other reported a $97 million loss for the year, which was in line with the prior year reflecting continued investments in CareScout and debt service expense, partially offset by favorable tax items in the current year.

Now taking a closer look at IMAX performance underlying its strong financial results, beginning on Slide 11. New insurance written of $14 billion in the quarter increased versus the prior quarter and prior year. Primary insurance in force grew slightly year-over-year to $273 billion, supported by both the growth in new insurance written and continued elevated persistency. Earned premiums in the quarter were $245 million relatively flat to the prior quarter and prior year. As shown on Slide 12, an net favorable $60 million pretax reserve release drove a loss ratio of 7%. The An estimated PMR sufficiency ratio remained strong at 162% or approximately $1.9 billion above requirements. -- while maintaining its strong balance sheet and that has continued to deliver significant capital returns to Genworth, we received $127 million from Act in the fourth quarter.

For the full year, an act generated a total of $407 million in proceeds to Genworth, basically in line with our expectations for the year. an act announced earlier this month that it received Board approval for a new share repurchase authorization of $500 million. Genworth will participate in the share repurchase program in order to maintain its overall ownership at approximately 81%. In Act ended the year with a strong balance sheet, well positioned for another successful year in 2026. -- turning to a discussion of our closed blocks, starting on Slide 13.

We continue to proactively manage LTC risk and maintain and improve self-sustainability in the closed block through a comprehensive set of in-force management actions. Benefit reductions and premium rate increases continue to be our most effective tools for mitigating tail risk in LTC. As of the end of the fourth quarter, we have achieved approximately $34.5 billion of in-force rate actions on a net present value basis since 2012. This includes $1 billion related to rate increase approvals this year. These approvals were lower than in recent years, in line with our expectations following the large approvals we've secured previously.

As part of this program, we offer a suite of options to help policyholders manage premium increases while maintaining meaningful coverage. These options enable us to reduce our exposure to certain higher cost features such as 5% compound benefit inflation options and large benefit pools. About 61% of our policyholders offered a benefit reduction have elected to take one, lowering our long-term risk. These initiatives have helped reduce our exposure to the riskiest LTC policy features. Notably, our exposure to the 5% compound benefit inflation option has decreased to less than 36% and down from 57% in 2014, and the percentage of our policies with lifetime benefits has decreased to 11%.

Benefit reductions continue to provide risk resiliency beyond the point of election helping to protect against potential assumption pressure in the future. The value recognized from benefit reductions already achieved increased by $2.3 billion in conjunction with our annual assumption updates this year and could continue to increase over time with any future changes, the liability assumptions and as we approach peak claim years.

Looking ahead, the remaining value we currently have left to achieve is approximately $5 billion. We will continue to work with state insurance regulators to maintain and strengthen our claims paying ability through premium rate increases while supporting customers with a wide range of benefit reduction options as demonstrated by our strong track record over the past 13 years. In addition to the rate increase program and other benefit reduction options, we're reducing risk in innovative ways through the CareScout Quality Network and our Live Well Age Well intervention program. The CareScout Quality Network provides direct claim savings and mitigates inflation risk via provider discounts. We continue to expect to benefit from these savings of $1 billion to $1.5 billion on a net present value basis in our Closed Block.

Our Live Well Age Well program delivers value for policyholders while also driving claim savings over time by delaying the onset of a claim. We continue to see strong engagement from our policyholders participating in the program. Connecting with our policyholders on Live Well Age Well is also an opportunity to refer them to the CareScout Quality Network which can further reduce the risk in our closed LTC block. We remain confident in the value these initiatives are expected to deliver to our in-force management program over time, and we'll continue to monitor their progress as they mature before incorporating them into our assumptions.

As we have said before, we are committed to managing GLIC and its subsidiaries as a closed system, leveraging their existing reserves and capital to cover future claims. We will not put capital into these companies. And given the long-term nature of our LTC insurance policies with peak claim years still over a decade away, we also do not expect capital returns.

Next, turning to Slide 14. We completed our annual assumption reviews for the closed block in the fourth quarter. We are pleased with assumptions held up in the aggregate, and we remain confident in our ability to manage these companies as a closed system. Overall, the updates resulted in a net unfavorable impact to the GAAP adjusted operating loss in the Closed Block segment of $6 million after tax. As part of this year's review, we updated the LTC healthy life and near-term cost of care inflation assumptions to better align with recent trends. These updates also recognize favorable claim termination experience and reflected continued favorable experience in the future rate increase and benefit reduction outlook.

These changes resulted in a net unfavorable $47 million pretax impact to the adjusted operating loss. The favorable $15 million pretax impact to life insurance adjusted operating income was related to updates to reflect the recent interest rate environment. Annuity assumption changes resulted in a favorable $25 million pretax impact to adjusted operating income primarily related to mortality. The impacts to statutory pretax income were primarily driven by favorable changes to the prescribed assumptions for certain universal life and term universal life products with secondary guarantees including mortality improvement. This was partially offset by unfavorable impacts in LTC and annuities.

Slide 15 shows the pretax statutory income for the U.S. Life Insurance companies of $3 million in the quarter, including the net favorable impact of assumption updates. On a full year basis, we had pretax income of $71 million, down from the prior year where results included a $355 million benefit from LTC legal settlements, which were materially complete by the end of 2024. Though the total statutory earnings from in-force rate actions decreased as a result of the lower settlement benefits, we continue to see higher income from IFA premiums as we successfully execute and implement our rate increase program.

GLIC's consolidated risk-based capital ratio was 300% at the end of 2025 with capital and surplus of $3.6 billion. This was down from 306% at the end of 2024 and reflecting higher required capital as we continue to grow our limited partnership portfolio, partially offset by statutory earnings in the year. The cash flow testing margin in GLIC remained in the $0.5 billion to $1 billion range at the end of 2025. Our final statutory results will be available on our investor website with our annual filings at the end of this month.

Turning to our investment results on Slide 16. Our portfolio continued to perform well in a dynamic market environment. We remain primarily allocated to investment-grade fixed maturities that support our long-duration liabilities. Reinvestment activity continued to benefit the portfolio with new money yields again exceeding those on sales and maturities. New investments made within our life insurance companies, including alternatives, achieved yields of approximately 6.5% for the quarter. Net investment income benefited from solid base portfolio performance along with steady contributions from our alternative asset program, primarily comprised of diversified private equity, our alternative assets generated approximately 9% returns for the year.

We continue to monitor our commercial real estate exposure. The portfolio is concentrated in high-quality investment-grade assets with conservative office exposure and performance has remained stable.

Looking ahead, our liability structure supports a stable liquidity profile, allowing us to invest for the long term, hold high-quality assets through cycles and grow alternatives prudently within regulatory limits.

Next, turning to the holding company on Slide 17. We ended the year with $234 million in cash and liquid assets. When evaluating holding company liquidity for the purpose of capital allocation and calculating the buffer to our debt service target, we exclude approximately $127 million cash held for future obligations including advanced cash payments from our subsidiaries.

Moving to Slide 18. Our capital priorities remain unchanged. We will continue to invest in long-term growth through CareScout, returned cash to shareholders through our share repurchase program when our share price trades below intrinsic value and opportunistically retire debt. We invested $85 million in the CareScout Insurance Company in 2025 to support regulatory requirements as we advanced our strategy to launch modern funding solutions for long-term care. Additionally, we invested approximately $50 million to fund working capital in CareScout Services in 2025 as we scale the platform, expanded its customer base and position the business for sustainable long-term growth.

We also invested $15 million through the purchase of Seniorly and we are very pleased with the value of that investment and the progress of the integration. We continue to return significant capital to shareholders, repurchasing $245 million of shares in 2025, including $94 million in the fourth quarter at an average price of $8.66 per share. We also repurchased an additional $38 million through February 20, 2026.

Finally, we also retired approximately $7 million of principal debt in 2025 for $6 million in cash, bringing our holding company debt down to $783 million. We maintain a disciplined capital structure with a cash interest coverage ratio on vet service of approximately 8x. Building on the strong execution of our strategy and disciplined capital deployment in 2025, I'll now turn to our outlook and walk through some guidance and how we'll continue this momentum into 2026.

First, as indicated on its earnings call earlier this month, Enact expects to return approximately $500 million of capital to its shareholders in 2026. Based on our approximately 81% ownership position, we expect to receive around $405 million from Enact for the full year. Second, we continue to create value for our shareholders through our share repurchase program. For the full year 2026 we expect to allocate between $175 million and $225 million to share repurchases. As we have said before, this range may vary depending on market conditions, business performance holding company cash and our share price.

Third, turning to CareScout, in the Services business, building on the success of our match growth in 2025 and we are targeting approximately 7,500 matches in 2026, including matches to providers in both the home care and assisted living space. In addition to matches, we are also sharing our first revenue outlook. For the full year 2026, we expect revenue of at least $25 million from the Services business. This reflects growing external demand as well as the revenue contribution from our legacy insurance companies, which continue to play a meaningful role as we scale the platform. We plan to invest approximately $50 million to $55 million in CareScout Services in 2016 as we continue scaling the business and expanding its reach.

These investments will support the continued build-out of our technology platform, the addition of new products and care settings and growth across both consumer and B2B channels. We are also deepening carrier partnerships and enhancing operational infrastructure to support higher volumes, recurring revenue and long-term scalability. Following our $85 million investment to launch CareScout Insurance in 2025, which funded regulatory capital and start-up costs, we expect our incremental investment in 2026 to be much lower. The level of investment will vary based on sales volume and mix, investment performance and operating expenses associated with scaling the business. We are pleased with the progress we've made in CareScout this year and our continued expected growth in 2026.

As we have said previously, it will take time to scale these businesses and reach breakeven. In closing, we are delivering on our strategic priorities, while proactively managing our liabilities and risk. As we look to the year ahead, our focus remains on driving durable growth through Enact and CareScout which serve as the foundation of our long-term value creation strategy. Our 2025 achievements have improved Genworth's financial strength, evidenced by our ratings upgrade from Moody's and positioned us well for 2026. We have greater financial flexibility and continued confidence in our long-term strategy, including our investment in growth through CareScout, our commitment to return capital to shareholders through targeted share repurchases and opportunistic debt retirement.

Now let's open up the line for questions.

[Operator Instructions] While the queue is gathering, I will turn the call back to Ms. Jewell to read questions received via e-mail.

Thank you, Lisa. We received a question around the importance of offering both services and insurance under the CareScout umbrella and why it makes sense to invest in both at the same time. Tom, can you please provide some additional color around this one?

I think that's a very important question about CareScout's future growth. I'd start by saying the LTC market is fragmented. OTC Care is very expensive, and the annual cost of care inflation is significant. as shown in the CareScout cost care survey that we've been doing for about 20 years. CareScout is the only LTC competitor that can deliver the full value chain in the LTC ecosystem. First, CareScout Services is focused on delivering LTC care advice, providing assessments of LTC care needs, working with families to develop her plans and providing access to the extensive and cost-efficient CareScout Quality Network.

CareScout Services target market is the 70 million baby boomers, 95% of whom never bought LTC insurance. CareScout Services will help these baby boomers determine the care they need and help them find care providers and the 20% discounts from providers in the CareScout Quality Network will make the LTC care more affordable. For CareScout Insurance, the very large population segments of the children and grandchildren of the baby boomers are about to find out how difficult it is to navigate the LTC ecosystem for their parents and grandparents or are looking for care for them.

And I think they'll be shocked at the very high cost of LTC care at $76,000 (sic) [ $77,000 ] a year for home care and $125,000 in some markets for nursing here care. And we think the target market for CareScout Insurance, the children and grandchildren of the baby boomers will rely on CareScout Services to help their parents and we believe they'll be interested in buying CareScout insurance and funding products to be better prepared for their own LTC care needs and the high cost when they reach their peak claim years when they were in their 80s. Samir, anything you want to add to that?

Tom, thank you for that holistic contextual answer. I agree. Look, we're in the middle of an aging crisis, which many 70-year-old plus population are feeling. And as we talk to the generation that follows after them, they are watching their long-term needs play out in front of them. Our ability to support consumers through both aspects of this through the history we've had over the last 40 years of supporting aging consumers and claims gives us a unique perspective to how consumers age and help them across their family needs, helping aging parents and in-laws with our services offering and then creating a lineup of insurance products to help folks with funding needs and services needs as they age through the process.

Great. Thank you, Tom and Samir, for that additional context. So Lisa, I'll turn the call back over to you, please, to take any live questions.

[Operator Instructions] It appears that there are no questions at this time. Ladies and gentlemen, I will turn the call back over to Mr. McInerney for closing comments.

Thank you very much, Lisa. And in closing, I want to say we're pleased with the strong progress we've made across Genworth's 3 strategic priorities in 2025, supported primarily by Enact's performance and we're excited to continue executing on those priorities in 2026. We're confident in our ability to maintain this momentum and deliver on our objectives going forward.

And I want to thank all of you who joined the call today and your investment and interest in Genworth, and we look forward to talking to you again next quarter.

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

Good morning, ladies and gentlemen, and welcome to Genworth Financial's Third Quarter 2025 Earnings Conference Call. My name is Lisa, and I'll be your coordinator today. [Operator Instructions] As a reminder, the conference is being recorded for replay purposes. [Operator Instructions].

I would now like to turn the presentation over to Christine Jewell, Head of Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Genworth's Third Quarter 2025 Earnings Call. The slide presentation that accompanies this call is available on the Investor Relations section of the Genworth website investors.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, Jamal Arland, President and CEO of our U.S. Life Insurance business; Greg Karawan, General Counsel; Kelly Salzgaber, Chief Investment Officer; and Samir Shah, CEO of CareScout Services, 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, Christine, and thank you for taking the time to join our third quarter earnings call this morning. Genworth reported solid net income of $116 million with adjusted operating income of $17 million or $0.04 per share. This quarter's results were driven again by strong performance from Enact, a mortgage insurance subsidiary, which contributed $134 million to Genworth's adjusted operating income. Our estimated pretax statutory income for our U.S. Life Insurance companies was approximately $68 million on a year-to-date basis through the end of the third quarter including the net favorable impacts to annuities from equity market and interest rate movements. Genworth ended the quarter with a healthy liquidity position, holding $254 million of cash and liquid assets.

Genworth continues to execute against our 3 strategic priorities. First, we continue to create value for shareholders through Enact's growing market value and capital returns earned through our approximately 81% ownership stake in the company, and that remains a key source of cash to Genworth, fueling our share repurchases and growth investments in CareScout. In the third quarter, we received $110 million of capital returns from Enact, bringing us to a total of $1.2 billion received from Enact since its IPO in 2021. Enact announced yesterday that it now expects to return approximately $500 million of capital to shareholders this year, highlighting the continued strong performance of its business.

Supported by these strong cash flows, we continue to execute our own share repurchase strategy through the third quarter. On September 18, we announced a new $350 million repurchase authorization underscoring the Board's confidence in Genworth's strategy and financial condition. We've made strong progress returning capital through share repurchases at prices that, in our view, represent a discount to intrinsic value.

Turning to our second strategic priority. We made additional progress in our self-sustaining and customer-centric LTC life and annuity legacy businesses. In the third quarter, Genworth secured $44 million of gross incremental premium approvals with an average premium increase of 63%. Our multiyear rate action plan has achieved $31.8 billion in net present value, since it began in 2012, driven primarily by benefit reductions and premium increases. The Myrap continues to be our most effective lever for stabilizing our legacy books of business. As we've said recently, we continue to expect approvals to be smaller this year versus last year in alignment with our plans.

Finally, we continue to drive future growth through CareScout. CareScout has made several important announcements in recent weeks as we execute on our strategy to build a comprehensive agent care platform that helps people understand, find and fund the quality of long-term care they need. In CareScout Services, we're maintaining a rapid pace of network expansion. The CareScout Quality Network now includes over 700 providers with more than 950 locations nationwide, covering over 95% of the U.S. population aged 65 and older.

This quarter, we continue to add providers in high-demand markets and areas where we can further strengthen the network. Each provider meets CareScout's rigorous crediting standards, ensuring quality and consistency for consumers who rely on our services.

CareScout Services achieved another strong quarter of matches between LTC policyholders and CQN home care providers. We have now achieved more than 2,500 matches year-to-date through October across 48 states, exceeding our original net goal for the year. We now expect to finish 2025 with over 3,000 matches. The CareScout Quality Network has expanded access to consumers in all 50 states and anyone searching for home care can visit carascout.com to filter by location and care needs to connect with quality providers. As CareScout's network expands and brand awareness grows, we expect increased utilization for consumers as well as a higher share of Genworth's long-term care claimants to choose CQN providers. This will help policyholders stretch every benefit dollar further and generate claim savings for Genworth over time.

We also continue to work with other insurance carriers managing their closed LTC blocks. 2 pilot programs are in progress, and we are in various stages of engagement with 3 other LTC insurers. We also took an important strategic step with the acquisition of Seniorly, a leading platform with a large network of senior living communities that help families with care planning and placement through its growing adviser network. The transaction has now closed and our focus is on integration to enhance and extend our value proposition to millions of aging consumers navigating aging and care decisions.

As we expand the CareScout Quality Network to span across both home care and assisted living, we can help a growing number of older adults who can no longer live alone and are seeking assisted living options. The acquisition also accelerates our expansion into the direct-to-consumer channel, allowing us to reach more aging adults and families beyond Genworth's policyholder base. Seniorly attracts thousands of consumers every month, who are exploring different agent care solutions, including senior living options. Based on their individual needs, we can now connect these consumers to the full range of CareScout offerings from personalized care plans to our national network of home care providers and assisted living communities.

Over the years, Seniorly has developed deep expertise in combining technology with a human touch to guide families through the aging journey. This approach aligns perfectly with CareScout's mission to deliver high-quality, personalized support to families navigating long-term care decisions. We believe the strong strategic and cultural alignment positions CareScout for continued growth and leadership as we build a trusted aging care platform of the future.

As the CareScout Quality Network expands to include assisted living communities, we will shift to a revenue model that is different from home care services. Unlike our ongoing discount structure for home care services, CareScout will earn a onetime placement fee when a customer successfully moves into the contracted community. This model is in line with how the broader industry operates.

Through this transition, our consumer value proposition around quality, price and service remains in place. We anticipate having a diversified group of communities in the network along different price points to enable more choice for consumers. As our care teams help aging consumers find the right community and the level of care for them, we look forward to helping families avoid unnecessary spend and enable more stable claim patterns for insurers.

In parallel with expanding the network, we're scaling additional fee-for-service offerings that generate a growing stream of recurring revenue. Our new care plans product launched in the second quarter continues to gain momentum with consumers and B2B audiences for a fee of $250, consumers receive a virtual evaluation with a licensed nurse and a personalized care plan outlining practical strategies and local resources to support their aging journey. We plan to launch an in-person evaluation option in the fourth quarter. Over time, we expect to expand both the range of services CareScout offers and the number of customers we serve.

Turning to CareScout Insurance. We advanced our strategy to roll out innovative funding solutions that address the rising need for long-term care. On October 1, we launched Care Assurance, CareScout's inaugural stand-alone LTC insurance product. This marks our foundational milestone for CareScout's Insurance business with the product now approved in 37 states with additional approvals pending. The CareScout Assurance product is easy to understand and features customizable levels of coverage, inflation protection and individualized policyholder experiences. It also provides access to the CareScout Quality Network for trusted sources of care and blends coverage with personalized service, enabling policyholders to maximize the value of every benefit dollar. We have designed the product to reduce risk, provide attractive returns and minimize the need for future premium increases.

Looking ahead towards future offerings, our next product will be an innovative hybrid LTC design that pairs a minimum LTC benefit with low-cost equity funds for accumulation. We're also advancing work site and association group offerings to broaden distribution through employers and other partners, and we hope to bring these products to market in the near term.

As we have said before, from a capital standpoint, our initial 2025 investment of $85 million represents the majority of our planned investment in CareScout Insurance over the next few years. Future capital contributions may vary based on sales level and mix in addition to investment performance and operating expenses. From services to insurance, CareScout is building a human-centered tech-enabled platform designed to simplify and dignify the aging journey. We will continue to grow organically and evaluate select inorganic opportunities as we add care settings, products and customers.

Next, I'll provide a quick update on the AXA litigation. As noted last quarter, the U.K. High Court in July issued a favorable judgment holding Santander liable for losses related to the misselling of payment production insurance. In October, Santander was granted permission to appeal the judgment. We continue to expect this process to take 12 to 18 months and remain confident in AXA's position. If the ruling is upheld, we expect to recover approximately $750 million, subject to exchange rates at that time and recoveries are not included in our capital allocation plans, but if and when funds are received, we will look to deploy them in line with our priorities, investing in CareScout, returning capital to shareholders and reducing debt.

Before I turn the call over to Jerome, I'd like to acknowledge the introduction of the supporting our seniors app bipartisan legislation authored by Senator Jackie Rosen of Nevada and Senator John Bosman of Arkansas. This measure will create a National Advisory Commission to assess and provide the Congress specific recommendations on how to improve long-term care service delivery, affordability and workforce adequacy. This legislation is long-term care needs through a comprehensive lens echoing the philosophy of CareScout, which helps aging Americans at every step of the process to understand, find and fund the long-term care they need.

I'm encouraged by policymakers increasing attention towards addressing the growing demand and costs for long-term care in the United States as a 70 million baby boomers age and we will continue to work with Congressional and other leaders to help advance responsible solutions that meet the moment.

In closing, we're pleased with the strong progress we've made across Genworth's 3 strategic priorities, supported by Enact's performance. We're confident in our ability to maintain this momentum and deliver on our objectives going forward.

Thank you, Tom, and good morning, everyone. We continue to build on our solid foundation, enhance our financial flexibility and execute on our strategic priorities. Enact once again delivered robust operating performance and maintained a strong capital and liquidity position. We also advanced our multiyear rate action plan, made significant progress advancing CareScout and continued to return capital to shareholders. I'll start with an overview of our financial performance and drivers followed by an update on our investment portfolio and holding company liquidity before we open the call for Q&A.

As shown on Slide 9, third quarter adjusted operating income was $17 million, driven by Enact. Our long-term care insurance segment reported an adjusted operating loss of $100 million, driven by a remeasurement loss primarily related to unfavorable actual variances from expected experience or A to E. The unfavorable A to E of $107 million pretax was driven by lower terminations and higher benefit utilization. As we previously noted, in 2023 and 2024, we saw an average quarterly loss of approximately $65 million in LTC related to A to E. While results can vary quarter-to-quarter, we still expect full year performance could track closely to that historical average. As a reminder, these GAAP fluctuations do not impact our cash flows, economic value or how we manage the business.

Life and Annuities reported adjusted operating income of $4 million in the third quarter. This included an adjusted operating loss of $15 million in life insurance, which improved versus the prior quarter and prior year due to favorable mortality, offset by adjusted operating income of $19 million from Annuities.

Corporate and Other reported an adjusted operating loss of $21 million for the third quarter, including a $7 million valuation allowance reduction on certain deferred tax assets. Excluding this item, results were consistent with the prior quarter and prior year, reflecting continued investment in CareScout and ongoing holding company debt service.

Now taking a closer look at Enact's third quarter performance on Slide 10. Enact delivered $134 million in adjusted operating income, down slightly versus the prior quarter and down 9% versus the prior year, reflecting a lower reserve release. Primary insurance in force grew slightly year-over-year to $272 billion, supported by new insurance written and continued elevated persistency.

As shown on Slide 11, Enact's favorable $45 million pretax reserve release drove a loss ratio of 15%. Enact's estimated PMIER sufficiency ratio remained strong at 162% or approximately $1.9 billion above requirements. Genworth share of Enact's book value, including AOCI, has increased to $4.3 billion at the end of the third quarter, up from $4.1 billion at year-end 2024. This book value growth includes a significant capital returns to Genworth, including $110 million returned in the third quarter.

Looking ahead, Enact continues to operate with solid business fundamentals and a strong balance sheet. Enact has recently taken several actions to further enhance its capital and financial flexibility. During the quarter, Enact secured a new forward quota share reinsurance agreement covering the 2027 book year and executed a new $435 million 5-year revolving credit facility. In October, Enact secured an excess of loss reinsurance agreement, also covering a portion of the 2027 book year. With these actions, underscoring the business' commitment to continuing to build financial flexibility, Enact remains well positioned to navigate the uncertainties in the macroeconomic environment.

As Tom mentioned, Enact now expects to return a total of approximately $500 million to its shareholders in 2025. Based on our approximate 81% ownership position, we expect to receive around $405 million from Enact for the full year, up from our prior estimate of $325 million.

Turning to long-term care insurance, starting on Slide 12. We continue to proactively manage LTC risk and maintain self-sustainability in the legacy U.S. life insurance companies. Our multiyear rate action plan or MYRAP continues to be our most effective tool for reducing tail risk in LTC. As of the end of the third quarter, we have achieved approximately $31.8 billion of in-force rate actions on a net present value basis. Rate increase approvals this year have been lower than recent years as expected, given large approvals in prior years, but we do anticipate higher approvals in the fourth quarter than we have received on a quarterly basis so far this year.

As part of the MYRAP, we offer a suite of options to help policyholders manage premium increases while maintaining meaningful coverage and to enable us to reduce our exposure to certain higher cost benefit features such as 5% compound benefit inflation options and large lifetime benefit amounts. About 61% of policyholders offered a benefit reduction have elected to do so, lowering our long-term risk. These initiatives have helped reduce our exposure to individual LTC policies with the 5% compound benefit inflation feature decreasing notably to approximately 36%, down from 57% in 2014.

In addition to the MYRAP and other benefit reduction strategies, we're reducing risk in innovative ways, including through the CareScout Quality Network and our Live Well Age Well intervention program, which deliver value for policyholders while also driving claim savings over time.

As we said before, we are committed to managing the U.S. Life Insurance companies as a closed system, leveraging their existing reserves and capital to cover future claims. We will not put capital into the legacy life insurance companies, and given the long-tail nature of our LTC insurance policies with peak claim years still over a decade away, we do not expect capital returns from these companies.

Slide 13 shows statutory pretax results for the U.S. Life Insurance companies with a loss of $12 million for the quarter. The LTC loss of $75 million reflected new claims growth as the block ages and higher benefit utilization. Earnings from in-force rate actions of $337 million were up from $322 million in the prior year, excluding the impact of the legal settlements, reflecting continued strong progress on the MYRAP. As a reminder, the prior year included an $88 million benefit from the implementation of the LTC legal settlements, which are now complete.

Life Insurance reported a loss of $2 million, including a benefit from favorable mortality in the quarter and our annuity products reported income of $65 million, reflecting the net favorable impact of equity market and interest rate movements in the quarter.

The consolidated risk-based capital ratio for Genworth Life Insurance Company, or GLIC, is estimated to be 303% at the end of September, down slightly since the end of June as the statutory loss was offset by unrealized investment gains. GLIC's consolidated balance sheet remains sound with capital and surplus of $3.6 billion as of the end of September. Our final statutory results will be available on our investor website with our third quarter filings later this month.

As we look ahead, I'd like to discuss our approach to this year's annual assumption review, which will be completed in the fourth quarter. While our review is still ongoing, we have been monitoring key trends and can provide some preliminary prospectus. In LTC, our review is primarily focused on short-term trends and key assumptions such as benefit utilization, incidents, terminations and in-force rate actions, which include benefit reduction initiatives. We faced pressure from higher benefit utilization and cost of care inflation. We will evaluate this pressure relative to the tailwinds of additional premium rate increases and benefit reductions as well as other initiatives which will reduce the overall impact in the aggregate.

For our Life and Annuity products, we are reviewing mortality, lapse rates and the potential impacts of the recent changes in interest rates. In parallel with the assumption review, we are conducting statutory cash flow testing for our life insurance companies. While this process is not yet complete, our initial assessment indicates that GLIC margin should remain positive. We will discuss the results of our assumption reviews and statutory cash flow testing on our fourth quarter earnings call.

Turning to Slide 14. We continue to see solid performance from our investment portfolio, where the majority of our assets are investment-grade fixed maturities held to support our long-duration liabilities. New cash flows invested in our life insurance companies during the quarter, including alternatives, achieved yields of approximately 6.8%. Our alternative assets program, which is largely focused [ in ] diversified private equity investments and has targeted returns of approximately 12%, continues to deliver strong results. In the quarter, we saw strong mark-to-market increases on these assets, which was a key driver of our net income, representing a significant portion of our net investment gains in the quarter.

We remain focused on growing this program prudently within regulatory limitations due to its robust track record of returns, diversification benefits and natural fit with long-term liabilities.

Next, turning to the holding company on Slide 15. We received $110 million in capital from Enact and contributed the remainder of our initial capital investment of $85 million into the new CareScout Insurance Company. We ended the quarter with $254 million of cash and liquid assets. When evaluating holding company liquidity for the purpose of capital allocation and calculating the buffer to our debt service target, we exclude approximately $145 million cash held for future obligations, including advanced cash payments from our subsidiaries.

Turning to capital on Slide 16. We continue to expect to invest approximately $45 million to $50 million in CareScout services in 2025 as we continue to build out the platform. This investment will go towards adding new products and customers, establishing a strong foundation to scale the business. This total excludes our payment of approximately $15 million for our strategic acquisition of Seniorly, which was funded from our existing holding company cash in the fourth quarter.

Moving to shareholder returns. As Tom mentioned, we're very pleased that the Board authorized a new share repurchase program of $350 million. We repurchased $76 million of shares in the third quarter at an average price of $8.44 per share and another $29 million in October. For the full year 2025, we now expect to allocate between $200 million to $225 million to share repurchases. This range may vary depending on business performance, market conditions, holding company cash and our share price. We will continue to create value for shareholders through our share repurchase program. Our holding company debt stands at $790 million, and we have financial flexibility, given the strength of our balance sheet and sustainable cash flows from Enact. We maintain a disciplined capital structure with a cash interest coverage ratio on debt service of approximately 7x.

As Tom discussed, Santander's request for an appeal in the AXA Santander litigation has been granted. If the appeal is favorably resolved, Genworth still expects to recover at that time, approximately $750 million, subject to movements in foreign exchange rates. We do not expect to pay taxes on this recovery. The new share repurchase authorization and updated share buyback guidance do not factor in any proceeds from the AXA litigation. If received, such proceeds could support incremental shareholder returns.

Our capital allocation priorities remain unchanged. We will continue to invest in long-term growth through CareScout, return cash to shareholders through our share repurchase program when our share price trades below intrinsic value, and opportunistically retire debt.

In closing, we are delivering on our strategic priorities, while proactively managing our liabilities and risk. The multiyear rate action plan and additional risk mitigation strategies are ensuring the self-sustainability of the legacy LTC block, And we will continue to focus on delivering sustainable long-term growth through Enact and CareScout while returning meaningful value to shareholders through share repurchases and opportunistic debt retirement.

Now let's open up the line for questions.

[Operator Instructions] It appears there are no questions at this time. Ladies and gentlemen, I would now turn the call back over to Mr. McInerney for closing comments.

Thank you very much, Lisa. And I want to thank everybody for joining the call today and for your continued interest in Genworth. And I'll turn the call back over to Lisa.

And our first question comes from Pete Enderlin with MAZ Partners.

Well, first of all, congratulations on the way you continue to manage all the multiple complicated moving pieces of this whole strategic picture. But second -- and this is kind of a hard question to ask and answer, I guess. But is there any meaningful way you could talk about the ultimate strategic long-term resolution of the LTC situation for the company. I mean you've done a lot to improve itself and also your approach to with the new operations you're undertaking. But if you look out, I don't know, 10, 20 years, whatever, where does that thing end up in relation to Genworth itself?

So Pete, that's a significant question. And I would say, one, we continue to focus on making sure of the self-sustainability of the legacy life companies, and we're making significant progress with premium increases and benefit reductions. Second, as one of the slides shows there are 71 million American 65 and older. There's 70 million baby boomers, 95% of whom do not have long-term care insurance. So CareScout Services is really designed to work with them if they do end up with long-term care disabilities and the projection is that 2/3 of baby boomers Americans when they reach their age will have need for long-term care.

CareScout Services is well positioned to help them assess what their care needs are, come up with care plans, and we've talked about the pricing on those and then refer those who need care to either our home care quality network or the assisted living communities and obviously, the Seniorly acquisition really significantly expanded that network by about 3,000.

So I think it's a huge market because of aging baby boomers. And there are not a lot of players left today in the LTC space. So we think it's a big market. We're well positioned both on the service side, helping people decide how much care they need and where to get it and then we offer discounts and incentives. And then on the insurance side, we have our first product that we are launching now and there's a number of products that will be developed and brought to the market starting in the first quarter. So we're very optimistic given the size of the market, our 50 years of expertise in the market and the 2 CareScout units that we're very well positioned to take advantage of a big and growing need for Americans needing to figure out what care they need, find the care and then help us provide funding solutions for them.

Is it too simplistic to say that the legacy LTC business is basically going to be a runoff and then the rest of it would be a stand-alone business that could eventually be literally separated from Genworth itself?

So we're -- the new CareScout businesses are not connected to the legacy Genworth companies, their own, obviously, by the parent. And so yes, I mean, for the legacy business, it's a runoff -- it's a long runoff because probably of the 1 million policyholders we have individual and group that runoff will be 30 years or more. But all the CareScout opportunities are in a separate business that will be run managed separately. And to your point, Pete, will be able to stand on their own separate apart from the legacy LTC company.

[Operator Instructions] We'll take our next question from [ Ross Levin with Arbiter].

My question is, at what point, you were generating some statutory income out of the legacy Life for long-term care business. It seems like that slipped to slightly negative over the last several quarters. Could you just talk -- I know it's small numbers in the context of the whole, but could you just talk about what's driven the transition to somewhat negative statutory earnings?

Sure. Jerome, do you want to handle that?

Ross, thank you for the question. I would just highlight from a statutory income perspective, the biggest driver right now of the pressure that we're feeling is long-term care, and that's where the pressure is normally coming from. And the driver of that is, basically, we continue to see claims go up, and we continue to see pressure from benefit utilization. And what we do with that is we take all of that and we prioritize that and put that in our multiyear rate action plan, and we've been executing very, very well against our multiyear rate action plan, which provides some offset. But there's no doubt there's pressure from a long-term care perspective, because of the claims. And those claims will continue to increase over the next several years because we've got some large blocks that are maturing. That's the biggest driver.

Number two, life has been pressured from a mortality perspective. And that pressure has continued to come through. That has been offset in part because of the strength in the equity markets with our annuity program. So we have annuities which when the equity markets go up, we get -- have some favorability that come through our statutory earnings.

The one thing that I will -- and also the one thing I would highlight is, we had legal settlements coming through in the prior year, which tamped down the pressure that we felt in LTC. And now those legal settlements are complete. The one thing from a U.S. life perspective, we focus on the MYRAP. That business, we have told our investors that we are not going to put money in the business. We're not going to take money out of the business. We're focused on closing that gap with a multiyear rate action plan. And we're telling our investors to value the business at zero.

Yes. Understood. I guess to the extent that maybe several quarters ago or a year or 2 ago, someone might have felt you were getting ahead of things in terms of being able to generate some statutory income via some of the modifications you were able to negotiate with your state regulators. Like why -- what has caused us to sort of fall behind the curve again, if that makes any sense?

So Ross, you may -- there's a couple of things that I would highlight for you. Number one, several years ago, COVID was a highly pressured situation overall geographically in the population. But it created additional terminations or deaths that came through, and we saw some favorability or profitability that came through during COVID. That's number one. That is behind us now.

Number two, we had some settlements, some very large settlements that came through that also increased our earnings or tamp down the pressure that we're feeling and those are now gone, and we're seeing some of the larger books that we have in our in-force block and our LTC in-force block coming through and claims are going up.

The only thing I would add to that, Ross, is I do think you are going to see quarter-to-quarter variation. There'll be some quarters where we'll have [indiscernible] usually the first quarter of the year is a good one of these claim terminations are higher than other quarters. It's always hard to predict when states, particularly large states will grant premium increases. And so depending on the timing of that, it could impact quarter-to-quarter results.

In addition, we have a significant plan to continue to be successful in getting benefit reductions. I think what the slide show that we're at 60%, 61% have taken a benefit reduction, that also helps. But I think over the long run, the statutory income will -- I think of it as breakeven. There'll be quarters that it will be positive quarters, negative or breakeven over time. And we really do depend on the MYRAP, premium increases, benefit reductions. I think over time, we've done extremely well, and certainly compared to others in the industry. But it is going to continue to be the case that from a statutory perspective, quarter-to-quarter, there'll be positive quarters and negative quarters, but overall, as Jerome said, we value the business. As Jerome think, we'll be able to ultimately achieve through the MYRAP enough premium increases, benefit reductions to pay all the claims that we forecast going forward.

Okay. So if you achieve your ambition in terms of the MYRAP, you would not expect to ultimately generate statutory income out of the legacy long-term care block?

I think we look at that as the premium increases and benefit reductions will allow us to be at breakeven going forward and be able to pay all the claims that we project.

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

Thank you very much, Lisa, and thank you to Pete and Ross for those questions. I think there are very good questions, and hopefully, we address them well. Thank you to all of you who joined the call today. We appreciate your interest and your ownership in the company and look forward to catching up with you when we release the fourth quarter results in February. And with that, Lisa, I'll turn the call back to you to close out the call.

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