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Genworth Financial Reports Second Quarter Net Operating Income Of $0.49 Per Diluted Share - Loss From Continuing Operations of $0.25 Per Diluted Share

RICHMOND, Va., July 29 /PRNewswire-FirstCall/ -- Genworth Financial, Inc. (NYSE: GNW) today reported a loss from continuing operations for the second quarter of 2008 of $109 million, or $0.25 per diluted share, compared with income of $321 million, or $0.72 per diluted share, in the second quarter of 2007. Net operating income for the second quarter of 2008 was $212 million, or $0.49 per diluted share, compared to net operating income of $351 million, or $0.78 per diluted share, in the second quarter of 2007.


                                  Three months ended June 30  (Unaudited)
                                        2008                   2007
                                             Per                      Per
                                           diluted                  diluted
                                   Total    share        Total       share
    (Amounts in millions, except
     per share)
    Income (loss) from
     continuing operations        ($109)   ($0.25)       $321        $0.72
    Net income (loss)             ($109)   ($0.25)       $379        $0.84
    Net operating income(1)        $212     $0.49        $351        $0.78
    Weighted average diluted
     shares                       432.9                 449.0

(1) This is a financial measure not calculated based on U.S. Generally Accepted Accounting Principles (Non-GAAP). See the Use of Non-GAAP Measures section of this press release for additional information.

Second quarter net investment losses of $321 million, net of tax and amortization of deferred acquisition costs (DAC), included $144 million of credit and/or cash flow related impairments, net of tax, and $215 million of impairments related to a change of intent to hold securities to recovery. Of total impairments, $326 million related to sub-prime and Alt-A residential mortgage and asset-backed securities. The company also had $17 million of net realized gains from asset sales, mainly related to portfolio repositioning activities.

Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting, requires that tax benefits be recorded during the year in proportion to pre-tax income. As a result, the higher level of investment losses during the quarter delayed tax benefits on operating income that would otherwise have been recognized in the second quarter. Absent this effect, operating income for the quarter would have increased $40 million, or $0.09 per diluted share. On a full year basis, Genworth's effective tax rate on operating income is expected to be between 26 and 27 percent.

"We are affirming our outlook for full year 2008 operating earnings per diluted share in the $2.25-$2.65 range. We continue to manage through a difficult environment in the U.S. housing and financial markets," said Michael D. Fraizer, Chairman and CEO. "We are actively mitigating risk in U.S. Mortgage Insurance as we build a strong 2008 book based on stringent guidelines and higher prices. We are prudently growing our high return international lines, and driving financial flexibility with several on-going capital efficiency projects. With these strategies in place, we remain comfortable with our capital position, including ending the year with strong risk-based capital ratios and risk-to-capital metrics, and have no current plans to raise equity capital."

Segment Results

Net operating income (loss) presented in the tables below excludes net investment gains (losses) and other adjustments, net of taxes, as well as the results from discontinued operations. In the discussion of International results, all references to percentage changes exclude the impact of foreign exchange. The impact of foreign exchange on net operating income in the second quarter of 2008 was a favorable $19 million.

A reconciliation of net operating income (loss) of segments and Corporate and Other activities to net income (loss) is included at the end of this press release.



    Retirement and Protection

      Retirement and Protection
      Net Operating Income
      (in millions)                                     Q2 08         Q2 07

      Wealth Management                                   $11           $11
      Retirement Income
        Fee-Based                                           6            17
        Spread-Based                                        7            26
      Life Insurance                                       87            75
      Long Term Care                                       34            41
      Institutional                                         5            10
      Total Retirement and Protection                    $150          $180


      Sales
      (in millions)                                     Q2 08         Q2 07
      Wealth Management
        Gross Flows                                    $1,405        $1,759
        Net Flows                                         361         1,265
      Retirement Income
        Fee-Based                                         705           628
        Spread-Based                                      448           354
      Life Insurance                                       85            85
      Long Term Care                                       66            54
      Institutional                                       934         1,007


      Assets Under Management (AUM)(2)
      (in millions)                                     Q2 08         Q2 07
      Wealth Management                               $20,285       $20,683
      Retirement Income Fee-Based                       7,959         5,867
        Total Fee-Based                                28,244        26,550
      Retirement Income Spread-Based                   20,018        20,341
      Institutional                                    10,773        11,515
        Total Spread-Based                             30,791        31,856
      Total Assets Under Management                   $59,035       $58,406

(2) Assets under management represent account values, net of reinsurance, and managed third party assets.

Retirement and Protection earnings declined $30 million to $150 million, primarily from reduced investment income and increased life reserve funding costs. In addition, $15 million of net tax benefits from favorable examination developments were more than offset by $16 million related to a tax timing difference recorded under APB No. 28. Investment income declined, reflecting reduced bond calls and prepayments, negative limited partnership valuation marks and lower short-term yields. The full year effective tax rate on operating income for Retirement and Protection is anticipated to be between 30 and 34 percent.

Wealth management earnings were stable at $11 million despite equity market declines. AUM was down slightly to $20.3 billion as net flows of $361 million were more than offset by a $537 million decline from market performance.

Retirement income fee-based earnings decreased $11 million due to a $4 million decline in third party service fees, a $3 million decline related to tax timing differences under APB No. 28 and the balance attributed to a refinement of a prior period dividends received deduction estimate and a change in financial presentation to net living benefit fees to account for hedging related costs. Adjusting for these items, fee-based quarterly earnings growth was consistent with growth in separate account assets. Income distribution series product sales increased 24 percent from expanded distribution reach coupled with higher producer productivity.

Retirement income spread-based earnings declined to $7 million, as a result of $12 million related to tax timing differences under APB No. 28 and $7 million of lower investment income associated with shortened asset duration and lower short-term rates. Sales increased 27 percent to $448 million driven by growth in fixed deferred annuities from increased wholesaler productivity.

Life insurance earnings increased 16 percent primarily from $16 million in more favorable taxes and strong mortality experience, partially offset by higher life reserve funding costs. Universal life sales grew seven percent as annualized first year premiums declined slightly and excess deposits grew 12 percent. Term life sales decreased 14 percent, reflecting intense pricing competition.

    Long term care earnings were $34 million compared with $41 million a year
ago. The prior year included $9 million of investment income from a bond call
compared to none in the current quarter. Results in the quarter reflected a
combination of new business growth, lower expenses, higher terminations and
claims development in older blocks. Total long term care sales increased 22
percent from strong Medicare supplement and individual long term care sales,
with growth in the career channel, offset partially by lower sales in the
independent channel.



    International

      International
      Net Operating Income
      (in millions)                                       Q2 08       Q2 07

      Mortgage Insurance (MI)
         Canada                                             $83         $59
         Australia                                           50          44
         Other International                                  1           4
      Payment Protection                                     49          35
      Total International                                  $183        $142


      International
      Sales
      (in billions)                                       Q2 08       Q2 07
      Mortgage Insurance
      Flow
         Canada                                            $7.5        $9.6
         Australia                                         10.0        11.6
         Other International                                2.1         5.1
      Bulk
         Canada                                             0.8        11.9
         Australia                                          0.6         5.9
         Other International                                0.5         0.4
      Total International MI                              $21.5       $44.5
      Payment Protection                                   $0.7        $0.9

Total International earnings increased 15 percent to $183 million. These results reflect growth in Canada and Australia mortgage insurance and in payment protection.

In Canada, earnings grew 29 percent from strong earned premium growth related to in-force book seasoning, offset by a modest increase in losses. The loss ratio declined sequentially from the first quarter from 26 percent to 21 percent and remains below long-term pricing expectations.

In Australia, earnings were $50 million, reflecting earned premium growth related to in-force book seasoning and a modest decline in losses, partially offset by slightly higher expenses. Earnings in the prior year included $5 million from a combination of accelerated premiums from higher policy cancellations and additional tax favorability that did not recur. The loss ratio declined six points to 41 percent, compared to a year ago, and was flat sequentially.

Other international mortgage insurance earnings were $1 million, $3 million below the prior year primarily due to higher losses in Spain.

Slowing global mortgage originations, coupled with selective risk management actions, resulted in a decline in flow new insurance written in most international markets. In Canada and Australia, flow new insurance written decreased 28 percent and 24 percent, respectively. In addition, the decrease in global mortgage securitizations resulted in limited bulk sales in both Canada and Australia. Other international sales dropped to $2.6 billion, reflecting a prudent approach to new markets and curtailing new business in Spain.

Payment protection earnings increased 26 percent to $49 million primarily from business growth and a lower effective tax rate, partially offset by investments in new markets. Total payment protection sales declined to $721 million, primarily from lower sales of structured products. Sales in established regions, outside of the U.K. and Ireland, grew seven percent. In the U.K. and Ireland, sales declined reflecting declining levels of consumer lending.



    U.S. Mortgage Insurance

      U.S. Mortgage Insurance
       (in millions)                                      Q2 08       Q2 07
      Net Operating Income (Loss)                          $(59)        $66

      Primary Insurance In Force                         $174.9      $135.5
       (in billions)
      Primary Risk In Force                               $36.0       $25.7
      (in billions)


      Primary Sales
      (in billions)
      Flow                                                $14.0       $10.8
      Bulk                                                  0.4        11.1
      Total Primary Sales                                 $14.4       $21.9

U.S. Mortgage Insurance had a $59 million net operating loss in the quarter as 28 percent earned premium growth was more than offset by higher incurred losses.

The gross increase in U.S. mortgage insurance reserves was $312 million before taxes, and was offset by $110 million of benefit from captive reinsurance. Net reserves increased $202 million primarily from increased delinquency counts and reserve strengthening concentrated in Florida, California, Arizona and Nevada and in the 2006 and 2007 book years. More than 80 percent of the reserve increase was related to mortgages in these four states.

Paid claims were $92 million, before taxes, an increase of $51 million versus the second quarter of 2007 and $8 million, sequentially. The average paid claim was $42,900, up from $32,500 a year ago, reflecting higher loan balances in recent book years and a shift in claims to higher loan balance states.

Loss mitigation activities have increased significantly driven by the corresponding increase in delinquencies. The company completed nearly 3,000 workouts, modifications and pre-claim sales during the quarter. Additionally, investigations and audits of emerging delinquencies in the second quarter resulted in an increase in rescissions due to misrepresentation, ineligibility and policy exclusions.

Flow new insurance written increased 30 percent to $14.0 billion from an increase in market share, partially offset by a decline in the overall size of the mortgage insurance market. Underwriting and guideline changes for risk management effectively limited sales of alternative products such as Alt-A and A minus loans, which represented only one percent of new insurance written during the quarter.

The price increase announced in April was successfully implemented in July, raising prices by more than 20 percent. Based on revised Government Sponsored Entity (GSE) requirements effective in June, excess of loss captive reinsurance limits have been reduced to a maximum 25 percent cede on new business, which will increase earned premiums going forward. Flow persistency remained strong, rising to 85 percent.



    Corporate and Other

      Corporate and Other (in millions)                 Q2 08         Q2 07
      Net Operating Loss                                 $(62)         $(37)

The Corporate and Other net operating loss of $62 million was $25 million higher primarily due to higher current period tax expense timing impacts.

Investments

Second quarter net investment losses of $321 million, net of tax and amortization of DAC, included $144 million of credit and/or cash flow related impairments, net of tax, and $215 million of impairments related to a change of intent to hold securities to recovery. Of total impairments, $326 million related to sub-prime and Alt-A residential mortgage and asset-backed securities, with the majority currently rated below single-A. The company also had $17 million of net realized gains from asset sales, mainly related to portfolio repositioning activities.

Bond calls and mortgage loan prepayments were $7 million, net of tax and DAC, in the quarter, compared with $13 million a year ago. Limited partnership income (loss) was $(7) million compared with $3 million a year ago.

Stockholders' Equity

Stockholders' equity as of June 30, 2008 was $12.3 billion, or $28.52 per share, compared with $13.0 billion, or $29.30 per share, as of June 30, 2007. Stockholders' equity, excluding accumulated other comprehensive income (loss), as of June 30, 2008 was $12.6 billion, or $29.14 per share, compared with $12.4 billion, or $28.05 per share, as of June 30, 2007.

About Genworth Financial

Genworth Financial, Inc. (NYSE: GNW) is a leading public Fortune 500 global financial security company. Genworth has $114 billion in assets and employs approximately 7,000 people in 25 countries. Its products and services help meet the investment, protection, retirement and lifestyle needs of over 15 million customers. Genworth operates through three segments: Retirement and Protection, International and U.S. Mortgage Insurance. Its products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth Financial, which traces its roots back to 1871, became a public company in 2004 and is headquartered in Richmond, Virginia. For more information, visit genworth.com.

Conference Calls and Financial Supplement Information

This press release with the expanded tables and the abbreviated statistical supplement are now posted on the company's website. The timing of the finalization of investment items impacted the production of the second quarter 2008 financial supplement, which will be available on the company's website on August 1. Investors are encouraged to review all of these materials.

Genworth will conduct a conference call on July 30 from 9 a.m. to 10 a.m. (ET) to discuss the quarter's results and outlook. The conference call will be accessible via telephone and the Internet. The dial-in number for Genworth's July 30 conference call is 877 545.1491 or 719 325.4943 (outside the U.S.), passcode 1536784. To participate in the call by webcast, register at http://investor.genworth.com at least 15 minutes prior to the webcast to download and install any necessary software.

The webcast will be archived on the company's website and a replay of the call will be available at 888 203.1112 or 719 457.0820 (outside the U.S.) passcode 1536784. The replay will be available through August 13, 2008.

Use of Non-GAAP Measures

This press release includes the non-GAAP financial measure entitled "net operating income (loss)." The chief operating decision maker evaluates segment performance and allocates resources on the basis of net operating income (loss). The company defines net operating income (loss) as income (loss) from continuing operations excluding after-tax net investment gains (losses) and other adjustments and infrequent or unusual non-operating items. This metric excludes these items because the company does not consider them to be related to the operating performance of its segments and Corporate and Other activities. A significant component of the net investment gains (losses) is the result of impairments, changes in intent to hold securities to recovery and credit-related gains and losses, the timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) are often subject to Genworth's discretion and are influenced by market opportunities, as well as asset- liability matching considerations. Infrequent or unusual non-operating items are also excluded from net operating income (loss) if, in the company's opinion, they are not indicative of overall operating trends. While some of these items may be significant components of net income (loss) in accordance with GAAP, the company believes that net operating income (loss), and measures that are derived from or incorporate net operating income (loss), are appropriate measures that are useful to investors because they identify the income attributable to the ongoing operations of the business. However, net operating income (loss) should not be viewed as a substitute for GAAP net income (loss). In addition, the company's definition of net operating income (loss) may differ from the definitions used by other companies. There were no infrequent or unusual non-operating items excluded from net operating income (loss) for the periods presented in this press release. The tables at the end of this press release reflect net operating income (loss) as determined in accordance with Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, and a reconciliation of net operating income (loss) of the company's segments and Corporate and Other activities to net (loss) income for the three months ended June 30, 2008 and 2007.

Due to the unpredictable nature of the items excluded from the company's definition of net operating income (loss), the company is unable to reconcile its outlook for net operating income (loss) to net income (loss) presented in accordance with GAAP.

Definition of Selected Operating Performance Measures

Management regularly monitors and reports a production volume metric referred to as "sales," which is a measure commonly used in the insurance industry as a measure of volume of new and renewal business generated in a period. "Sales" refers to (1) annualized first-year premiums for term life insurance, long term care insurance and Medicare supplement insurance; (2) new and additional premiums/deposits for universal life insurance, linked-benefits, spread-based and variable annuity products; (3) gross and net flows for the wealth management business which represent gross flows net of redemptions; (4) written premiums and deposits, gross of ceded reinsurance and cancellations, and premium equivalents, where we can earn a fee for administrative services only business, for payment protection insurance; (5) new insurance written for mortgage insurance, which in each case reflects the amount of business the company generated during each period presented; and (6) written premiums, net of cancellations, for the Mexican insurance operations. Sales do not include renewal premiums on policies or contracts written during prior periods. The company considers annualized first-year premiums, new premiums/deposits, gross and net flows, written premiums, premium equivalents and new insurance written to be measures of the company's operating performance because they represent measures of new sales of insurance policies or contracts during a specified period, rather than measures of the company's revenues or profitability during that period.

Management regularly monitors and reports assets under management for the wealth management business. Assets under management for the wealth management business represent third-party assets under management that are not consolidated in the financial statements. Insurance in-force for the life insurance, international mortgage insurance and U.S. mortgage insurance businesses is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. Risk in-force for the international and U.S. mortgage insurance businesses is a measure that recognizes that the loss on any particular mortgage loan will be reduced by the net proceeds received upon sale of the underlying property. The company considers assets under management for its wealth management business to be measures of the company's operating performance because they represent measures of the size of the business at a specific date, rather than measures of the company's revenues or profitability during that period.

These operating measures enable the company to compare its operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.

Cautionary Note Regarding Forward-Looking Statements

This press release 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 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 and risks, including the following:

-- Risks relating to the company's businesses, including interest rate fluctuations, downturns and volatility in equity and credit markets, downgrades in the company's financial strength or credit ratings, insufficiency of reserves, legal constraints on dividend distributions by subsidiaries, intense competition, availability and adequacy of reinsurance, defaults by counterparties, legal or regulatory investigations or actions, political or economic instability, regulatory restrictions on the company's operations and changes in applicable laws and regulations, the failure or any compromise of the security of the company's computer systems, and the occurrence of natural or man-made disasters or a disease pandemic;

-- Risks relating to the company's Retirement and Protection segment, including changes in morbidity and mortality, accelerated amortization of deferred acquisition costs and present value of future profits, goodwill impairments, reputational risks as a result of an announced rate increase on certain in-force long term care insurance products, medical advances such as genetic mapping research, unexpected changes in persistency rates, increases in statutory reserve requirements, and the failure of demand for long term care insurance to increase as the company expects;

-- Risks relating to the company's International segment, including political and economic instability, foreign exchange rate fluctuations, unexpected changes in unemployment rates, deterioration in economic conditions or decline in home price appreciation, unexpected increases in mortgage insurance delinquency rates or severity of defaults, decreases in the volume of high loan-to-value international mortgage originations, increased competition with government-owned and government-sponsored entities offering mortgage insurance, changes in regulations, and growth in the global mortgage insurance market that is lower than the company expects;

-- Risks relating to the company's U.S. Mortgage Insurance segment, including increases in mortgage insurance delinquency rates or severity of defaults, deterioration in economic conditions or a decline in home price appreciation, 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 alternatives to private mortgage insurance (such as simultaneous second mortgages) and reductions by lenders in the level of coverage they select, increases in the use of reinsurance with reinsurance companies affiliated with the company's 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 the company's U.S. contract underwriting services; and

-- Other risks, including the possibility that in certain circumstances the company will be obligated to make payments to General Electric Company (GE) under the company's tax matters agreement with GE even if the company's corresponding tax savings are never realized and the company's payments could be accelerated in the event of certain changes in control, and provisions of the company's certificate of incorporation and bylaws and the company's tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.



                      Consolidated Statements of Income
               (Amounts in millions, except per share amounts)

                                                           Three months ended
                                                                June 30,
                                                             2008       2007

    Revenues:
      Premiums                                             $1,709     $1,549
      Net investment income                                   953      1,024
      Net investment gains (losses)                          (518)       (51)
      Insurance and investment product fees and other         254        243

        Total revenues                                      2,398      2,765

    Benefits and expenses:
      Benefits and other changes in policy reserves         1,386      1,090
      Interest credited                                       320        391
      Acquisition and operating expenses, net of
       deferrals                                              551        495
      Amortization of deferred acquisition costs and
       intangibles                                            209        207
      Interest expense                                        110        124
        Total benefits and expenses                         2,576      2,307

    Income (loss) from continuing operations before income
     taxes                                                   (178)       458
    Provision (benefit) for income taxes                      (69)       137

    Income (loss) from continuing operations                 (109)       321
    Income from discontinued operations, net of taxes           -          5
    Gain on sale of discontinued operations, net of
     taxes                                                      -         53

    Net income (loss)                                       $(109)      $379

    Earnings (loss) from continuing operations per common
     share:
      Basic                                                $(0.25)     $0.73
      Diluted                                              $(0.25)     $0.72

    Earnings (loss) per common share:
      Basic                                                $(0.25)     $0.86
      Diluted                                              $(0.25)     $0.84

    Weighted-average common shares outstanding:
      Basic                                                 432.9      439.4
      Diluted                                               432.9      449.0



         Reconciliation of Net Operating Income to Net Income (Loss)
               (Amounts in millions, except per share amounts)

                                                           Three months ended
                                                                 June 30,
                                                             2008       2007

    Net operating income:
    Retirement and Protection segment                        $150       $180
    International segment                                     183        142
    U.S. Mortgage Insurance segment                           (59)        66
    Corporate and Other                                       (62)       (37)

    Net operating income                                      212        351
    Net investment gains (losses), net of taxes and
     other adjustments                                       (321)       (30)

    Income (loss) from continuing operations                 (109)       321
    Income from discontinued operations, net of taxes           -          5
    Gain on sale of discontinued operations, net of taxes       -         53

    Net income (loss)                                       $(109)      $379

    Earnings (loss) per common share:
      Basic                                                $(0.25)     $0.86
      Diluted                                              $(0.25)     $0.84

    Net operating earnings per common share:
      Basic                                                 $0.49      $0.80
      Diluted                                               $0.49      $0.78

    Weighted-average common shares outstanding:
      Basic                                                 432.9      439.4
      Diluted                                               432.9      449.0



         Net Operating Income by Segment - Retirement and Protection
                            (Amounts in millions)

                                       Retirement and Protection
                                                               Long-term
    Three months ended  Wealth    Retirement Instit-    Life     Care
     June 30, 2008     Management  Income    utional Insurance Insurance Total

    Revenues:
    Premiums              $-        $111         $-     $250     $524    $885
    Net investment
     income                1         291        100      148      215     755
    Net investment
     gains (losses)        -        (105)      (303)     (80)     (23)   (511)
    Insurance and
     investment
     product fees
     and other            85          54          -       89        6     234
        Total revenues    86         351       (203)     407      722   1,363

    Benefits and expenses:
    Benefits and other
     changes in policy
     reserves              -         191          -      208      531     930
    Interest credited      -         129         86       60       45     320
    Acquisition and
     operating expenses,
     net of deferrals     67          42          2       34       84     229
    Amortization of
     deferred
     acquisition costs
     and intangibles       1          28          1       39       31     100
    Interest expense       -           1          -       38        -      39
        Total benefits
         and expenses     68         391         89      379      691   1,618

    Income (loss) from
     continuing
     operations before
     income taxes         18         (40)      (292)      28       31    (255)
    Provision (benefit)
     for income taxes      7           -       (101)      (6)      12     (88)
    Income (loss) from
     continuing
     operations           11         (40)      (191)      34       19    (167)
    Adjustment to income
     (loss) from
     continuing
     operations:
    Net investment
     (gains) losses,
     net of taxes and
     other adjustments     -          53        196       53       15     317
    Net operating income $11         $13         $5      $87      $34    $150


                                       Retirement and Protection
                                                               Long-term
    Three months ended  Wealth    Retirement Instit-    Life     Care
     June 30, 2007     Management  Income    utional Insurance Insurance Total

    Revenues:
    Premiums              $-        $151         $-     $238     $498    $887
    Net investment
     income                1         315        167      164      213     860
    Net investment
     gains (losses)        -         (22)        (6)      (7)     (10)    (45)
    Insurance and
     investment product
     fees and other       81          46          -       95        5     227
        Total revenues    82         490        161      490      706   1,929

    Benefits and
     expenses:
    Benefits and other
     changes in policy
     reserves              -         221          -      202      494     917
    Interest credited      -         142        149       62       38     391
    Acquisition and
     operating expenses,
     net of deferrals     65          37          2       31       87     222
    Amortization of
     deferred
     acquisition costs
     and intangibles       -          41          1       36       34     112
    Interest expense       -           1          -       50        -      51
        Total benefits
         and expenses     65         442        152      381      653   1,693
    Income (loss) from
     continuing
     operations before
     income taxes         17          48          9      109       53     236
    Provision for
     income taxes          6          16          3       39       19      83
    Income (loss) from
     continuing
     operations           11          32          6       70       34     153
    Adjustment to income
     (loss) from
     continuing
     operations:
    Net investment
     (gains) losses,
     net of taxes and
     other adjustments     -          11          4        5        7      27
    Net operating income $11         $43        $10      $75      $41    $180



               Net Operating Income by Segment - International
                            (Amounts in millions)

                                               International
                           Mortgage    Mortgage     Other      Payment
    Three months ended     Insurance   Insurance   Mortgage   Protection
     June 30, 2008         - Canada   - Australia  Insurance  Insurance  Total


    Revenues:
    Premiums                  $ 139       $85       $29      $375      $628
    Net investment income        50        38         9        51       148
    Net investment gains
     (losses)                    26         -         -        (1)       25
    Insurance and investment
     product fees and other       -         1         -         6         7
        Total revenues          215       124        38       431       808
    Benefits and expenses:
    Benefits and other
     changes in policy reserves  30        35        19        76       160
    Acquisition and operating
     expenses, net of deferrals  22        18        17       216       273
    Amortization of deferred
     acquisition costs and
     intangibles                  9         6         2        80        97
    Interest expense              -         -         -         8         8
        Total benefits and
         expenses                61        59        38       380       538
    Income from continuing
     operations before income
     taxes                      154        65         -        51       270
    Provision (benefit) for
     income taxes                54        15        (1)        3        71
    Income from continuing
     operations                 100        50         1        48       199
    Adjustment to income
     from continuing operations:
    Net investment (gains)
     losses, net of taxes
     and other adjustments      (17)        -         -         1       (16)
    Net operating income        $83       $50        $1       $49      $183
    Net operating income
     adjusted for foreign
     exchange                   $76       $43        $1       $44      $164


                                              International
                           Mortgage    Mortgage    Other      Payment
    Three months ended     Insurance   Insurance   Mortgage   Protection
     June 30, 2007         - Canada   - Australia  Insurance  Insurance  Total


    Revenues:
    Premiums                   $ 94       $72       $29      $314      $509
    Net investment income        31        31         7        44       113
    Net investment gains
     (losses)                     -        (2)       (1)       (2)       (5)
    Insurance and investment
     product fees and other       -         -         -         7         7
        Total revenues          125       101        35       363       624
    Benefits and expenses:
    Benefits and other
     changes in policy reserves  16        34        11        51       112
    Acquisition and operating
     expenses, net of deferrals  15        13        18       183       229
    Amortization of deferred
     acquisition costs and
     intangibles                  5         5         1        75        86
    Interest expense              -         -         -        10        10
        Total benefits and
         expenses                36        52        30       319       437
    Income from continuing
     operations before income
     taxes                       89        49         5        44       187
    Provision for income taxes   30         7         1        10        48
    Income from continuing
     operations                  59        42         4        34       139
    Adjustment to income
     from continuing operations:
    Net investment (gains)
     losses, net of taxes and
     other adjustments            -         2         -         1         3
    Net operating income        $59       $44        $4       $35      $142


 Net Operating Income by Segment - U.S. Mortgage Insurance and Corporate and
                                  Other
                            (Amounts in millions)

                                                     U.S. Mortgage   Corporate
    Three months ended June 30, 2008                   Insurance     and Other

    Revenues:
    Premiums                                               $190           $6
    Net investment income                                    36           14
    Net investment gains (losses)                             1          (33)
    Insurance and investment product fees and other          11            2
      Total revenues                                        238          (11)

    Benefits and expenses:
    Benefits and other changes in policy reserves           295            1
    Acquisition and operating expenses, net of
     deferrals                                               36           13
    Amortization of deferred acquisition costs
     and intangibles                                         11            1
    Interest expense                                          -           63
      Total benefits and expenses                           342           78

    Income (loss) from continuing operations
     before income taxes                                   (104)         (89)
    Provision (benefit) for income taxes                    (45)          (7)
    Income (loss) from continuing operations                (59)         (82)

    Adjustment to income (loss) from continuing
     operations:
    Net investment (gains) losses, net of taxes
     and other adjustments                                    -           20
    Net operating income (loss)                            $(59)        $(62)


                                                     U.S. Mortgage   Corporate
    Three months ended June 30, 2007                   Insurance     and Other

    Revenues:
    Premiums                                               $148           $5
    Net investment income                                    36           15
    Net investment gains (losses)                             -           (1)
    Insurance and investment product fees and other          10           (1)
      Total revenues                                        194           18

    Benefits and expenses:
    Benefits and other changes in policy reserves            60            1
    Acquisition and operating expenses,
     net of deferrals                                        34           10
    Amortization of deferred acquisition costs and
     intangibles                                              8            1
    Interest expense                                          -           63
      Total benefits and expenses                           102           75

    Income (loss) from continuing operations
     before income taxes                                     92          (57)
    Provision (benefit) for income taxes                     26          (20)
    Income (loss) from continuing operations                 66          (37)

    Adjustment to income (loss) from continuing
     operations:
    Net investment (gains) losses, net of taxes and
     other adjustments                                        -            -
    Net operating income (loss)                             $66         $(37)



                         Consolidated Balance Sheets
                            (Amounts in millions)

                                                       June 30,   December 31,
                                                         2008         2007

    Assets
      Investments:
        Fixed maturity securities available-
         for-sale, at fair value                       $51,887       $55,154
        Equity securities available-for-sale,
         at fair value                                     409           366
        Commercial mortgage loans                        8,573         8,953
        Policy loans                                     1,806         1,651
        Other invested assets                            4,614         4,676
          Total investments                             67,289        70,800
      Cash and cash equivalents                          5,861         3,091
      Accrued investment income                            679           773
      Deferred acquisition costs                         7,530         7,034
      Intangible assets                                    991           914
      Goodwill                                           1,618         1,600
      Reinsurance recoverable                           16,571        16,483
      Other assets                                       1,320           822
      Separate account assets                           12,356        12,798
        Total assets                                  $114,215      $114,315

    Liabilities and stockholders' equity
      Liabilities:
        Future policy benefits                         $27,529       $26,740
        Policyholder account balances                   36,842        36,913
        Liability for policy and contract claims         4,418         3,693
        Unearned premiums                                5,758         5,631
        Other liabilities                                6,093         6,255
        Non-recourse funding obligations                 3,455         3,455
        Short-term borrowings                              200           200
        Long-term borrowings                             4,531         3,903
        Deferred tax liability                             688         1,249
        Separate account liabilities                    12,356        12,798
          Total liabilities                            101,870       100,837

      Stockholders' equity:
        Common stock                                         1             1
        Additional paid-in capital                      11,482        11,461
        Accumulated other comprehensive income (loss):
          Net unrealized investment gains (losses)      (1,723)         (526)
          Derivatives qualifying as hedges                 548           473
          Foreign currency translation and other
           adjustments                                     904           780

        Total accumulated other comprehensive
         income (loss)                                    (271)          727
        Retained earnings                                3,833         3,913
        Treasury stock, at cost                         (2,700)       (2,624)
          Total stockholders' equity                    12,345        13,478
          Total liabilities and stockholders'
           equity                                     $114,215      $114,315



      Net Investment Gains (Losses), Net of Taxes and Other Adjustments
                            (Amounts in millions)

                                            Impairments (After-Tax)
                                              Credit
                                             and Cash     Change in    Total
    Three months ended June 30, 2008       Flow Related     Intent   After-Tax

    Alt-A residential mortgage-backed
     securities                                  $(60)       $(55)      $(115)
    Sub-prime residential mortgage-backed
     securities                                   (52)       (159)       (211)
    Prime residential mortgage-backed
     securities                                    (8)         (1)         (9)
    Corporates and other                          (24)        -           (24)
        Total impairments                       $(144)      $(215)       (359)

    Total net realized gains (losses)                                      17
    Other                                                                   6
    Net investment gains (losses), net of
     taxes                                                               (336)
    DAC and other intangible amortization
     related to net investment gains (losses)                              15
    Net investment gains (losses), net of
     taxes and other adjustments                                        $(321)

SOURCE Genworth Financial, Inc.
CONTACT: Investors, Alicia Charity, +1-804-662-2248
alicia.charity@genworth.com; or Kelly Groh, +1-804-281-6321
kelly.groh@genworth.com; or Media, Tom Topinka, +1-804-662-2444
thomas.topinka@genworth.com
Web site: http://www.genworth.com
(GNW)