Genworth Financial, Inc.

Amy Corbin – Senior Vice President Investor Relations Tom McInerney – President and Chief Executive Officer Marty Klein – Chief Financial Officer Kevin Schneider – President and Chief Executive Officer - Global Mortgage Insurance

Suneet Kamath – UBS Sean Dargan – Macquarie Ryan Krueger – Keefe, Bruyette & Woods Ken Billingsley – Compass Point Research Steven Schwartz – Raymond James Geoffrey Dunn – Dowling & Partners John Hall – Wells Fargo Donna Halverstadt – Nomura Securities

Thank you, operator and good morning, everyone. Thank you for joining us today for our extended call to discuss Genworth's third quarter 2014 results and to provide an update on the company's long-term care claims reserve review.

Our press release and financial supplement were released last evening and this morning, our third quarter earnings summary presentation, along with the long-term care claims reserve review materials were posted to our website. Both of these presentations will be referenced during our call and we encourage you to review all of these materials.

Today, you will hear from our President and Chief Executive Officer, Tom McInerney, followed by Marty Klein, our Chief Financial Officer. Following our prepared comments, we will open the call up for a question and answer period.

In addition to our speakers, Kevin Schneider, President and CEO of our Global Mortgage Insurance division and Jerome Upton, Chief Financial Officer of our Global Mortgagee Insurance division will be available to take your questions. With regard to forward-looking statements and the use of non-GAAP financial information, 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 note regarding forward-looking statements in our earnings release and the risk factors of our most recent annual report on Form 10-K and our Forms 10-Q, as filed with the SEC.

This morning's discussion also includes non-GAAP financial measures that we believe maybe meaningful to investors. In our financial supplement, earnings release and investor materials, non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules.

Also when we talk about international protection and international mortgage insurance results, please note that all percentage changes exclude the impact of foreign exchange. And references to statutory results are estimates for the quarter due to the timing of the filing of the statutory statements.

Given the level of interest for today's call, we ask that analysts limit themselves to one question and one follow-up. Should you have additional questions, please re-enter the queue.

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

Thank you, Amy and good morning everyone. Thank you for joining us for the third quarter earnings call and LTC claims review update.

Today, I will briefly discuss the third quarter results, which are strong for the Global Mortgage Insurance businesses, but disappointing for the Life business. I will also provide an update on US Mortgage Insurance Capital and discuss the LTC claim reserve with you.

Our objectives for this call are to, provide an in-depth understanding of the LTC claims review and findings, outline our current position and path forward and in doing so, address your questions and concerns. But first, I owe you an apology.

In trying to explain the second quarter LTC claim results, relative to comments from the December Investor Call, I made a misstep when my comments shifted responsibility away from the company and me. I recognize that the LTC claim reserve review is the primary topic of interest today, so I'll keep my Global Mortgage remarks brief.

The three key takeaways for our mortgage businesses are as follows: first, the mortgage insurance businesses continued to perform well in the third quarter. Excluding the charge in US mortgage related to certain loss mitigation-related disputes, which reflects important steps towards resolution; Global Mortgage results were in line with our expectations and benefited from strong fundamentals in each of our three main platforms.

Second, we continue to work through the potential impacts of the new GSE capital requirements on US mortgage and remain focused on compliance by the anticipated effective date of June 30, 2015. Working with potential re-insurers, we continue to believe that we will satisfy the requirements for these new capital standards, largely through reinsurance.

Third, stepping back and looking at the big picture, we think our Global Mortgage Insurance businesses are well along in their turnaround. Now let me turn to the Life division.

Overall, results for this division were very disappointing. The Life Insurance business was negatively impacted by higher mortality and we experienced continued weakness in the LTC line.

In contrast, the Fixed Annuity business had another good quarter. As you saw in the press release, we announced three significant charges in the third quarter.

The conclusion of the review of the LTC claim reserve resulted in a need to strengthen the claim reserves by $531 million for GAAP and $589 million for SAP. Our annual goodwill review resulted in two impairment charges, $350 million for the Life business and$167 million for long-term care.

Let me provide some background. As we've communicated previously, we've been working to transition both of these lines of business.

First, the Life business is moving to more permanent products in order to improve returns, in doing so, we plan to limit sales of lower return capital-intensive term insurance and increased sales of universal life, index universal life and combo products, as they provide better market opportunities for the company. Additionally, in long-term care, we continued to introduce higher-return, lower risk products and with the launch of Privileged Choice Select 3, our newest LTC product, our expectation is that near-term LTC sales will be lower than our historical run rate before gaining traction.

These decisive actions resulted in the goodwill charges in the third quarter. While we are optimistic that our new product offerings across both businesses will result in increased sales and higher profit, our expectations reflect a more conservative ramp up time for the distribution.

While any charge is disappointing, we believe these actions represent proactive and prudent steps, as we work to turnaround our Life division. While in LTC, we have clearly had a setback, we are leading the charge on reshaping this industry and our track record of securing premium rate increases is evident.

Additionally, we are developing new products that will address the legacy issues of the older blocks and drive future profitability. And now I will turn the call over to Marty to cover the third quarter results, the claim reserve review, the changes in LTC claim reserve assumptions and their impact on reserves in more detail.

At the conclusion of Marty's remarks, I will comment on some of the implications of our third quarter performance and our strategy going forward.

Thanks, Tom and good morning everyone. This morning I will discuss our long-term care comprehensive claim reserves with you and impacts related to it.

But first, I will briefly review our third quarter results. We reported a net operating loss of $317 million for the quarter and a net loss of $844 million.

As shown on slide 3, there were several factors impacting quarterly performance including, first a $345 million after-tax impact from the long-term care claim reserve review, a $35 million after-tax unfavorable correction of a long-term care claim reserve calculation, a $34 million after-tax accrual in USMI in connection with loss mitigation disputes and $517 million of after-tax goodwill impairments in Life Insurance and long-term care impacting only the net loss. In Global Mortgage Insurance, as shown on Slide 5, reported net operating income was $85 million, down slightly versus the prior quarter, when adding back the non-controlling interest impact of the Australia IPO in both quarters and the loss mitigation dispute accruals in USMI.

Let's cover Canada on Slide 6 first where operating earnings were $46 million for the quarter. We saw a lower unemployment rate and a modest sequential increase in home prices.

The loss ratio increased nine points in the prior quarter to 21% from higher new delinquencies net of cures. We still expect the 2014 full year loss ratio to be between 15% and 25%.

Turning to Australia on Slide 7, operating earnings were $48 million, up $3 million versus the prior quarter when adding back the non-controlling interest impact of the IPO we executed during the second quarter. Macroeconomic conditions were generally stable in the quarter, as there was a slight increase in the unemployment rate and overall home prices experienced modest gains.

The loss ratio remained low at 21%. Given the strong loss ratio performance experienced so far this year and the stable economic environment, we now expect the 2014 full year loss ratio in Australia to be between approximately 20% and 25%.

In Australia, we expect operating earnings, before the impact of the minority interest to be modestly above 2013 levels, assuming stable foreign exchange rates. With the impact of minority interest, earnings are expected to be lower, compared to 2013.

Moving to Slide 8 and USMI, the net operating loss was $2 million for the quarter, including $34 million of after-tax accruals recorded in connection with a settlement agreement with Bank of America, subject to GSE approval to resolve pending arbitration, as well as discussions with another servicer in an effort to resolve pending disputes of our loss mitigation activities. Although this has been an unfavorable impact in the quarter, this is a positive development for the business, as it will put the arbitrations behind us.

After adjusting to remove these accruals, earnings were down modestly from the prior quarter reflecting a seasonal increase in new delinquencies. NIW benefited as the business increased its market share to approximately 15% and its purchase originations rose.

Turning to capital in the division on Slide 9, the Prescribed Capital Amount, or PCA, ratio in Australia is estimated at 156%, up from the prior quarter from continued strong statutory income. For Canada, the Minimum Capital Test or MCT ratio is estimated at 224%, down from the prior quarter as the business paid a dividend to its holding company that was partially offset by statutory income.

In USMI at quarter end, the risk-to-capital ratio for GMICO was approximately 14.8 to 1, up from the 14.0 to 1 in the prior quarter from the loss mitigation accruals, an FX impact on affiliated investments and increased risk in-force from new business. Turning to the US Life Insurance division as shown on Slide 10, the operating loss was $322 million, reflecting the impact of the long-term care claim reserves review.

Higher mortality in Life Insurance was partly offset by good performance in fixed annuities. The division's results also included a $14 million adverse impact from an adjustment to prepayment paid assumptions on mortgage-backed securities.

Moving to Slide 11, operating earnings in Life Insurance were $13 million for the quarter. Mortality experience was unfavorable versus the prior quarter and the prior year.

The long-term care insurance net loss in the quarter was $361 million, as shown on Slide 12, driven primarily by the completion of the claim reserves review and an unfavorable correction of the claim reserve calculation of benefit utilization. I will provide greater detail on the claim reserves with you in just a few minutes.

Moving to Slide 13, the in-force rate action continues to favorably impact earnings, benefiting results by $44 million, $21 million higher than last year, but $3 million lower than the prior quarter. For fixed annuities on Slide 14, earnings were $26 million, slightly improved over the prior quarter and up $10 million from the prior year driven by favorable investment income and higher levels of customer account values.

Turning to US life statutory performance, results were clearly adversely impacted by the claim reserves review, as unassigned surplus decreased by approximately $270 million and the RBC ratio decreased approximately 45 points to approximately 445%. I will provide more detail on the capital impacts on the long-term care claim reserves with you in just a few minutes as well.

Shifting to slide 17 in the Corporate and Other division, the net operating loss for the quarter was $80 million, as international protection earnings improved slightly over the prior quarter, run-off earnings were lower by $10 million in the quarter, as equity market growth was below that of the prior quarter and we had unfavorable taxes in corporate and other. Moving to investments on slide 18, the global portfolio core yield was up slightly from the prior quarter at 4.46% and we continue to experience a low level of impairments.

As shown on slide 19, at the holding company, we continue to maintain significant liquidity with cash and liquid assets of approximately $1.1 billion at the holding company, representing a buffer of approximately $720 million in excess of 1.5 times debt service and well above our $350 million risk buffer over that 1.5 times level. Unfortunately, our leverage ratio increased to 25.1% above our year-end expectation of 24%, which we are now not likely to achieve, given the impact to equity of the claim reserves review and goodwill impairment.

Let me now discuss the US life goodwill impairments. In the third quarter, we recorded after-tax goodwill impairments of $517 million in the life and long-term care insurance businesses in connection with our annual goodwill review.

The goodwill impairments are reflected in our net income figures, but excluded from net operating income and only impacted our GAAP financials, as we do not have any goodwill on our US life statutory financials. Results of our goodwill analysis are highly dependent upon new business.

We conservatively lowered future sales assumptions and did not reflect certain anticipated actions, which we believe could increase sales over time. These lower sales assumptions resulted in this charge.

We have provided more background information on this charge in our earnings slides. Now I will turn to long-term care and discuss our comprehensive claim reserves review.

As a reminder, the claim reserve represents our best estimate of what we will pay on our existing claims, which currently number about 50,000 in total. As I will discuss in more detail later, the results of the review indicate people are using more of their benefits in aggregate and people are staying on claim longer than we had previously assumed.

Today, I will provide some background on the impact to the claim reserve, the process we use and key findings and changes made. But first, let me provide you a summary of the results and their impacts.

As shown on Slide 2, on a GAAP basis, the claim reserve increased by $531 million, net of reinsurance, which has an after-tax earnings impact of approximately $345 million, while on a statutory basis, the reserve increased by $589 million. The difference between GAAP and statutory figures is solely a function of the discount rate used.

This statutory claim reserve increase impacts capital levels in the Life division. As a result, US life company unassigned surplus was reduced by approximately $230 million, while the associated RBC impact is about 40 points, with the US life RBC now approximately 445%.

In our Bermuda company, BLAIC, which reinsures almost half of the long-term care business in the US life companies, the impact, given the smaller size of this platform, is larger, decreasing BLAIC's capital ratio by about 135 points, now approximately 245%. Given tax plans and timing, we believe BLAIC year-end RBC ratio will be over 300%.

Notwithstanding these impacts, with the significant increase in capital and unassigned surplus levels we've achieved in these companies over the last couple of years, capital and RBC levels remain solid, although well below where we want to be. Before I get into the specifics of the review process and changes, I want to first provide some background in context on LTC reserves.

Turning to Slide 3, as you know, there are two primary factors that affect claim costs: the frequency of claims and the severity of claims. Both of these factors impact the assessment of future claims for our policyholders, for which we hold an active life reserve.

However, the claim reserve is reserved for current claims. The frequency is not an issue, since the claims have already happened.

Only severity impacts the claim reserves and that impact is driven by how long we expect to pay a claim and how much of the benefit we expect to pay. Key assumptions behind those primary drivers are claim termination rates, or the rate at which claims end; and benefit utilization rates, or how much of available policy benefits are expected to be used.

As you can appreciate, the characteristics of the person going on claim, such as the age and sex of the person, the nature of the claim itself or the diagnosis for the claims such as dementia or stroke, where the claimant is being treated, such as at home or in a facility and the corresponding policy benefits all influence these drivers. Moving to Slide 4, the review, which took several months, included extensive internal resources as well as the engagement of a well-known actuarial firm with long-term care specialists who work closely with us, as we reviewed our claims experience and developed our assumptions.

This firm also was very helpful in providing context in industry practices and assumptions, as well as providing specific long-term care expertise. We also had the results of our work peer reviewed by a separate and independent firm using their long-term care experts.

Having been in the business for almost 40 years, Genworth has more experience than most if not all other long-term care providers and that 40 years of experience has now given us about 200,000 paid claims review, as we develop our assumptions. During this review, we looked at all of our claims experience, majority of which comes from the last 20 years, given that we did not see many claims in the first of 10 to 20 years we were in business.

The claims review included approximately three additional years of claims data, as compared to the last extensive claims review. This has been extremely helpful, particularly in assessing behavior for later stage claims where we've historically had significantly less claimant data, given most claims end after just a few years.

Before diving into this year's review, I want to describe the claim reserve review that took place in 2012. That review was based on our data through 2010.

While this claim review was extensive, at that time, we still did not have enough experience in which the base assumptions for claims in the later durations. So for claims of five years or more, we, like others in the industry, look to relevant industry tables, essentially mortality tables, on which to base these assumptions.

Our review at that time included analyzing claims patterns before and during the economic crisis, which showed claims were tending to persist longer in the crisis. That observation led us to assume we would see claims revert back more to historical termination levels as the US economy recovered.

We also instituted new claim oversight protocols, that at the time, we expected would improve claims experience going forward. In our current review, we revisited those two assumptions and we removed them, as we have not seen sufficient evidence in the last three years to continue to support that view.

After implementing the new claim reserve assumptions and methodologies in 2012, we monitored claims experience versus the reserve. For example, we did quarterly hindsight testing of payments against the associated reserves throughout 2013, which indicated in the aggregate that the reserves were covering payments made on our existing claims.

We also did a high-level reserve adequacy review in the third quarter 2013, although not as extensive as that done in 2012, given that the reserve appeared to hold up well since the 2012 update. We continued to perform hindsight testing into this year.

In our December 2013 long-term care disclosures, we described at length our work in assessing margins for our long-term care business, which are basically the margins on our active lives; where the policyholder is not on claim, under an economic basis, as well as using GAAP and statutory approaches, as called for under loss recognition testing and cash flow testing, respectively. As we noted at the time, in contrast, the claim reserve as the best estimate.

The best estimate, by definition has zero margin. In other words, accounting prescribes that the claim reserve should be set sufficient to offset the claims expected to be paid, with no incremental margin.

As a best estimate, the claim reserve can and will change when the underlying best estimate assumptions are modified. This works very differently than the active life reserve, or ALR, for which we were assessing margins.

In assessing margins for GAAP, best estimates are used to determine adequacy, but there is no change to the active life reserve until the margins become negative. The process is similar for statutory purposes, but the assumptions of margin testing do have Provisions for Adverse Deviation, or pads.

Therefore, changes in assumptions impact the claim reserve in the period adapted, but do not impact the active life reserve, unless its associated margin becomes negative. We'll come back to margins shortly.

Turning to key findings on Slide 5, with the additional three years of data in the current review, as compared to our last review, we now have a significant increase in the number of claims by almost 45%, on which the base assumptions. This additional data gave us greater reliability, more statistical credibility on which to base assumptions, which we did not have before in the later claim durations.

While we have high credibility in the earlier claim durations, or years one to six, for subsequent claim durations, the credibility declines as claim durations extend, given that most of our claims on average terminate within three to four years. Lack of credible experience data for later claim durations was the key reason why historically, we used relevant industry tables instead of our own experience, which we believe has been the case for others in the LTC industry as well.

The additional data we now have better enables us to use our own experience in later claim durations as we develop assumptions. We also refined our methodology to enable us to improve the reliability of our own data by grouping the claim population into fewer segments, increasing the amount of data in those segments and further informing our ability to use our data in developing assumptions.

With our updated and broader experience, we made two critical observations. First, we saw that the duration of claims we were experiencing is longer than what we had assumed, particularly in the later claim durations where we had been relying significantly on an industry table to those assumptions.

And second, we are seeing claimants use a higher amount of their available benefits than previously assumed. That is, we saw higher benefit utilization, again more significantly in later claim durations.

I will now discuss these two observations and the changes they led us to make in more detail. Turning to Slide 6, let's first talk about claim termination rates.

Claims terminate for one of three reasons, claimant either recover, die, or exhaust their available benefits. I should note that benefit exhaustion is a policy feature explicitly in our reserve and projection models.

The claim termination assumptions need to cover only recoveries and death. In the earlier years of a claim, recoveries can play a significant part of the overall claim termination rates experienced, but generally after someone has been on claim for about seven years, the recovery rate is insignificant.

So the claim termination rate thereafter is effectively a mortality rate. While the life insurance industry has many accepted life mortality tables, in the case of long-term care claimants, the population is essentially older lives which are impaired and there are no accepted industry tables due to limited mortality experience for such a population.

Given the lack of credible data in the later claim durations, actuarial judgment is applied and the assumptions are assessed periodically as experience evolves. Up until this claims review, given the lack of statistically credible data for these later duration claims, we had been using claim termination rates, a claim duration six and beyond, in part, on an industry mortality table adjusted by a multiple; an approach used by others in the long-term care industry.

In our 2014 review, the additional data since our last review provided us with more experience to assess. With this additional information, we saw that our experience was different from the assumptions used in our prior approach.

While the statistical credibility of this data is still limited and decreases the further out a claim goes, we believe it is appropriate now to change our assumptions and accordingly reduce our claim termination rates, in line with our emerging actual experience. Until this review was completed, we did not have, in our view, sufficient data in the later claim durations, to begin fitting our assumptions to our experience.

As a result of this review, our claim termination rate assumptions changed only modestly in the early claim durations, with the more significant changes for claim termination rates at duration seven and beyond. These new and lower claim termination rate assumptions reflect longer length of stays on claims than assumed before.

For example, as shown on the top of slide 6, when a policyholder first goes on claim, our expectation now in that first year is that the length of the claim will be on average about 2.9 years, an increase from 2.2 years before. Given that most of the change in claim termination rates is in the later claim durations, the resulting difference in length of claim, for claims which last longer is even larger.

For example, for claims that remain open or ongoing by duration seven, the expected length of claim on average is now 2.8 years remaining versus 1.7 years remaining previously. The changes we have made in claim termination rates, which again are more significant for the later claim durations, drive about half of the overall increase in our claim reserves.

Now, I will turn to the second of the two major assumptions driving claim severity, benefit utilization rates. Based on our review of all of our experience and here again, benefiting from the additional data that we now have for claims and later durations, we have revised our assumptions and methodology.

As shown on the bottom of slide 6, in aggregate, across all claim durations, the benefit utilization rate assumptions increased by about 1 percentage point, from 66% to 67%. In other words, in aggregate across all claims, we assume our claimants are using about 67% of their available benefits.

We have different benefit utilization rate assumptions based on a variety of factors including age of the claimant; whether the policy has a lifetime or non-lifetime benefits; whether the policy features have benefits which grow each year at some rates, such as 3% or 5% or remain flat; the type of care facilities such as home care, or nursing home; and claim duration. To better align our assumptions with this experience, we have slightly lowered utilization assumptions in the first three years on claim by about 1 percentage point, but notably raised utilization rates at claim duration four and beyond by 10 to 13 percentage points.

In addition, we've changed our methodology to self-adjust as utilization rate behavior evolves by incorporating a 12-month rolling average approach to update utilization rates each quarter. Moving to Slide 7, let me provide some perspectives on these changes to our claim reserve methodology and assumptions.

The new claim reserve assumptions we developed fit well with our actual most recent experience. This is evidenced by the actual to expected back-testing we did, comparing the new assumptions to our actual experience over the last four, three, two, and one year periods.

In particular, we looked at ratios of actual to expected claim termination rates and also compared actual benefits paid to what would have been assumed to be paid using the new approach. In addition, we performed reserve adequacy hindsight testing using the new assumptions against our actual claims experienced over the last four years and shorter periods within that time.

We believe this update to our claim reserve assumptions and methodologies brings us to our best estimate. However, I do want to make to two points.

First, we, like others in the industry still must apply actuarial judgment in developing reserve assumptions. While we have based our assumptions largely on our experience and have more data than in past years, we still do not have complete statistically credible experience in the later claim durations seven and beyond.

However in our judgment, given our additional data, we believe placing more weight on this experience to set claim termination rates provides a better estimate than using a single multiple of an industry table, as we've done before. And second, changes in experience from related trends in the future will of course require modifications to our claim reserve assumptions.

Turning to Slides 8 and 9, let me now shift from our claim reserve assumptions and discuss how such assumptions impact our view of the active life reserve or ALR. The ALR represents the liability for future claims from the active lives, that is, the policyholders who are paying premiums and not currently on claim.

This reserve is about $15 billion on a GAAP basis and$16 billion on a statutory basis. ALR assumptions are established in the year the policy is sold and the reserve builds over time until that policyholder dies, lapses, our goes on claim.

Under both statutory and GAAP accounting, the reserve assumptions are locked-in at policy issue. When a policyholder goes on claim, the claim reserve is set up at that time and the corresponding ALR for that policyholder is released on a GAAP basis.

Although on a statutory basis, it continues to be held until the policyholder is no longer on claim. As noted earlier, the claim reserve is based on best estimates and updated as those assumptions change.

Given the ALR assumptions are locked-in, the ALR needs to be assessed at least annually, to assure that the reserves remain adequate given emerging experience and updated views on assumptions. The process to do this is margin testing, which is done under the loss recognition testing framework for GAAP and under the cash flow testing framework for statutory purposes.

The margin tests project income over 40 or more years from expected future premiums and investment portfolios behind the reserves and also the expected benefits and expenses to be paid, using current best estimate assumptions, with the PAD reflected in statutory testing only. So the set of assumptions influencing those projections is broader than are the assumptions behind claim reserves.

Claim projections and margin testing also reflect the severity factors that we discussed earlier, but in addition must include assumptions regarding claim frequency, as well as other inputs including interest rates, lapses, investment spreads, premium expectations for both original and additional expected premiums and so forth. It is important to note that the ALR essentially remains locked-in, unless the margin becomes negative.

Changes in margin prior to that time generally have no current earnings impact, although increases or decreases in margin correlate to future profit margin increasing or decreasing for that particular block. This is different from the claim reserve, where as I said earlier, changes to assumptions are reflected immediately and recorded in the current earnings period.

Shifting to Slide 10, we are in the process of conducting our annual margin analysis. As we assess our long-term care margins, clearly our updated assumptions on claim severity are relevant and are expected to materially reduce margins.

However, we are focused on management actions that are expected to offset much or possibly most of that impact. As we mentioned, we will pursue additional rate actions given the results of our claim reserve review.

We will also evaluate additional actions to reduce risk, which Tom will discuss shortly. In addition, we are reviewing and updating other assumptions associated with our margin analysis.

I should also note that under the special rules of New York, margins in our New York subsidiary, which is less than 10% of our overall long-term care reserves have been essentially zero and management actions have typically been limited to only those that have been implemented. There are some key differences between our active and disabled lives that will be factored into the analysis as they have been in the past.

Given the majority of our disabled lives underwent less underwriting and have older generation products with different policy features and benefit options than do our active lives, our margin testing will reflect those differences. We very much understand the importance of our updated margin analysis to all of our stakeholders.

We've accelerated our normal timeline from this analysis and are actively working to complete it. We plan to disclose the results of our margin analysis in December.

I've covered a lot of ground this morning to provide investors more transparency on these changes. Let me just quickly sum up what we've done in our claim reserve review.

First, we leveraged more general data than in the past, now that we have additional data. Second, we refined our methodology to better capture changes in benefit utilization, as it happens.

Third, we tested our work and conclusions to ensure a good fit with recent experience. And finally, while the impact of these changes is certainly significant, we have solid capital and strong liquidity levels and we are committed to increasing our strength from here.

And now, I will turn the call back over to Tom.

Thank you, Marty. In light of the outcome of the LTC claim reserve review and the poor performance of the legacy older blocks, the turnaround in our LTC business and thus the Life division, will take longer to accomplish than previously expected.

This will not be an easy process, but we remain committed to improving this business to create value for our shareholders. Let me leave no doubt that we are focused on improving this business across the board and while we have made some progress, there is more work to do.

In that regard, we are taking the following steps to move the Life division forward, as outlined on Slide 11. Given the holding company's financial stability, we plan to forego dividend payments from the Life division for the remainder of 2014 and into 2015.

This will strengthen Life division capital allowing operational flexibility in the near-term. Additionally, we are taking actions to build capital and improve statutory earnings, including stepping up existing and initiating new LTC premium rate actions, pursuing actions to capitate risk on in-force blocks, exploring a block transactions, expanding our use of reinsurance and adjusting sales.

We believe these steps will allow us to rebuild capital in the Life division to even higher levels than before the charge. We believe it is prudent to maintain a higher capital level to provide a cushion if, in the future, there's a future deterioration in LTC reserves, which we currently do not expect, but believe it is prudent to prepare for.

Additionally, our goals for these steps to enable the Life division to return to paying a regular ordinary dividend as soon as possible. With regard to other capital needs, specifically the new GSE capital requirements within US mortgage, we continue to focus on reinsurance as the primary funding vehicle.

In light of our plan to forego our life dividends in the near term, while at the same time maintaining strong liquidity at the holding company, we are taking the following steps. First, we will maintain our current cash target of 1.5 times interest coverage, plus a risk buffer and may choose to hold in excess of that amount.

Second, we will retain the majority of the Australian IPO proceeds at the holding company for the foreseeable future. We previously earmarked these proceeds for delevering after ensuring adequate capital levels existed across all platforms.

As a result, our ability to reach our leverage target of 20% to 22% will take additional time. Third, we will shift more of the debt obligations in the near-term to our Mortgage Insurance division, given its continued strength.

Our ability to do so has largely been driven by International Mortgage Insurance performance and we will eventually be bolstered as US mortgage returns to paying regular ordinary dividend in the next several years. And finally, we consider monetizing additional non-core assets at the appropriate time.

Turning to slide 12, enhancements to the internal processes surrounding our LTC claim reserve are underway, including but not limited to more robust and frequent reviews; combined with the establishment of additional metrics, in order to better identify changes in behaviors. We have also taken steps to enhance our LTC bench strength, adding key actuarial and financial positions.

Turning to Slide 13, despite these challenges, we believe the best path forward is for Genworth to continue with the three-part LTC strategy we announced last year, which is focused on improving returns through premium rate actions on our in-force business and new products, with more conservative assumptions in underwriting. We believe staying in the LTC business is the right decision for three reasons.

First, in our opinion, the best way to improve near-term performance of these legacy older blocks of business, which were written over a decade ago, is to continue to work with regulators on premium rate increases to limit losses and improve returns. We believe that our commitment to the LTC business is a positive catalyst towards continuing to obtain these premium rate increases.

If there is a silver lining in the claim charge, it is another data point for regulators and while we need to work together to define the appropriate premium level on an important product for retiring baby boomers. Second, we believe our new LTC products have strong returns and manageable risks.

And third, we believe there is future demand for LTC insurance, as Americans seek to mitigate long-term care costs in retirement and there are a limited number of providers. On that basis, we remain confident that over time the LTC insurance business can become a very good business for Genworth .

Turning to slide 14 and an update on our LTC premium rate increases, we continue to make solid progress. On the 2012 premium rate action, as of the end of October, we have reached an agreement with 47 states and we are working closely with California, which has already approved the rate increase on one of our blocks.

All told, we are on track to meet our 2017 expectation of $250 million to $300 million on our 2012 premium rate increases. We have, however, notified three states; Massachusetts, New Hampshire and Vermont, that we will suspend business in their states because we were not able to reach an acceptable agreement on the 2012 premium rate action.

These states represent only 4% of our LTC premiums. For the smaller premium rate increases on our newer Choice 2 blocks, as of today, we have heard back from 30 states and received approval from 22 states.

We believe the Choice 2 approvals received so far will add an incremental $25 million to $35 million in annual premium increases once fully implemented. As you can see from the tables on slide 14, we have been successful in securing rate increases over the last seven years.

We will continue to file for and pursue rate increases on our LTC products, in order to get the legacy older blocks closer to breakeven, as well as to help maintain returns in our newer blocks, in line with their pricing assumptions. Turning to Slide 15, in summary, as we look at the overall strategy for Genworth, we continue to believe the best way to enhance shareholder value is to improve the operating performance of the global mortgage and life divisions, so that each can stand on their own and support an appropriate level of our overall debt.

This strategy increases our flexibility to pursue other options to create shareholder value in the future. Today, we have taken a step back in the Life division's facility to accomplish this.

As we work towards these priorities with urgency, we remain open to all feasible strategic alternatives that increase long-term value to our shareholders. And now let's open the floor to your questions.

(Operator Instructions) We will take our first question from Suneet Kamath from UBS.

Thanks. First question is on BLAIC.

Can you just give us the nominal amount of capital that's in that reinsurance subsidiary?

Sure, Suneet. It's Marty.

Before this update, we had close to about $900 million in capital and that's dropped now to about a little over $600 million. That’ll be close to about $630 million I believe.

Okay, and then I guess the second question and I'll re-queue is for Tom. On that ROE targets, I mean, it sounds like, you didn't mention that 7% to 9% target for 2016.

I don't believe, maybe you did, but I'm assuming that that's off the table at this point?

We will obviously going forward, do the work in the fourth quarter on the ALR margin and we'll also likely then in December give you an update on the ROE targets for the Life division and also for the Global Mortgage Insurance division.

And I guess based on everything that you're saying today around the capital flexibility, can you rule out an external capital raise to deal with long-term care?

Hey, Suneet, it's Marty. I believe that we still have, if you look at some of the numbers, very solid capital levels within the US Life division, kind of the mid-400s in RBC still significant unassigned surplus, also have very solid capital levels and strong capital levels in some of the other platforms and we have a very big chunk of the liquidity at the holding company with the Australia IPO over $700 million north of our 1.5 times debt service buffer.

So it's certainly not something we anticipate doing at this time and it's certainly something we don't want to do, but we'll watch and as things – as circumstances change, we’ll certainly have to consider everything involved.

All right. Thanks, I'll re-queue.

Yes, Thanks. I guess, I have an overarching question for Tom.

Given that I think you can make a possible argument that the non-LTC businesses are worth more than where the stock will probably open up this morning. Why don't you put LTC into run-off?

Sean, that's certainly an option we’ve considered. In our opinion, that would not be a good thing to do, because I think we have done a very good job of receiving rate increases from the regulators and we are stuck with these old blocks whether we keep the business, continue the business or put the business in run-off.

And I think we have and it’s showed on our slide 14, we've done a very good job working with regulators. I think we have a very good working relationship with all of them, very proactive.

I think they understand the need for these increases and I think it's, one, our position in the industry as a leader and number two, our commitment to the business that has made regulators very comfortable with giving us these increases, because as they look at it, they need us and they need a private market. There's less than 10% of Americans within the appropriate age categories have private insurance.

And that means that the states are already seeing – I've said this before, Sean that 25% to 50% of the state Medicaid budgets today go towards long-term care and that's only going to continue in the future. And so I think that these states have been willing to give these very large increases that they haven't always been willing to do in the past, I think, because they know that they can keep Genworth the leader in the business, committed to the business, we help them by taking through private coverage some of the future burdens that they see – I mean, they see these things, I am sure, claim terminations, rates going down and a higher utilization of benefits and that is covered today by Medicaid.

So, I think it's important to remain in the business, so that we can get – continue to get those significant premium increases.

All right, thanks. And one follow-up, can you tell us how much DAC is associated with long-term care?

And can you remind us what that amortization is tied to? Is that EGP or is it premium levels?

Sean, it's Marty. I don't actually have that right at my fingertips, but I am surrounded by people that do have it.

So let me come back to you a little bit later in the call with that number, once we have it.

Okay. Thank you.

And actually that time is now. We have about $1.4 billion in DAC at 0 in behind the long-term care business.

And, I guess, what test do you use to – what would make you have to write that down?

Yes. It's really the loss recognition testing that I referenced earlier.

So in loss recognition, we look at the overall margins on a GAAP basis in loss recognition and then to the extent there is – the market goes negative, then you begin to write down GAAP and then reset the reserves from there.

Okay. So you would write down DAC before you reset GAAP reserves?

Correct.

Okay. Thank you.

Hi, good morning. I was hoping you could help me think more about the – I guess, the timing of the additional rate actions and how that will come into play when you do the active life margin testing.

So, you haven't requested the rate actions yet. I am not sure when I guess that will be done.

But when you think about updating your active life reserve margins, will – I guess, will you incorporate the planned rate increases into both the GAAP and the statutory test?

Hey Ryan, it's Marty. Let me start out with that.

Obviously, these new claim assumptions as a result of our study are really just a few weeks old, so we've been assessing those and putting them into our balance sheet and earnings for the disabled life reserve. Now we have to project those forward and see how they – how we think they may impact our active lives policyholders not on claim and try to get a sense for the incremental claims that we might expect over the next 10, 20, 30 years from that.

From there, we - on a preliminary basis begin to do that. We're working very actively to then see what does that mean as far as call for rate actions.

So we are creating a multi-year plan for our rate actions that will also include reduced benefit options that we think relegated regulators and policyholders find very acceptable. And so, we're working through that very actively as we speak and we are been in discussions with our regulators.

As I said earlier, we'll have more of an update on our margins, sometime in December and should have a pretty good sense of that by that point in time.

Yes, I guess, the timing consideration that seems important, because if you're basically telling us that all, else equal, your active life margins are going to decline substantially and I don't think you've ruled out that they could potentially go negative, but that there is this big offset potentially from higher rate increases. I guess, it seems important to know if you can incorporate higher rate increases when you do the test this year or if you have to wait you start approvals sometime in the future.

Sure, Ryan. Very good question and it actually, for GAAP loss recognition testing, we put in our best expectations in the future.

So that would include future rate actions, not just the ones that we have, kind of that we are implementing and approve, but the ones that we intend to do down the road.

So it's hard to really - obviously project with certainty what those are going to be. Obviously, if our new assumptions are right and we end up seeing those claims 10 or 20 years down the road, we'd be filing for rate actions at that time.

So that's what we be embedding in. So, based on both GAAP and stat, we’d be building in those rate actions into the margins, even though they would happen in the future, again on stat with some conservatism.

I should mention there is an exception, sometimes a case with the state of New York. New York does preclude future rate actions in their – at least at the moment, typically in their margin testing.

Rate actions that haven't been yet implemented or approved and filed, I should say. So we're having discussions with them.

We also have rate action filings with them on a number of the old block policies, so we'll see how that plays out and that will be reflected in our margin testing in December. I'd say that New York subsidiary, GLICNY has a little bit under 10% of the overall business.

All right, and then just last one for now. I think last year you had, in addition to the New York on a statutory basis, you mentioned that you have an acquired long-term care block I think with $2.5 billion of reserves that you had to test independently on a GAAP basis.

Is that something we should also be considering?

Yes. There and let me go first to on the GLICNY piece, the New York piece, that is a statutory phenomenon that I talked about, was not including future rate actions.

For statutory cash flow testing, so that's more of a statutory consideration, not GAAP. Moving to the acquired block, which is about $2.5 billion, that's actually more of a GAAP phenomenon.

We have pretty thin margins in that block on a GAAP basis and given the block is an older group of policies, the ability for future rate actions to really have a significant impact on the margin is less. So we do anticipate there is potentially going to be some pressure on that particular block from a GAAP standpoint.

So we wanted to make sure we called out for investors in our disclosures.

Got it. Thank you.

Right, good morning. On the margins, when you are looking at making adjustments and I'm thinking about the December 2013, Slide 8, when you're looking to unlock, is it one adjustment and you are unlocking it, or you able to make changes, or does it have to be a cumulative effect from all of the changes and that your margins have to go down to zero before you could make any reserve adjustments?

Yes, Ken, it's Marty. Yes, essentially, once the margins become negative, that's the point generally in which you unlock.

And at the time you unlock, you basically reset your reserve assumptions, so that you basically predict it's going to be zero profit in the future. From stat you put a little bit of conservatism into that reserve calculation.

But that becomes effectively your best estimate at that time and you set the assumptions based on your best estimate at that time to basically assume that the business is going to breakeven from that point forward. And then from there on, obviously there's effectively zero margin and at the time you do that because you assume that as you reset the reserves to zero profit and then obviously you retest that every period and see how that's performing at that time under those new assumptions.

So just be - to clarify for me, it still has to be a cumulative effect taking it to zero, not just an assumption of 10 year treasury rates going – and your - I think your estimates were…

Right, you're looking at your – exactly, you're looking at your present value. All your revenues if you will, over the 40-years plus your projection premiums and investment income, then you look at your present value of all your claims and expenses and then you net those two, but it's on a PV basis and not a current basis.

And this is – it is going to allow you to, what you believe to get rate increases. My question on the future rate increases, the $250 million to $300 million expectation and the new rate increases that you're going to go for – that actually will flow into book value as you get those rates?

Essentially, isn't there going to be a future claim on those rate increases, typically for the older block of business that you're just trying to get back to breakeven? So technically, some of that book value is actually going to be utilized for paying claims in the future?

Since I have been doing most of the work with regulators on the rate increases, let me comment on that. I think what we will now do is on the old blocks, as we describe them in the slides that you have, we have been and we will now seek additional rate increases or benefit reductions to restore the margin back to essentially on those blocks, we're trying to get to breakeven.

So we'll take the new claim termination and benefit utilization assumptions that Marty went through in his DOR presentation, apply them to the old block and then estimate what we need in the future for additional premium increases beyond the $250 million to $300 million to get those blocks with the new assumptions closer to breakeven and then we'll work with the rate – the regulators to get those. In addition, we'll also apply those same claim termination and benefit utilization assumptions to our Choice 1, Choice 2 and the three Flex blocks, Flex 1, Flex 2 and there's also an ARP block within there.

And so again, we'll apply those same new assumptions. We'll see what premium increases we need or benefit reductions to get those blocks back to the original pricing assumptions.

And that’s sort of as I've discussed – or as we've discussed with all of the regulators, it's getting the old blocks closer to breakeven, counting all the new assumptions and things that impact the block and then on the newer blocks to get those back to the original pricing margins. I'll also note that on PC Flex 3, while we’ll look at the impacts of these changes for Flex 3, we've already capitated the length of duration on those to five years and since, as Marty said, most of the claim termination and benefit utilization change assumption changes apply to durations seven and longer, it shouldn't have a big impact on the PC Flex 3 pricing or returns.

There is going to be over time, just a difference in the period of recognition in a statutory earnings for example, of when you’re recognizing the premium versus when you're going to pay the claims and that's what the reserves are kind of set up for and kind of build over time. You get the premiums generally sooner, you play the claims later and reserve is meant to build up to kind of offset a lot of that difference.

Okay, thank you.

Thanks. Just wanted to get a sense on the Choice 2, I think you said whatever, $25 million to $30 million of additional premium.

But obviously, that's a younger block and you're going to collect those premiums for a longer period of time before they go to claim, assuming, I mean, on that assumption. So, I guess how material is that to the balance sheet margin, would you say?

Maybe and just to add onto Tom's comment, if you think about the $250 million to $300 million that we've expected to get on the 2012 rate actions, that's worth maybe about $2.5 billion of margin. So if you carry that forward and think about $25 million to $35 million on Choice 2, as Tom was speaking, you'd expect to get the premium longer.

The kind of annuity factor if you will, is going better for Choice 2. I don't have that available for you today, that will be part of the margin testing work.

I will provide in December.

Right, I was just doing the math of the $2.5 billion divided by, I think, you used $280 million, just on a nine times or something and then multiplying that against the $30 million for Choice 2, which gets you $260 million, $270 million of additional margin, but obviously that doesn't factor into the calculation effect that you're going to be collecting up for a long period of time.

Correct.

Well, let me go first. It's Marty.

I think obviously, while the US Life division has significant dividend capacity this year and we still anticipate it having very significant dividend capacity next year, with the liquidity we have at the holding company, with the dividend flows that we can achieve from the other businesses, particularly the international mortgage insurers, we have the ability to forgo dividends not only this year, but I think we also plan to forgo most if not all of the 2015 dividends from the US life division.

Okay. I mean I guess I was referring to some of the other things like reinsurance and block transactions, but, I don't know if you have any more color you can provide on the materiality of those levers?

All right, and then let maybe just lastly for Tom, a while ago, you talked about changing the model of long-term care, where the pricing on the business would reflect more like the health insurance business, where you could reassess every couple of years. I know you've been out talking to regulators about that.

Any color on what the response has been and how feasible you think a change in the model could be down the road?

No, on that, I think we've made a lot of progress with regulators. So if we go back to 10 or 20 years ago, they were very reluctant to grant premium increases and of course, we and others in the industry did not regularly do that.

I think they now accept and I think this claim review that we just did will be more strong evidence for them that it is impossible to predict all this stuff in advance, whether it's interest rates or lapse rates or claims and that ultimately the only way you can be in this business. And I have said this since the day I got here, is you have to be able to receive regular increases as soon and as often as you need them and I think by doing it and what I've said to them every year or every other year in doing the single digits, it's a lot easier for them to approve it and it's a lot easier for our customers, policyholders and consumers in general to absorb it.

So, there really is no way in my opinion that any insurance company can stay in this business unless the regulators allow frequent rate increases, so that you can adjust as the real world plays out and interest rates change and lapse rates change, or morbidity claim costs change, people are living longer. That will probably continue and so I think we'll have to do that.

And I think it's critical for the regulators to understand that, I think they do. And to allow us to receive those increases so we can make this business more manageable going forward.

All right. Thanks.

Hey, good morning everybody. I apologize in advance.

I got on late, so maybe these were already addressed in the presentation before I got on. But I did have a couple still, on LTC and then I did want to address MI.

Marty, can you talk about, if you haven't already the differences between the stat charge and the GAAP charge? The STAT charge was higher maybe I'm thinking about the ALR, but I would have thought the stat charge would have been lower because LTC, my understanding is that's that all tested together, but Life is in there and other things are in there as well.

So, I am kind of interested in why that stat charge was higher?

Sure, Steven. Really again the disabled life reserve or the claim reserve, as we call it, is for both GAAP and stat on a best estimates basis, so it works differently than a lot of other reserves on our balance sheet, which are where the assumptions are locked-in and you test them every year with margins.

For the claim reserves, you basically every year look at the assumptions and you modify them if you think it have then better assumptions. So it does – it kind of works very differently from an accounting standpoint, both for GAAP and stat.

The difference then really is only related to the discount rate. You're dealing with claims that kind of have a duration of two to three years and they use different discount rates.

For GAAP you use your best estimate of the discount rate and for stat it is a prescribed rate from the regulators. So that’s probably the only difference.

Okay, so to – well, was I right the ALR is, you test the ALR on a statutory and - on GAAP for stat purposes, do you test the ALR on an entity-basis and it's all mixed up? For example, if you have lack of margin in LTC, you might have excess margin in Life and they offset?

Yes, for GAAP, it's all, we look at it in the aggregate for GAAP, because it's all general business, it all rolls up. For statutory purposes, we do the margin testing which is cash flow testing on a legal entity basis, so we do it for Delaware – well we do it for all of our legal entities, but in the case of long-term care, it resides in our Delaware company and in our New York company and then in our Bermuda affiliate, BLAIC.

Right, okay, so, but the DLR is not done on that entity basis.

The DLR is also on an entity basis, but there is not really a concept of cash flow testing for that, because it's just a best estimate reserve. So there is really not a margin in it, just every year you set up a reserve for it.

Okay, so there is no offset, okay, I get that. And then kind of the same question, can you talk about the DK offset?

Obviously, a lot less than 35%, does that have to do with how much deferred taxes can be admitted? There is like a 10% limit or something like that?

Yes, there is a little bit of a limit on that, that we saw in the US life companies that we expect is really more of a timing thing and over the next quarter or so, we expect that to come – really they kind of come in at the capital. But that's really a smaller amount.

The larger amount is really in BLAIC, the Bermuda company where the regs there don't really permit you to allow any DTA, but we do expect that there'll be some current tax benefits that the business has in the next quarter, that'll basically get the capital back up. So we do expect over the next quarter or so to get that full tax benefit, or pretty close to it.

Yes, real quickly to solve to the math and then we can do it offline as well, but, call it 10% of the business that's in GLICNY, it's actually a little bit less. The other 90% resides in the Delaware company, GLIC.

Of that 90%, half of it goes down to BLAIC, so BLAIC's closer to, call it 45%.

Okay.

And then we expect, not - we didn't get it this quarter, but we expect to get to the full tax offset well over the next quarter. So there is a little bit of a timing mismatch.

That timing mismatch is more on BLAIC, because none of the tax benefits or offsets were really realized in the third quarter we expect that into the fourth quarter.

Okay, all right. Good.

And then if I can, I have a feeling nobody's talked about MI. Could you talk about the premiums and the change in the estimate, I'm interested in how much of that had to do with the change in value of Genworth Canada?

I think in Genworth Canada. And then, risk retention rules come out and I believe they are not going to give credit for MI and I was wondering if I could have some thoughts on that?

Well, first of all, think about it pre-tax.

Okay.

Okay. Got it.

All right, and then on the risk retention rules?

The impact, if you're referring to the recent clarification on the QRM rules?

Yes.

I think is what you're focusing on.

Yes.

Steven, it's Marty. Really appreciate your questions but we have some others in the queue.

I'm done.

We’ll talk to you off-line, and I'm happy to do that.

I'm done, Marty. Thank you.

Thanks very much.

Thanks, good morning. I want to follow-up on the MI question there.

As you have been exploring reinsurance options, is there any appetite out there for 2008 and prior vintages, or reinsurance still be concentrated in the 2009 and after?

Great question, Geoff. We are actually in good discussions with the re-insurers across all of our various books of business.

So our current negotiations are not just on the new books, there is in fact appetite for the old books as well.

Okay, and I know you can't get into the specific details, but if we're trying to evaluate potential cost impact, is there any reason to think that any reinsurance that you would enter is materially different than some of the examples we've seen among some of your peers?

Okay and then last question, relating to what changed this quarter, was there anything surprising that you had to strip out of your calculation? I understand the two major impacts, but was there anything you were including in your previous estimate of note that you had to take out, as you further interpreted the proposal?

As written, - the - we're still working through with the GSEs, trying to understand exactly what the GSE's interpretation for everything is going to be. They are trying to work through it on their side.

They got several mortgage insurers those are trying to sort through this with. So they were complex eligibility guidelines to begin with.

And as we’ve worked through them, we haven't gotten clarity on everything. So perhaps we're just a bit more cautious in providing a range that we can ultimately live within.

As written, - the - we're still working through with the GSEs, trying to understand exactly what the GSE's interpretation for everything is going to be. They are trying to work through it on their side.

They got several mortgage insurers those are trying to sort through this with. So they were complex eligibility guidelines to begin with.

And as we’ve worked through them, we haven't gotten clarity on everything. So perhaps we're just a bit more cautious in providing a range that we can ultimately live within.

Okay, great. Thank you.

We actually decreased utilization, our expectations in utilization, by about 1% in the first three years, but then increased it more significantly by - I think 10 points or 12 points or so in the later claim durations. In aggregate, we expect utilization to go up 1%, but obviously, in the later durations, we're now seeing that people utilizing more of their benefits than we previously assumed and that's about the other half.

We actually decreased utilization, our expectations in utilization, by about 1% in the first three years, but then increased it more significantly by - I think 10 points or 12 points or so in the later claim durations. In aggregate, we expect utilization to go up 1%, but obviously, in the later durations, we're now seeing that people utilizing more of their benefits than we previously assumed and that's about the other half.

Okay. If I think about that – let Marty and I just broad math, 500 divided by 2 - 250 and I say, well, maybe utilization rates go up in the aggregate another 1% in the future.

Should I think about 250 again?

Because, as they go from claim duration two to three, to years four and five and six, that’s kind of built in that we expect utilization to be increasing over time. Obviously, if there are different trends that we see, where people just in aggregate begin using even more of the benefits in the historical pattern it has been that we have seen, then there could be a change there.

Because, as they go from claim duration two to three, to years four and five and six, that’s kind of built in that we expect utilization to be increasing over time. Obviously, if there are different trends that we see, where people just in aggregate begin using even more of the benefits in the historical pattern it has been that we have seen, then there could be a change there.

Okay. Moving on to the active lives reserves, Slide 8 shows about $15 billion or so currently on the books.

In your discussion about what you're going to be doing going forward, you mentioned, management actions being able to address and potentially preventing or eliminating a need for any additions. Can you break out that $15 billion between the reserves that are subject to management actions and those where you don't think you're going to be able to do anything?

We'll also do it with Choice 1 and 2, where we've had these smaller rate actions going on. And then we'll look at it with some of the newer vintages of product, Flex 1 and Flex 2, where those are newer products, but we now, if we have an expectation of some higher claims on those, we'll really reassess what we expect for our expected loss ratios and file for those as well.

So it's really across the board and that's what we're looking at very actively right now and devising these multi-year rate action plans that I talked about earlier and building into our margin testing that we'll talk about in December.

We'll also do it with Choice 1 and 2, where we've had these smaller rate actions going on. And then we'll look at it with some of the newer vintages of product, Flex 1 and Flex 2, where those are newer products, but we now, if we have an expectation of some higher claims on those, we'll really reassess what we expect for our expected loss ratios and file for those as well.

So it's really across the board and that's what we're looking at very actively right now and devising these multi-year rate action plans that I talked about earlier and building into our margin testing that we'll talk about in December.

I think it's really in mostly all of them, I think from a GAAP basis, that PVFP block, this block this block that we acquired, which is about $2.5 billion, that’s certainly a block that we can ask for additional rate actions. It's just that that block is older.

So, the kind of the annuity factor if you will of that additional premium is going to be just much smaller. So it's not to say we can't get additional rates on it, but it's just not going to be for as long a period of time, so the impact of that will be less.

Right.

Great and I just want to make sure that I heard you correctly, you said that in December you'll have the results of the ALR study?

Yes. We're actively working on it.

People are working around the clock and on weekends to get it to everybody as soon as we possibly can, so it will be sometime in December.

Thanks very much. Good luck.

Thank you.

Yes, thanks. I just want to follow-up on John's question about the timing.

So, as we sit now, you have roughly $4 billion of margin, give or take on a GAAP and stat basis. You will run your tests, come back to us in December.

And would there be a scenario in which you might need to raise external capital if you still have some positive margin or what kind of cushion would you like to have in terms of life statutory capital? I am just trying to think about what would it take for you to have to raise external capital?

I think it would take a lot to do that. I think we're sitting at mid-400 for RBC or $300 million of unassigned surplus, very high capital levels in the Life division, we have over $1 billion of holding company cash, $700 million north of our expectations.

We want to maintain a minimum RBC ratio of 400%. We want to build it from the mid-400 where we are overtime, but we have a lot of internal cushions, if you will, for - in case margins do go negative between the capital and the business and ultimately in the holding company liquidity.

So I think, as we sit here today, and that’s something that we see a need to do or plan to do. Obviously, we will look at circumstances as they play out.

And we do anticipate, while we have higher claims expectations that we do expect that much of that, if not most of it, should be offset by these rate actions, because it's what we're looking at.

Thanks and can you just remind…

But if our margin goes from $2.6 billion to $1.5 billion that obviously is a reflection that business is potentially going to be less profitable over the future, but it's not that it will call for any capital need. It's only if the margins become negative that there is a capital impact.

Yes, it's $300 million.

Okay. Thank you.

Hi, I had a question about the upstream dividends and you talked about your ability to forego the upstream dividends, the rest of this year and for most if not all of 2015, which is fine for now. But, can you talk to us or give us some color about what needs to happen, either qualitatively or perhaps you've set some specific metrics for yourself that you'd like to meet, before you get to the point that you are comfortable resuming that dividend stream.

And along with that, what's your best guess as to when that might happen? When do you think you might be comfortable resuming the dividend stream?

Again, it's Marty. I'd remind folks that we do have dividend capacity in the business and we expect that to continue even to next year.

Dividend capacity next year would be, call it, a little over $300 million probably. It's just that we would make a conscious decision not to take it, to allow the business to retain their earnings and kind of build that capital up over time.

So it would be a conscious decision. We have a lot of holding company liquidity right now and frankly we expect our dividends from our other platforms next year to really the debt service that we have next year.

So I think we're in pretty decent shape. We are going through our multi-your planning process now.

We don't expect to get a dividend out of US life this year, we want to recover and probably next year, we'll have to assess 2016. As we get into our fourth-quarter call, where we usually talk about what our plans are for next year or two, we'll have more of an update on that.

But from what we see now, we have the ability to forego a dividend in US life the next couple of years, while maintaining very high holding company liquidity of $350 million or more above our 1.5 times debt service target.

Yes. Okay, it’s a good question and again we'll provide more specifics.

What we want to do is really manage the business, the US life business to a higher level of capital over time. We are working on that behind the scenes.

I don't really want to get into the specifics right now, but I'd say that directionally within the long-term care business, I think we're likely to manage for that business line to a higher level of capital to absorb volatility over time. We'll provide more specifics, but it's probably along the lines of having higher RBC capital ratios that we manage to in old blocks and new blocks, but we're working through that.

And then also, I think we want to have certain unassigned surplus levels that we get to before we take our dividend target out. So those are the types of things that we're looking at and as we work on those plans over the next couple of months, we'll have more details in our fourth-quarter call and that stuff.

Sure. I'll try to take those in order and I think I'll kick one over to Tom.

As far as the number of claims, first of all, I observe that we have about, versus when we did our last study, about 45% more claims in aggregate and we have over 80% more claims in duration 7 to be looking at. So now we're in a position to be able to use that additional data, which is significant, in the later claims on which to base our assumptions.

But really in aggregate, we only have a little bit less than 5% of the overall claims that we had, really go to duration 7 and beyond. So it's a pretty small percentage and that's where we saw the biggest changes.

Yes, and in terms of the management action steps, so there are several we can do with regulators, which we are doing, which is, seek additional rate increases and potentially also seek to reduce the benefit or capitate the benefit. There been a few cases where regulators have worked with companies on the reduction of benefit and I think we've said this before, but, we offer all of our policyholders.

They don't have to take the rate increase that's been approved. They can reduce the benefit and we give them quite a bit in terms of options, where they can keep paying the premium they've been paying and just accept less of a benefit.

In addition, and a number of companies did this in the past in other product lines, but we are also looking at opportunities for us to work directly with our policyholders on beyond whatever the regulators allow us to do overall for a class - to work with other ideas, where we would agree to reduce premiums for policyholders, in terms of them giving up either their benefits, moving from a lifetime benefit to less than that, giving up a year of coverage, giving up an amount of coverage or potentially, we call these elimination periods, but think of that as a deductible, that they would pay more of the claims before the coverage would come into play.

Really, the margin testing, I think is probably the nearest term thing that we are focused on and looking at and there would be a charge if the margins would go negative. Again, if you reference back to our December disclosures, it kind of gets into the magnitude of the margins, statutory margin is about $2.6 billion.

The GAAP margin for loss recognition testing is around $3 billion and there we'll be obviously modeling out claims under our new assumptions, we'll be modeling out premiums under our rate action plans that we're developing and we'll look at how those offset, as well as look at some of the other assumptions that we'll be looking at, as well, and we'll see how all that nets out. But the amount of additional claims would have to very significantly offset the rate actions and as you can see in one of the slides that's in there, we've had a very good track record of getting rate action success for the rate actions that we've asked for, except for the smaller rate actions around 90%.

Okay, and if I could just slip in one last one. I think you briefly mentioned moving some of your debt obligations to the MI entity, but could you just give more color on what you meant by that?

Did you literally mean moving them or did you just mean relying more on cash flows from that business?

It's really not - actually physically moving them, although, Kevin's sitting across from me and I can ask him if he would like us to do that. It's really more of a matter of us having the mortgage insurers cover the debt service this year and next, as opposed to physically moving it.

We'll continue to report our debt service in our corporate and other division.

Thank you so much for taking my questions.

Certainly, thanks for your question.

Hi, thanks for taking the follow-up. I guess one question was, I think is that probably a natural inclination to say that your claim reserve charge was 15% of claim reserves.

Would that I guess map to a – I guess, 15% impact to your active life reserve margin? I guess, can you just talk to how you would have us thinking about mapping those two and what maybe the key differences would be?

Ryan, I'm actually very glad you asked that question, because that's a question we've been asked a lot and it hadn't come up yet amazingly enough. So I'm glad you asked it.

It does not actually map like that. It maps actually very differently.

The way, you should think about margins, what it really is and again if I reference our December margins discussion, really what you do is, when you're looking at your margins, you look at the present value of the claims you expect to pay and the expenses you expect to have.

It's more a matter of looking at the present value of claims and trying to assess how much of that present value of claims would go up and then looking over at the premium side and trying to understand how much those premiums would go up. So I think it's really more a function of that.

I would say that and we've made some note of this in the presentation that the - for the active life reserves, these are the people that are not on claim currently, they're paying the premiums and so the active life reserve is meant to help fund their future claims.

The newer policies really represented more by our more life policyholders have much less in the way of lifetime benefits, by way of example. In any event, you look at the present value of claims and try to get a sense for how much that's going to go up and that's part of what our actual modeling will do and then we'll obviously build in the rate actions.

I guess, is the takeaway though, the all-in takeaway that it sounds like you're saying that there was a 15% impact to the claim reserve based on better characteristics of the remaining block and other factors that you would normally expect less - something less than 15% to impact the active life margins?

Okay and then that's helpful and then last one. Would you anticipate needing to take a - change any of your interest rate assumptions at this point, when you do the update?

Okay, all right. Thanks a lot.

Thank you, Jennifer. And again, Marty, Kevin, and I want to thank all of you for your time today.

We thought you asked great questions and we do appreciate your questions and obviously, your interest in Genworth. We hope you found today's discussion helpful, that we were transparent and forthright when that was certainly our goal.