GNW 08/01/03%20US%20Mortgage%20Insurance%20Materials

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GNW 08/01/03%20US%20Mortgage%20Insurance%20Materials

  1. 1. Investor Update U.S. Mortgage Insurance February 8, 2008 ©2008 Genworth Financial, Inc. All rights reserved. Company Confidential
  2. 2. Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for the company’s future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors, including those discussed in the Appendix and in the risk factors section of the company’s Form 10-K filed with the SEC on February 28, 2007, the company’s Form 8-K filed with the SEC on April 16, 2007 and the company’s Form 10-Q filed with the SEC on October 26, 2007. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Non-GAAP and Selected Operating Performance Measures For important information regarding the use of non-GAAP and selected operating performance measures, see our Fourth Quarter 2007 Financial Supplement which can be found on our website at genworth.com. This presentation should be used in conjunction with the accompanying audio or call transcript. Investor Update U.S. Mortgage Insurance – February 8, 2008 1
  3. 3. Agenda Key Definitions & Factors Relating To Loss Development Delinquency Rate Claims Frequency Past Industry Experience Exposure & Severity Claim Size The Role Of Captive Reinsurance in Providing Protection Extreme Stress Scenarios To Assess Potential Impact on Book Value Investor Update U.S. Mortgage Insurance – February 8, 2008 2
  4. 4. How Do You Measure Delinquency Rate? Delinquency Rate Definition of a “Cure” Prior Delinquency That: Current # Delinquencies – Is Now Paid Current Remaining # Policies in Force Or – Has Been Refinanced Current Period Metric Or – Associated Property Has Been Sold Leading Indicator of Claims Reserves For Delinquencies Frequency Determined On An Individual Loan Leading Indicator of Potential Basis, Driven By: Captive Reinsurance Attachment/ Benefit Number of Delinquencies Aging of Delinquencies A Delinquency Cures or Moves To Loan Amounts Claim Claim Experience/Trends Policy Lapse Increases Magnitude Delinquency Rate Is Sometimes Referred to as Default Rate. Investor Update U.S. Mortgage Insurance – February 8, 2008 3
  5. 5. How Do You Measure Claims Frequency? Claims Frequency Paid Claims Delinquency Fully Reserved At Time Lifetime # Claims Paid of Claim Payment (on Average) Original # Policies In Force Average Claim Driven By: Lifetime Metric Loan Amount Cumulative Home Price Change Can Impact Claims Frequency Coverage Positively or Negatively Severity Claims Frequency, Plus Average Claim Size, Drive Captive Reinsurance Cash Benefit Lapse Decreases Future Claims Investor Update U.S. Mortgage Insurance – February 8, 2008 4
  6. 6. How Does Lapse Impact Claims Frequency? Lifetime Claims Frequency Based on Original Policies in Force Lapsed Policies Cannot Become A Future Claim Therefore, Remaining Policies Drive Lifetime Claims Frequency of Original Book 2005 Book Year Illustrative Example Claims Frequency Policies In Ever To Lifetime Illustrative Claims Frequency on Force Date Scenario Remaining Policies Would 12/31/07 12/31/07 Have to Perform at an Total Original Policies 155K 1.0 10.0 Extreme Level for the Total Book to Reach 10.0 on a Less: Lapsed Policies (51K) 2.9 2.9 (Includes Paid Claims) Lifetime Basis. Remaining Policies 104K 0.0 13.5 Claims Frequency Represents Claims per 100 Loans. Investor Update U.S. Mortgage Insurance – February 8, 2008 5
  7. 7. Mortgage Insurance Industry Experience Two Housing Recessions Oil Patch Southern California Materially Higher Interest 15 15 Claims Frequency Claims Frequency Rates ~10% 30-Yr FRM 10 10 Driven By Regional GDP / National National 5 5 Unemployment 0 0 Portfolio Concentration ~20% ‘79 ‘81 ‘83 ‘85 ‘87 ‘88 ‘90 ‘92 ‘94 ‘96 Book Year Book Year Unemployment: Regional 10% 10% National 7% 7% Home Price Change*: Regional (9%) (18%) National +17% +23% Severity 110% 108% Estimated based on Economy.com Interest Rates, Unemployment, GDP and Home Price Changes; MICA Industry Claims Rate; Genworth’s Severity Oil Patch Region Includes TX, WY, OK, LA, CO and AK * Regional and National Home Price Changes represent cumulative changes during calendar year period: 1985-1988 Oil Patch, 1991-1996 Southern California Industry Changes Since Late 80’s Impact Assessment Increased Prices + Adopted FICO Credit Scores For Underwriting + GSE’s Adopted Use of Automated Underwriting + Growth of Higher Loan-To-Value Loans, Alt-A, and Sub-prime Products - Investor Update U.S. Mortgage Insurance – February 8, 2008 6
  8. 8. Historical Experience Vs. Portfolio Scenarios Risk In Force Historical Claims Frequency Specific Book Years Claims Frequency Oil Patch California ’80-’84 ’89 – ’92 Performing 70-75% National (Total) 11 5 Other States 9 3 Regional (Under-Performing) 25 19 GNW Claims Frequency Illustrations If One Assumes: Claims Frequency Total Portfolio 7 10 15 20 Under- 25-30% Performing Segment 5 6 8 10 Performing Then Remaining Must Be: Portfolio Mix Under-Performing Segment 12 20 32 44 Under-Performing Segment is Selected Product, Geographical and Book Year Combinations Where Ever To Date Actual Loss Ratio Performance Exceeds Ever To Date Pricing Expectations. Select Geographies Include CA, FL, AZ, NV and Great Lakes, Select Products Include Alt-A, A Minus and Sub-prime. Claims Frequency Represents Claims per 100 Loans. Oil Patch Region Includes TX, WY, OK, LA, CO, AK Investor Update U.S. Mortgage Insurance – February 8, 2008 7
  9. 9. Exposure & Severity Definitions Lesser of “Maximum Exposure” or “Loss on Sale of Property” Claim Payment (Unpaid Principal Balance + Claimable Expenses) x Coverage Percent Maximum Exposure Claimable Expenses Mortgage Insurance Coverage Option Accrued Interest (Typically Coverage Loan to Value 65% of Total Claimable) 100% 35% Legal Fees 95% 30% Property Taxes 90% 25% Hazard Insurance, etc. Property Sale Proceeds - Unpaid Principal Balance Loss On Sale - Claimable Expenses Option - Sales Costs Loss On Property Sale Claim Payment Severity Coverage Percent x Unpaid Principal Balance (MI Coverage Amount) Investor Update U.S. Mortgage Insurance – February 8, 2008 8
  10. 10. The Influence of Larger Loan Balances Average Loan Balance increasing Average Claim Payments Increasing ($000’s) ($000’s) 164 35 146 28 135 26 2005 2006 2007 2005 2006 2007 Based on Primary (Flow and Bulk) Insurance In Force Cumulative Home Price Appreciation Increasing Loan Balances Increased Portion Of Claims From Higher Priced States Will Tend To Drive Up Average Claim Payments Higher Priced States Include California, Florida, Arizona and Nevada Investor Update U.S. Mortgage Insurance – February 8, 2008 9
  11. 11. Loan Balances By Region Average Loan Balance Key Factors ($000’s) Regions 2005 2006 2007 Significant Variance By Region Southeast 131 143 155 South Central 125 133 147 Northeast 140 148 165 Product Mix Changes North Central 135 140 149 Pacific 176 216 268 Regional Shift in Claims Great Lakes 116 118 122 Plains 107 111 121 Mid-Atlantic 153 171 199 New England 180 194 210 Total 135 146 164 Average Loan Balance Is The Principal Driver of Average Claim Payment Average Loan Balances Shown Reflect Primary Loan Balances as of Year End. Investor Update U.S. Mortgage Insurance – February 8, 2008 10
  12. 12. Claim Payment & 100% Severity Scenarios Assumptions Original Property Value $111,100 Home Price Decline ~(13)% Loan To Value 90% 95% Unpaid Principal Balance $100,000 $105,600 Claimable Expenses (@ 15%) 15,000 15,800 $115,000 $121,400 Higher Loan Balances Coverage x 25% x 30% and Higher Coverage Maximum MI Exposure $28,800 $36,400 Increases MI Exposure Proceeds From Sale (87%) $96,700 $96,700 Sales Costs (7%) (6,800) (6,800) Net Proceed From Sale $89,900 $89,900 Loss on Sale $25,100 $31,500 MI Claim Payment (Lesser of $25,100 $31,500 Higher Loan To Value or ) Reduces Severity But MI Coverage Amount $25,000 $31,700 Increases Average 99% Severity ( Divided by ) 100% Claim Investor Update U.S. Mortgage Insurance – February 8, 2008 11
  13. 13. Claim Payment & 115% Severity Scenarios Assumptions Original Property Value $111,100 Factors Keeping Severity Home Price Decline ~(25)% Under 115% Loan To Value Loan Balance Drives Severity 90% 95% of 100% Unpaid Principal Balance $100,000 $105,600 Additional 15% Limited By: Claimable Expenses (@ 15%) 15,000 15,800 $115,000 $121,400 Foreclosure Cycle Time (Typically 12 Months) Coverage x 25% x 30% Maximum MI Exposure $28,800 $36,400 Predictable Expenses Active Loss Mitigation Proceeds From Sale (75%) $83,300 $83,300 Sales Costs (7%) (5,800) (5,800) Net Proceed From Sale $77,500 $77,500 Loss on Sale $37,500 $43,900 MI Claim Payment (Lesser of $28,800 $36,400 or ) Maximum MI Exposure Limits MI Coverage Amount $25,000 $31,700 Loss 115% Severity ( Divided by ) 115% Investor Update U.S. Mortgage Insurance – February 8, 2008 12
  14. 14. What Severity Have We Seen? Factors Impacting Severity Genworth Severity By Region % Flow RIF Claim Factors 4Q07 Regions 2005 2006 2007 Claimable Expense 25% Southeast 96% 92% 95% Lower Home Prices 17% South Central 86% 88% 93% 13% Northeast 109% 104% 100% Offsetting Factors 12% North Central 94% 96% 98% Borrower Equity 9% Pacific 71% 75% 89% Total Home Price Appreciation 9% Great Lakes 109% 107% 109% Coverage Level 6% Plains 92% 93% 96% Regional Variation 4% Mid-Atlantic 92% 88% 93% 4% New England 85% 90% 91% Flow Portfolio 100% Severity 96% 96% 99% Severity Based on Simple Average of Claim Payment Experience. Investor Update U.S. Mortgage Insurance – February 8, 2008 13
  15. 15. Lender Captive Reinsurance Protection 63% GNW Flow Portfolio Has Lender Captive Reinsurance Coverage – Protects Downside Risk Written on a “Book Year” Basis By Lender Attachment Points Are % of a Book Year’s Original Risk In Force Reinsurance Premiums Deposited in 3rd Party Trust 40% Cede Excess of Loss Example 25% Cede Excess of Loss Example Premiums Losses Premiums Losses Lender 25% Remaining Remaining Lender 40% GNW GNW Losses Losses 2nd Loss 2nd Loss Lender Lender (4-14 Claims Layer) 60% 75% (5-10 Claims Layer) GNW GNW 1st Loss (0-4 Claims Layer) 1st Loss (0-5 Claims Layer) GNW GNW Captive Reinsurance Liability Limited to Funds in Trust, Not Subject to Lender Bankruptcy. Trust Balance Impacted by Future Premiums Received, Payment of Claims and Dividends. Funds and % of GNW Portfolio in Captive Reinsurance Arrangements As of 12/31/07. Investor Update U.S. Mortgage Insurance – February 8, 2008 14
  16. 16. Lender Captive Reinsurance Trusts Structural Example for Individual Lender Funds in Trust are Fungible 2010 & Beyond - Book Years Cross Collateralized 2009 - Trust Balance Contributions from Ceded Premiums 2008 on Old and New Books 2007 - Minimum Required Funding at Risk to Capital of 10:1 - Dividends Allowed At Risk to Capital of 5:1 2006 - $880MM Funds In Trust as of 12/31/07 2005 High Quality Trust Investments 2004 & Prior - ~97% Investments Are Government Issued or Rated AA or Higher Funds Held In 3rd Party Trust Captive Reinsurance Trust Set Up for Each Lender; Balances Secures that Lender’s Risk Only Captive Reinsurance Liability Limited to Funds in Trust, Not Subject to Lender Bankruptcy Trust Balance Impacted by Future Premiums Received, Payment of Claims and Dividend. Assumes Ongoing Captive Reinsurance on Substantially Similar Terms. Trust Investments – Portfolio Ratings as of 12/31/07 Investor Update U.S. Mortgage Insurance – February 8, 2008 15
  17. 17. Captive Reinsurance Attachment Progress Book Year In Aggregate Book Year Observations 3Q07 4Q07 ($MM) 2005 Sum of Reinsurance Attachment Points $125 Aggregate Book Year Analysis Ever to Date Incurred Losses $48 $61 Provided To Illustrate % To Attachment 38% 49% Directional Progression Toward Attachment 2006 Actual Benefits Will Vary By Sum of Reinsurance Attachment Points $173 Individual Reinsurance Contract Ever to Date Incurred Losses $68 $101 % To Attachment 39% 58% Quarterly Captive Benefits $1 2007 Sum of Reinsurance Attachment Points $198 $289 Ever to Date Incurred Losses $16 $56 % To Attachment 8% 19% Additional Details By Book Year in Appendix Figures Are Presented in Aggregate For All Trusts, and excludes Quota Share Captive Arrangement data. Incurred Losses = Change in Reserves + Paid Claims Investor Update U.S. Mortgage Insurance – February 8, 2008 16
  18. 18. 2006 Book Year Example Original 2006 Book Year $4.3B Risk In Force With Captive Reinsurance Coverage $173MM Losses = Sum of All Attachment Points 46 Lender Captives Comprise Total – Actual Attachment Will Vary By Lender As of 4Q07 % Progression to RIF Ever to Date Specific Lender Remaining Incurred Losses Attachment Point ($B) ($MM) 0 – 50% .7 10 50 – 75% 1.8 55 75 – 100% .8 31 Includes ~$1MM of Captive Reinsurance Benefit 100%+ (Captive Benefit) .1 5 3.4 $101 58% Progression to Aggregate Attachment Point Information excludes Quota Share Captive Arrangement data. Additional Book Years Included in Appendix. Investor Update U.S. Mortgage Insurance – February 8, 2008 17
  19. 19. Selective Bulk Participation Characteristics Downside Protection RIF ~720 Average FICO Primary MI On Loans 80%+ LTV GSE Alt-A $0.4B 79% Average LTV 97% With Stop Loss 85% With Deductibles 720+ Average FICO Primary MI On Loans 80%+ LTV Portfolio $0.6B 76% Average LTV 100% With Stop Loss Transactions 97% Full Documentation 27% With Deductibles Federal Home 740+ Average FICO Primary MI On Loans 80%+ LTV Loan Bank 67% Average LTV 77% With Stop Loss $0.5B /Other 82% With Deductibles Did Not Participate In Sub-Prime Bulk Risk In Force (RIF) Associated With Bulk NIW Is Lower Than a Corresponding Amount Of Flow NIW Due To The Structure Of The Coverage (Stop Losses And Deductibles). The Effective Risk Is Lower Due To The Order In Which Losses Are Absorbed; 1) Borrower Equity, 2) Primary MI Coverage For LTVs > 80% (Coverage Effectively Down To 65%), 3) Deductibles, And Finally, 4) Genworth's Bulk Policy Which Is Typically Further Limited By Aggregate Stop Losses. Investor Update U.S. Mortgage Insurance – February 8, 2008 18
  20. 20. Scenario Analysis – Key Concepts $2.6 Billion U.S. Mortgage Insurance Book Value As of 12/31/07 Standard Assumptions: - Strong Revenue Growth 14% CAGR - Persistency 75-80% - $3 Billion Investment Assets ~ 4% After-tax Yield If 2008 Losses Accelerate, Captive Reinsurance Benefits Are Recognized Sooner Investor Update U.S. Mortgage Insurance – February 8, 2008 19
  21. 21. A 5-Year View Key Assumptions Book Value Profile ($B) @ 100% Severity $3.9+ Existing Portfolio $0.7 Claim Frequency Expectation for Every 100 Loans $0.5 Claim Frequency Captives New Portfolio $2.6 Attach? Ever-To-Date Lifetime Business Invest. ’04 & Prior No 1.4 2 Income Existing ’05 – ’07 Yes 0.3 8 Business Underwriting ’08 & Forward No - 4 Margin 12/31/07 12/31/12E Performing Well 5 2005-2007 Books @ 115% Severity: Under-Performing 13 $.1B Additional Losses By 2012 Book Value Progression $3.9+ ($B) @ 100% Severity $2.6 $2.5-2.6 Company Estimates; Captive Attachment Based on Aggregate Analysis – Actual Results Will Vary By Lender Lifetime Loss Ratio Reflects Weighted Average Lifetime Expected Loss Ratio For Total Portfolio Existing Business and Investment Income Are Net of Income Taxes Existing Business Includes After Tax Premium From International Support Arrangements Projected Book Value Excludes Impact of Dividends From Our U.S. Mortgage Insurance Subsidiaries to Genworth 2007 2008E 2009E 2010E 2011E 2012E Investor Update U.S. Mortgage Insurance – February 8, 2008 20
  22. 22. Scenarios:Exhaust Captives or Eliminate Book Value Exhaust Captive Coverage U.S. Mortgage Ins. Book Value To 0 Claim Frequency Assumptions for Every 100 Loans Claim Frequency Assumptions for Every 100 Loans Claim Frequency Claim Frequency Captives Captives Portfolio Portfolio Attach? Attach? Ever-To-Date Ever-To-Date Lifetime Lifetime ’04 & Prior ’04 & Prior No No 1.4 1.4 2 2 ’05 – ’07 ’05 – ’07 Yes Yes 0.3 0.3 15 40 ’08 & Forward ’08 & Forward No No - - 4 4 Performing 8 Performing 10 Under-Performing 25 Under-Performing 81 Book Value Profile $2.9+ ($B) @ 100% Severity $0.6 $(0.3) $2.6 New Business Invest. Existing Income Business Underwriting Margin 12/31/07 12/31/12 2005-2007 Books @ 115% Severity: Company Estimates; Captive Attachment Based on Aggregate Analysis – Actual Results Will Vary By Lender Existing Business and Investment Income Are Net of Income Taxes $.2B Additional Losses Incurred By 2012 Existing Business Includes After Tax Premium From International Support Arrangements Projected Book Value Excludes Impact of Dividends From U.S. Mortgage Insurance Subsidiaries to Genworth Investor Update U.S. Mortgage Insurance – February 8, 2008 21
  23. 23. Summary - Looking Ahead Captive Reinsurance Mitigates Downside Exposure 2008 Looks To Be The Inflection Point Accelerated Stress Scenarios in 2008; Improves 2009 Outlook Book Value Supported – With An Accretion Opportunity Investor Update U.S. Mortgage Insurance – February 8, 2008 22
  24. 24. Investor Update U.S. Mortgage Insurance – February 8, 2008 23
  25. 25. Appendix ©2008 Genworth Financial, Inc. All rights reserved.
  26. 26. Captive Reinsurance - Disclosure Captive Disclosure Q4 2007 Original Book 4Q07 Progression Sum of Loss to Additional Losses Aggregate % Ever to Date Attachment Attachment to Incurred Losses to Reach Aggregate RIF ($B) Points ($MM) Point Current RIF ($B) Attachment ($MM) Attachment Book Year ($MM) 2005 Total 3.0 125 2.0 61 64 49% 0.8 16 0 -50% 0.8 28 50 -75% 0.4 15 75-99% 0.0 2 Attached 2006 Total 4.3 173 3.4 101 72 58% 0.7 10 0 -50% 1.8 55 50 -75% 0.8 31 75-99% 0.1 5 Attached 2007 Total 7.2 289 6.9 56 233 19% 6.9 56 0 -50% 0.0 0 50 -75% 0.0 0 75-99% 0.0 0 Attached Captive Benefit in Quarter ($MM) 1 Aggregate Book Year Analysis Provided To Illustrate Directional Progression Toward Attachment Data Presented in Aggregate For All Trusts. Actual Trust Attachment Will Vary By Individual Lender Contract. Incurred Losses = Change in Reserves + Paid Claims Information excludes Quota Share Captive Arrangement data. Investor Update U.S. Mortgage Insurance – February 8, 2008 25
  27. 27. U.S. Portfolio – Delinquency Rates ($B) Total FICO > 660 FICO 620 - 659 FICO < 620 Primary Risk In Force 3Q 07 4Q 07 3Q 07 4Q 07 3Q 07 4Q 07 3Q 07 4Q 07 $31.3 $28.1 $2.9 $6.4 $22.1 Primary Risk In Force $19.7 $5.9 $2.5 3.4% 4.3% Default Rate 1.9% 6.3% 10.5% 12.8% 7.5% 2.5% $12.1 $8.1 $2.4 $1.3 2007 Policy Year $5.5 $8.5 $1.7 $0.9 1.4% 2.8% Default Rate 0.9% 1.7% 5.0% 3.8% 9.4% 1.7% $6.0 $5.9 $0.6 2006 Policy Year $4.2 $1.2 $0.6 $1.2 $4.1 3.8% Default Rate 2.2% 6.0% 12.6% 5.4% 15.4% 8.3% 3.6% $4.4 $4.2 $0.9 $0.3 2005 Policy Year $3.1 $0.9 $0.4 $3.0 4.0% Default Rate 2.4% 6.6% 12.2% 5.2% 8.5% 14.4% 3.2% $9.1 $9.6 $0.7 2004 & Prior Policy Years $6.8 $2.1 $0.7 $6.5 $1.9 4.3% 4.7% Default Rate 2.2% 8.8% 14.0% 2.4% 9.5% 15.3% $26.2 $29.4 Fixed Rate $18.2 $5.6 $2.4 $2.7 $20.6 $6.1 3.3% Default Rate 1.7% 6.2% 10.3% 12.5% 4.0% 2.1% 7.2% $1.9 $1.9 ARMs $1.5 $0.3 $0.1 $1.5 $0.3 $0.1 4.1% 7.2% Default Rate 5.9% 3.0% 9.0% 17.1% 12.0% 23.2% $7.9 $2.3 $1.2 $8.8 LTV > 95% $4.7 $2.1 $1.1 $5.4 4.6% 5.8% Default Rate 2.1% 6.4% 11.6% 2.6% 8.0% 15.3% $1.9 $1.9 $0.3 $0.1 Alt-A $1.5 $0.3 $0.1 $1.6 4.1% 6.2% Default Rate 3.3% 7.9% 13.2% 5.1% 11.7% 18.2% $3.6 $3.3 $4.0 $0.5 Interest Only & Option ARMs $2.9 $0.5 $0.2 $0.2 3.1% 5.0% Default Rate 2.6% 5.7% 9.9% 9.2% 5.6% 16.8% = Significant Increases in Delinquency Rates Loans With Unknown FICO Scores Are Included in the FICO 620 – 659 Category Delinquency Rate Represents Number of Lender Reported Delinquencies Divided By Number of Remaining Policies Consistent With Mortgage Insurance Industry Practices GNW Alt-A Consists of Loans With Reduced Documentation or Verification of Income or Assets And a Higher Historical And Expected Default Rate Than Standard Documentation Loans. Investor Update U.S. Mortgage Insurance – February 8, 2008 26
  28. 28. Product Actions Taken For 2008 Flow New Insurance Written Products Not Insured By Genworth Sub-Prime Bulk Alt-A >95% LTV 100% Sub-Prime 2% Product Exits A-Minus 5% 1% Alt-A Alt-A > 90% LTV, < 660 FICO Prime 12% A Minus Above 95% LTV, < 575 FICO > 95% LTV 100 LTV < 620 FICO And Interest Only Guideline Restrictions Prime Primary & 2nd, Purch. & Rate Term Alt-A 80% ≤ 95% LTV A Minus Primary Only 100 LTV 95% LTV in 85 Declining Markets Price Increases Alt-A ~43% in 660 – 699 FICO Bucket A Minus ~18% Price Increase 2008E 100 LTV ~50% Increase for 56% of NIW Genworth Alt-A Consists Of Loans With Reduced Documentation Or Verification Of Income Or Assets And A Higher Historical And Expected Default Rate Than Standard Documentation Loans Investor Update U.S. Mortgage Insurance – February 8, 2008 27
  29. 29. Cautionary note regarding forward-looking statements This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including the following: • Risks relating to our businesses, including interest rate fluctuations, downturns and volatility in equity and credit markets, defaults in portfolio securities, downgrades in our financial strength and credit ratings, insufficiency of reserves, legal constraints on dividend distributions by subsidiaries, competition, availability and adequacy of reinsurance, defaults by counterparties, regulatory restrictions on our operations and changes in applicable laws and regulations, legal or regulatory investigations or actions, political or economic instability, the failure or any compromise of the security of our computer systems, and the occurrence of natural or man-made disasters or a pandemic disease; • Risks relating to our U.S. Mortgage Insurance segment, including the influence of Fannie Mae, Freddie Mac and a small number of large mortgage lenders and investors, decreases in the volume of high loan-to-value mortgage originations or increases in mortgage insurance cancellations, increases in the use of simultaneous second mortgages and other alternatives to private mortgage insurance and reductions by lenders in the level of coverage they select, unexpected increases in mortgage insurance default rates or severity of defaults, deterioration in economic conditions or a decline in home price appreciation, increases in the use of reinsurance with reinsurance companies affiliated with our mortgage lending customers, increased competition with government-owned and government-sponsored entities offering mortgage insurance, changes in regulations, legal actions under Real Estate Settlement Practices Act, and potential liabilities in connection with our U.S. contract underwriting services; and • Other risks, including the possibility that in certain circumstances we will be obligated to make payments to GE under our tax matters agreement even if our corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control, and provisions of our certificate of incorporation and by-laws and our tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Investor Update U.S. Mortgage Insurance – February 8, 2008 28

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