Genworth Financial (GNW) Q4 2023 Earnings Call Transcript


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Genworth Financial (GNW -1.57%)
Q4 2023 Earnings Call
Feb 22, 2024, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to the Genworth Financial’s fourth-quarter 2023 earnings conference call. My name is Jenny, and I will be your coordinator today. At this time, all participants are in a listen-only mode.

We will facilitate a question-and-answer session toward the end of this conference. As a reminder, the conference is being recorded for replay purposes. Also we ask that you refrain from using cellphone speaker phones or headsets during the Q&A portion of today’s call. I would now like to turn the presentation over to Brian Johnson, senior vice president of financial planning and analysis.

Please go ahead, sir.

Brian JohnsonSenior Vice President, Financial Planning and Analysis

Thank you, and good morning. Welcome to Genworth’s fourth-quarter 2023 earnings call. The slide presentation that accompanies this call is available on the Investor Relations section of the Genworth website, investor.genworth.com. Our earnings release and financial supplement can be found there, and we encourage you to review these materials.

Speaking today will be Tom McInerney, president and chief executive officer; and Jerome Upton, chief financial officer. Following our prepared remarks, we will open the call up for a question-and-answer period. In addition to our speakers, Jamala Arland, president and CEO of our U.S. life insurance business; and Kelly Saltzgaber, chief investment officer, will be available to take your questions.

During the call this morning, we may make various forward-looking statements. Our actual results may differ materially from such statements. We advise you to read the cautionary notes regarding forward-looking statements in our earnings release and related presentation as well as the risk factors of our most recent annual report on Form 10-K as filed with the SEC. This morning’s discussion also includes non-GAAP financial measures that we believe may be meaningful to investors.

In our investor materials, non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules. Also, references to statutory results are estimates due to the timing of the filing of the statutory statements. And now, I’ll turn the call over to our president and CEO, Tom McInerney.

Tom McInerneyPresident and Chief Executive Officer

Thank you very much, Brian. Good morning, everyone, and thank you for joining our fourth-quarter earnings call. Before I get to the quarter, I want to welcome Jamala Arland to her first earnings call in her official capacity as the new president and CEO of our U.S. life insurance business.

Jamala has been with Genworth for 18 years. She’s one of the top actuaries in the LTC insurance industry, and she’s been an integral leader in both the development and execution of our multiyear rate action plan. I’m very excited to work with her in her new and broader role. I also want to thank Brian Haendiges for his tremendous contributions and accomplishments at Genworth.

As you know, Brian recently retired. In 2023, Genworth made outstanding progress against our three strategic priorities, which enabled us to return significant value to our shareholders. Before I discuss these accomplishments, I’ll quickly review our financial performance. For the full year, net income was $76 million or $0.16 per diluted share, and adjusted operating income was $41 million or $0.09 per diluted share.

These results were led by Enact, which had an outstanding year delivering adjusted operating income of $552 million for Genworth. And that continues to execute on its strategy, maintaining a strong balance sheet and high-quality books of insurance in force. And that also expanded its platform in 2023 with the launch of Enact MI to pursue opportunities in the mortgage insurance market. In the fourth quarter, Genworth reported a net loss of $212 million, or $0.40 per diluted share, and an adjusted operating loss of $230 million, or $0.51 per diluted share.

These results were driven by losses in both life and annuities and in LTC, primarily due to the impact of our annual assumption reviews as well as quarterly actual to expected experience under new LDTI GAAP accounting standards, which Jerome will discuss in more detail. On a statutory accounting basis, pre-tax income for the U.S. life insurance companies was $148 million for the fourth quarter and $433 million for the full year, driven by a net benefit in variable annuities from better equity markets and higher interest rates and a net favorable impact of assumption updates. $1.6 billion earnings — pre-tax earnings benefits in 2023 from LTC in-force rate actions and settlements were offset by higher claims as the blocks age.

Complete statutory results for our U.S. life insurance companies who will be available when we file our fourth-quarter statutory statements later this month. Enact had a very strong fourth quarter with adjusted operating income of $129 million to Genworth. We’re pleased with Enact’s continued strong operating performance and capital levels.

Since Enact’s IPO, Genworth has received approximately $615 million in capital from Enact, including $128 million in the fourth quarter. Cash flows from Enact have fueled our share repurchase program and our growth in CareScout. Moving to our strategic progress. We continue to further strengthen the financial and operational capabilities of our legacy LTC insurance business.

We’re achieving this primarily through our multiyear rate action plan, or MYRAP, the most effective tool we have to bring our legacy LTC insurance portfolio to economic breakeven on a go-forward basis and ensure the self-sustainability of the life companies. 2023 was a very successful year for MYRAP on a few different fronts. First, we achieved a total of $354 million in premium rate increase approvals in 2023, well above our forecast of $275 million. In the fourth quarter, premium rate increases totaled $127 million from 13 states with an average percentage increase of 75%, which is one of the strongest quarterly percentage increases we’ve ever achieved.

We also saw significant approvals in our PCS II policies as a result of the new National Association of Insurance Commissioners’, or NAIC’s, process to develop a multistate actuarial review to address state inequalities. Perhaps most importantly in 2023, the value of our MYRAP progress achieved to date increased by $4.5 billion, which reduces the remaining amount currently left to be achieved by $1.5 billion. In the past two years, we’ve reduced the remaining amount left to be achieved by almost $4 billion. While Jerome will discuss our 2023 efforts in more detail, I wanted to note our significant progress and continued momentum on this important strategic priority.

As we’ve said before, we manage the U.S. life insurance companies on a stand-alone basis. They operate as a closed system, leveraging existing reserves and capital, current premiums, as well as future new premiums under the LTC MYRAP plan to cover future claims and other obligations. We will not put capital into life insurance companies, and given the long-tail nature of our long-term care insurance policies with peak claim years still well over a decade away, we also do not expect capital returns from this segment.

Our second strategic priority is to leverage Genworth’s LTC expertise to develop new, innovative aging services and solutions. On this front, CareScout achieved several key milestones in 2023. After our initial launch in Texas, the CareScout Quality Network is now available in 20 states. We continue to add providers to the network that meet our quality credentialing standards and that agree to negotiated discount rates.

At the end of 2023, we had 125 providers in the network. And by the end of 2024, we anticipate we will have CareScout Quality Network home care coverage for approximately — from approximately 600 providers that will cover two-thirds of the aged 65-plus census population in the U.S. and also approximately two-thirds of our 1 million LTC policies. With the discounted rates negotiated, we will bend the future LTC claim curve and reduce future LTC claim cost.

Genworth policies will also be able to extend their available benefits, particularly where they have limited benefits. We continue to forecast claim savings on Genworth LTC claim cost over time of between $1 billion to $1.5 billion on a net-present-value basis, driving further risk mitigation for the legacy LTC block. In addition, we have been focused on building the foundation necessary to reenter the long-term care insurance business with new funding solutions in 2024 through our new subsidiary, CareScout Insurance. We are focused on product development and pricing, identification of a highly rated reinsurance partner, regulatory engagement and operational readiness as we prepare to launch new LTC insurance products later in 2024.

Moving to our third strategic priority. We continue to allocate excess cash from Enact to drive Genworth’s long-term shareholder value. We returned significant capital to shareholders via share repurchases in 2023, and we remain committed to the execution of our buyback program. In July of last year, the Genworth Board authorized an additional $350 million in share repurchases, significantly expanding our original share repurchase operation, which we first announced in May of 2022.

This step was reflective of the transformative progress we’ve made as a company in recent years, our strong progress on buybacks, and the board’s confidence in our strategy and in our future. Since the initial authorization in May 2022, we have repurchased a total of approximately $384 million worth of shares at an average price of $5.33 per share, as of February 13th, and reduced outstanding shares by 13% from approximately 511 million shares to 443 million shares outstanding. We also invested approximately $30 million in CareScout services in 2023 in line with our guidance. We plan to invest an additional approximately $35 million in 2024 as we build out the CareScout Quality Network.

We will continue to prudently scale and diversify CareScout services in a way that we leverage our intellectual property, successfully drive claim savings for Genworth Life Insurance Company in GLIC day and introduce new offerings — insurance offerings to the market and drive long-term growth. Our 2023 achievements have improved Genworth’s financial strength evidenced by our ratings upgrades from both Moody’s and S&P and allowed us to enter 2024 with greater financial flexibility and continued confidence in our long-term strategy to invest in growth, primarily through CareScout, and continue returning capital to our shareholders. And with that, I’ll turn the call over to Jerome.

Jerome UptonExecutive Vice President, Chief Financial Officer

Thank you, Tom, and good morning, everyone. We completed our annual LTC and life insurance assumption reviews in the fourth quarter under the new U.S. GAAP accounting standard, LDTI. While our U.S.

GAAP earnings were pressured by these assumption updates, I’m very pleased with Genworth’s strategic progress in 2023, the ongoing value creation delivered by Enact, and our strong momentum on LTC in-force rate actions, which helped drive positive statutory income in our U.S. life companies for the year. I’ll discuss Genworth’s results and drivers in more detail, including Enact’s performance and the results of our assumption reviews. Then I’ll provide an update on our investment portfolio and capital position before we open the call for Q&A.

Tom covered our consolidated financial results, so I’ll start with Enact’s performance on Slide 6. Enact delivered very strong fourth quarter and full year results, including high-quality growth in its insured portfolio, increasing investment income and strong profitability. Enact’s adjusted operating income of $129 million was up 8% versus the prior year. Primary insurance in-force increased 6% year over year to a record $263 billion, driven by new insurance written and continued elevated persistency.

Genworth share of Enact’s book value, including AOCI, has increased from $3.4 billion at the end of 2022 to $3.8 billion at the end of 2023, while at the same time, Enact has delivered significant dividends to Genworth. The business continues to operate from a position of strength and has had strong loss performance, which has allowed it to release excess reserves. As shown on Slide 7, Enact had a favorable $53 million reserve release in the fourth quarter, which drove a loss ratio of 10%. The reserve release primarily reflects favorable cure performance on 2022 and earlier delinquencies.

Both Enact’s prior-quarter and prior-year results included favorable net reserve releases as well, totaling $55 million and $42 million, respectively. Enact has a strong estimated PMIER sufficiency ratio of 161%, approximately $1.9 billion above PMIER’s requirements. Enact continues to deliver strong cash flows to Genworth, the combination of Enact’s quarterly dividend. Its special dividend and its share repurchase program generated a total of $128 million in proceeds to Genworth in the fourth quarter.

For the full year 2023, Genworth received $245 million from Enact, which enabled us to advance Genworth’s strategic initiatives and capital return program. In 2024, Enact has stated that it expects its total capital return will be similar to what it delivered in 2023. Turning to long-term care insurance, starting on Slide 8. We continue to significantly reduce the tail risk on our legacy LTC block with progress on our multiyear rate action plan, or MYRAP, and legal settlements.

As of the end of 2023, we have achieved in-force rate actions worth approximately $28 billion on a net-present-value basis since 2012 and have seen a cumulative policyholder response rate of 51% to reduce benefits. As Tom mentioned, the year-over-year increase in the economic value of our rate actions achieved to date is significant. As shown on Slide 9, this $28 billion reflects $4.5 billion in growth from last year. $2 billion of the increase is attributable to our 2023 rate action approvals and settlement implementations.

The benefit reductions associated with these actions not only provide stability to our financials in the period implemented but also continue to provide risk resiliency going forward as the blocks reach peak claim years, helping to protect against any potential deterioration in the future. As such, the value of the benefit reductions connected with our previously achieved rate actions and settlements also increased by an additional $2.5 billion in 2023 from the impact of our assumption updates and ongoing risk reduction measures. The remaining amount we currently have left to achieve is approximately $5 billion, which has decreased approximately $1.5 billion from this time last year. Our achieved value reflects progress of 84% toward our latest estimate of approximately $33 billion for the total net present value of premium increases and benefit reductions contemplated in our MYRAP.

Slides 10 and 11 show more details on the filings approved in recent quarters, as well as the positive trend we’ve seen in policyholder benefit reduction elections, both of which demonstrate the progress we’re making on our strategy. In addition to the MYRAP, recent legal settlements have further reduced risk associated with our legacy LTC book. In connection with these settlements, many policyholders have elected to reduce their benefits in order to reduce or eliminate their premiums, which allows them to maintain meaningful coverage while reducing Genworth’s tail risk on these policies and further protecting our ability to pay claims. The PCS I and II settlement was materially completed as of the end of the quarter.

The third and final settlement on our large Choice II block will continue throughout most of 2024 and will further reduce risk through benefit reduction options. Long-term care insurance GAAP results are covered on Slide 12. Our LTC segment reported an adjusted operating loss of $151 million in the fourth quarter, compared to an adjusted operating loss of $71 million in the prior quarter and adjusted operating income of $204 million in the prior year. In the fourth quarter, LTC had a liability remeasurement pre-tax loss of $188 million, including a $127 million loss on actual to expected experience, principally on our CAP cohorts.

The experience during the quarter was related to higher claims and unfavorable timing impacts of the PCS I and II legal settlement. Despite the quarterly variation in experience, as I noted, this settlement is now materially complete and has been very favorable to Genworth on a cumulative basis. For the full year 2023, the total liability remeasurement loss from actual to expected experience was $269 million, with a quarterly average of about $65 million. Though this quarterly average represented less than 0.5% of our total liability for future policy benefits of approximately $42 billion, we expect volatility at this average level could continue, particularly for our CAP cohorts, and believe this could be a main driver of our quarterly earnings pressure for LTC in 2024.

This potential impact will vary based on actual experience and seasonal trends. Importantly, the quarterly U.S. GAAP fluctuations do not impact cash flows or long-term economics or the way we manage the LTC business. We continue to primarily manage the LTC business by seeking to maximize net present value economics under the MYRAP.

We believe statutory pre-tax results better reflect our execution and fully reflect the performance of all books of business as the concept of capped versus uncapped cohorts does not exist. As I mentioned, this is the first quarter that we are reporting long-term assumption updates for U.S. GAAP under the new LDTI accounting standard. As a reminder, we no longer perform loss recognition testing for our LTC active life reserves.

LTC assumptions are now reflected at best estimate with any changes recorded through our income statement. LTC assumption updates in the fourth quarter resulted in an additional $61 million pre-tax remeasurement loss in LTC, as shown on Slide 13, compared to a $303 million remeasurement gain in the fourth quarter of 2022. The gain in 2022 was largely related to the PCS I and II legal settlement, which primarily impacted capped cohorts. We made a similar assumption update to reflect the positive impact of the Choice II legal settlement in the fourth quarter.

However, the P&L impact was muted because this settlement primarily impacted uncapped cohorts. The assumption changes implemented better align near-term projections with our recent experience for cost of care, mortality, incidents, and lapses for our healthy lives, which had a net unfavorable impact in the fourth quarter. We also updated our disabled life mortality assumption to reflect continued favorable expectations over the next few years as we emerge from COVID. Based on favorable recent rate increase approval experience and feedback from regulators, we have updated our assumption for future approvals and benefit reductions to reflect additional future value.

This assumption update demonstrates our confidence and expectation of continued success in achieving actuarially justified LTC rate increases. Unlike the GAAP earnings impact resulting from LDTI, updates to best estimate assumptions for LTC, healthy lives are reflected in cash flow testing margin on a statutory basis. However, assumption updates for disabled life reserves are reflected in statutory income similar to GAAP. The assumption updates and cash flow testing resulted in a net $58 million increase in statutory reserves.

I will now turn to our life and annuities segment GAAP results on Slide 14. The segment reported an adjusted operating loss of $183 million, driven by an adjusted operating loss in life insurance of $206 million, partially offset by adjusted operating income of $9 million from fixed annuities and $14 million from variable annuities. In life insurance, results were primarily driven by unfavorable long-term assumption updates, which had a pre-tax impact of $226 million. Mortality was also unfavorable compared to the prior quarter and prior year.

The DAC amortization expense was slightly lower than the prior year due to lower lapses and block runoff. Unlike LTC, which is split approximately 50-50 between capped and uncapped cohorts, currently, the term life insurance business is primarily in uncapped cohorts, which mutes the impact of the actual to expected experience. Fixed annuities results were down versus the prior quarter due to less favorable fixed payout annuity mortality and down versus the prior year from lower net spreads. Variable annuities were up versus the prior quarter and prior year due to the favorable impact from assumption updates in the fourth quarter.

As shown on Slide 15, the $226 million life assumption impact primarily reflected unfavorable updates to persistency assumptions for certain universal life products with secondary guarantees, or ULSG, and unfavorable mortality updates, including more modest mortality improvement in term and UL products. These updates are similar to those made by other insurers However, at approximately $4 billion, our ULSG block is relatively small compared to others in the industry and is a closed block that has not issued new business since 2016, leading to a smaller relative impact. The impact also reflects an expectation that mortality across all of our life products will remain elevated in the short term as we emerge from the pandemic, similar to the adjustment made to LTC disabled life mortality. Assumptions for universal life and term universal life were always on the best-estimate basis with changes recorded through income as was the case under the old accounting guidance.

And now, under LDTI, assumption updates to our term life insurance business also impact income instead of loss recognition testing margin. Under GAAP accounting, these liability assumption updates were only partially offset by a favorable update in our UL products for the current interest rate environment. However, statutory updates in Life were net favorable due to a significant increase in the regulatory prescribed reinvestment rate in our ULSG products, which more than offset the other liability assumption changes. Note that for both life and LTC, our assumptions do not reflect any potential long-term impacts from COVID as we continue to monitor emerging experience.

Rounding out the fourth-quarter GAAP results, corporate and other reported an adjusted operating loss of $25 million, up from $18 million in the prior quarter, reflecting growth investments in CareScout and taxes. Turning now to our statutory results for our U.S. life insurance companies, which we believe better represents their underlying performance and our primary focus in managing these companies. Slide 16 illustrates the continued benefit the in-force rate actions and legal settlements have on our LTC business as shown through the $1.6 billion benefit the statutory income on a pre-tax basis recognized year to date.

Overall, statutory earnings in LTC were $79 million in 2023, down from the $257 million during 2022, primarily due to higher claims as the block ages and block runoff, which is partially offset by larger impacts from in-force rate actions and legal settlements. Slide 17 shows that paid claims are increasing as the blocks age and pandemic trends subside. Paid claims will continue to increase as peak claim years on our largest blocks, Choice I and Choice II are over a decade away. This trend is expected and incorporated in our long-term assumptions and reserve methodology.

We will continue to monitor new claims growth and benefit utilization trends. Slide 18 shows our fourth-quarter total pre-tax statutory income for the U.S. life insurance companies of $148 million. This is driven primarily by variable annuities from the net favorable impact of equity market and interest rate movements in the quarter as well as net favorable impacts from assumption updates in the quarter, primarily in life insurance.

LTC had a $467 million pre-tax benefit from in-force rate actions and legal settlements, but this was largely offset by higher claims as the block ages. The consolidated risk-based capital ratio for Genworth Life Insurance Company, or GLIC, was 303% at the end of the year, compared to 291% in the prior year. GLIC’s consolidated balance sheet remains sound with capital and surplus as of the end of the year of $3.4 billion. Cash flow testing margin in our life insurance companies remain positive at the end of the year with GLIC’s margin ending within the $0.5 billion to $1 billion range after the assumption updates.

Our final statutory results will be available on our investor website with our annual statement filings later this month. Moving to our investment portfolio, which is summarized on Slide 19. We remain confident in our positioning and believe we have the right strategy, given the products in our portfolio and the duration of our liabilities. As a reminder, the majority of our assets are in investment-grade fixed maturities that we generally buy and hold to support the U.S.

life insurance company’s liabilities with unrealized gains and losses impacting equity through changes in other comprehensive income. Because the liabilities are very long duration, especially for LTC, we have very limited liquidity risk. The portfolio continues to benefit from the high interest rate environment. New money is currently being invested between 5.75% and 6%, excluding alternative investments, which have targeted returns of approximately 12%.

The current attractive new money rates will benefit the portfolio over time. Our net investment income reflects both solid base portfolio performance and strong returns in our alternative assets program, which is comprised mainly of diversified private equity. Our commercial real estate exposure is approximately 16% of our total portfolio and is concentrated in higher quality investment-grade assets with office exposure of approximately 19% of our real estate investments. Next, turning to the holding company on Slide 20, we continued to return capital to shareholders via share repurchases in the fourth quarter, repurchasing $35 million at an average price of $5.90 per share and another $25 million through February 13th.

We received $128 million of capital from Enact and $64 million from intercompany tax payments in the fourth quarter. We ended the year with $350 million of cash and liquid assets. For the full year, we received a total of $234 million of net intercompany tax payments. We have now fully utilized our available tax assets, meaning, we will have less net cash inflows during 2024 to deploy.

Tom reviewed our capital allocation strategy, and I’ll reiterate that our top priorities remain to invest in long-term growth through CareScout services, return cash to shareholders through our share repurchase program when our share price is below intrinsic value, and opportunistically pay down debt when attractive to us. We’re very pleased with the value created for shareholders through our share repurchase program. In 2023, we fully completed the initial $350 million program that began in May 2022. We have an additional $316 million remaining under our current authorization as of February 13th.

And in 2024, we expect to allocate roughly $125 million to $150 million to share repurchases. This range could be higher or lower depending on our cash position, share price and market condition, and is lower than the amount we’ve repurchased in 2023 given that we have fully utilized our tax assets. Also in 2023, we completed a successful consent solicitation from bondholders, representing the majority in principal amount of our senior notes due in 2034. This transaction amended a restrictive covenant that limited our ability to repurchase our 2066 subordinated notes.

We now have greater optionality to opportunistically buy back holding company debt when it’s attractive relative to our other uses of capital. In the fourth quarter, we repurchased $21 million of debt, reducing our total holding company debt to $856 million. After achieving our target debt level in 2022, we strive to maintain a debt-to-capital ratio of 25% or below, attributing no equity value to LTC, life and annuities. As of year-end, our debt-to-capital ratio was strong and below this target.

We are pleased with our financial flexibility given our liquidity level, sustainable cash flows from Enact, and manageable debt level. In closing, we are delivering on our strategic priorities while proactively managing our liabilities and risk. The multiyear rate action plan and the additional benefit from the three LTC legal settlements are enhancing our ability to honor policyholder commitments and further stabilize the legacy LTC block. Enact is a strong driver of shareholder value as evidenced by its stable earnings, increasing book value and capital returns.

Looking ahead, we will continue to focus on delivering sustainable long-term growth through CareScout while returning meaningful value to shareholders through share repurchases. Now, let’s open up the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is going to come from Ryan Krueger from KBW. Please go ahead.

Ryan KruegerKeefe, Bruyette and Woods — Analyst

Hey, good morning. I have a few questions on long-term care. The first one was on CareScout. I believe you said you expected $1 billion to $1.5 billion of present value of claim savings related to CareScout over time.

As — I guess, first, I just wanted to understand. Did you already assume that in your reserve projections? Or is that something that you would view as a possibility that you haven’t reflected yet?

Tom McInerneyPresident and Chief Executive Officer

So, Ryan, great question. And it’s the latter. So, we — we assume the savings will be in that range, $1 billion to $1.5 billion. But we’re just rolling out the network.

We’ve had some matches, probably about 30 so far, since we’re just starting. So, as we get more information on how many are using the quality network versus another provider and how big the discounts are, our goals are to be the discounts between 10% and 20%. So far, we’re able to achieve discounts at the higher end of that range. So, as we gain more experience, at some point, we’ll view it as statistically significant.

And at that point, you’ll see us assume that, and that would reduce the amount of premium increases that we need in the future by that amount. So, to your question, it’s what we project, but it’s — we haven’t factored it into — and assumed in our projections the value of it yet.

Ryan KruegerKeefe, Bruyette and Woods — Analyst

Understood. And then secondly, I guess, I wanted to understand if you get to a point of economic breakeven on long-term care. Obviously, that’s — you want to be in that place. But is there — what are the broader implications for Genworth once you get to that place?

Tom McInerneyPresident and Chief Executive Officer

Well, yes. Great question. So, it’s about a long-term effort, and we’ve achieved — I mean we’re very pleased with the results of adding $28 billion to the economics of the business. We think by the end of 2026, that will be largely breakeven self-sustainability.

And at that point, I would say, in most states, so let’s say, 35, 40 states, we’ll be done with premium increases. As we’ve said before, over the quarters, Ryan, as you know, there are a number of states who are well below average. I do think in those states, even beyond 2026, we’ll continue to pursue rate increases until we get that — those states to the average of all the states.

Ryan KruegerKeefe, Bruyette and Woods — Analyst

Thanks. And then just one last one. You’ve obviously made a lot of progress on achieving rate actions. But I think if you look back over time, either your loss recognition testing margin or your cash flow testing margin has remained about the same despite a very high level of achieved rate increases and benefit reductions, which implies a similar level of adverse reserve development from assumption updates over that same period.

So, I guess, what gives you the confidence that this time, once you achieve these rate increases, you won’t have further offsets from negative reserve adjustments?

Tom McInerneyPresident and Chief Executive Officer

Yes. Another great question. And there’s a lot embedded in that. I would say that we’ve now paid 360,000 claims and $26 billion of value claims.

And if you look at that one slide, it shows the claims we’ve actually paid in the last so many years. So — and every year, we look at the new claims get added to the total claims. And based on those, we determine whether there are any of our long-term assumptions that need to be changed. So, my view is we’re getting near the end.

I think if you look at that, there’s another slide that shows what the net present value total that we’re looking to achieve to get to that breakeven is $33.3 billion. And we’ve achieved $28 billion to date. That $33.3 billion could go up, potentially could go down over time. And so, I think while there likely are some assumptions that will, based on new claims, we might change.

I think based on 10 or 11 years of looking at it, I think we’re getting near the end. So, I don’t think there’s a lot left. The other way we sort of look at things, we think we’re 85% of the way to being at breakeven or sustainability.

Jerome UptonExecutive Vice President, Chief Financial Officer

Tom, could I just add one comment for Ryan to consider. And that is our block has gone through measurable settlement activity. And it provides risk resiliency to the block overall through the actions that have been taken, the selections that have been made by the policyholder. So, as — should we see adverse development there, those reductions that have occurred through the settlement will add meaningful value to us and really cuts off tail risk for the block.

Tom McInerneyPresident and Chief Executive Officer

I agree with that. Good point. Jamala, anything you want to add?

Jamala ArlandPresident and Chief Executive Officer, U.S. Life Insurance

Thank you for the introduction at the beginning, Tom. And thank you for the good questions, Ryan. I reiterate what Jerome added in terms of the resiliency of the benefit reductions in settlement, adding additional support as we think about how the development of adverse assumptions in the future. Thank you.

Tom McInerneyPresident and Chief Executive Officer

Thanks, Jamala.

Ryan KruegerKeefe, Bruyette and Woods — Analyst

Thank you.

Tom McInerneyPresident and Chief Executive Officer

Anything else, Ryan?

Ryan KruegerKeefe, Bruyette and Woods — Analyst

I think that was it. I appreciate the answers.

Tom McInerneyPresident and Chief Executive Officer

All right, thanks so much. Thanks for your questions.

Operator

[Operator instructions] Our next question is going to come from Christopher Bolton, private investor. Please go ahead.

Christopher BoltonPrivate Investor

Hello. Who did you ask to have a question?

Operator

Christopher, your line is open.

Christopher BoltonPrivate Investor

Thank you. In listening to the call, you mentioned that the GLIC risk-based capital ratio was 303%. Could you give a risk-based capital ratio for GLIAC?

Tom McInerneyPresident and Chief Executive Officer

We did not. But, Jamala or Jerome, we have that number, if you want to give it.

Jerome UptonExecutive Vice President, Chief Financial Officer

Chris, we have not provided that number, but it’s north of 400%. And it’s gone up throughout the course of 2023. We’ve had particularly good results on the variable annuity block given the equity market conditions. So, it’s north of 400%.

Tom McInerneyPresident and Chief Executive Officer

Christopher, just to follow up on that. In Genworth Life Insurance and Annuity Company or GLIAC, there’s very little, if any, LTC policies. It’s mostly a life and annuity company. So, it’s RBC is significantly better because it hasn’t had the statutory losses of the past that we had in the LTC companies.

Jerome UptonExecutive Vice President, Chief Financial Officer

Chris, I want to add one thing. All of our statutory filings will be coming soon. So, you will be able to access and see the metrics in specific detail.

Christopher BoltonPrivate Investor

Well, I have one more question. In view of GLIAC’s strong risk-based capital ratio — and I would say 400% could be characterized as strong. When do you think — why do you feel that AM Best is still only giving GLIAC a fair best rating?

Tom McInerneyPresident and Chief Executive Officer

Yeah. Look, I would say we don’t always agree with the rating agencies. I think GLIAC is a very strong company. I think any RBC ratio, really above 350 as usually deemed to be strong investment grade.

But I think, Christopher, the rating agencies, so AM Best and probably S&P and Moody’s, because we’ve said that we’re not going to put any more shareholder capital into the life companies, and that’s all three, that they’re a closed system. They operate on their own. I think — and therefore, we’re relying on premium rate increases. I think the rating agencies have based the rating on that.

And so, we’re disappointed. We think they should be higher, but that’s where they are. That’s a good question.

Christopher BoltonPrivate Investor

Good. Thank you for that information. I appreciate it.

Tom McInerneyPresident and Chief Executive Officer

Thank you.

Operator

[Operator instructions] OK. We have one more question. We’re going to ask Arthur Tetyevsky from Cantor Fitzgerald. Please go ahead.

Arthur TetyevskyCantor Fitzgerald — Analyst

Good morning. Thank you very much for the call. My question refers to the bottom of Slide 20 of your presentation. You talked about the share repurchases as well as the repurchased $21 million of principal of 2034 and your 2066 final maturity subs.

I’m wondering if you can share any plans to continue to repurchase both of these bonds going forward? And if you could also provide some detail in terms of the proportionality of that $21 million bought back, broken down between the 2034 and 2066 notes. Thank you so much.

Tom McInerneyPresident and Chief Executive Officer

Thanks, Arthur. I’ll start out and then turn it over to Jerome, our CFO, to give you more details. But we negotiated in 2023 a very good adjustment to the bond offering. So, prior to a consent from bondholders, we couldn’t really repurchase the 2066s, which have traded well below par in the last several years.

So, we agreed with them in exchange for repurchasing some of the ’34s going forward for every dollar of 2034 debt that we repurchased, we can buy $2 of the 2066 debt. And because both are traded below par, but particularly the 2066s, we have been opportunistically repurchasing debt. Our priority is still to focus more on repurchasing shares because that’s a better economic return for our stakeholders, shareholders, in particular, but we’ll continue to do opportunistic debt. So, we did a reasonable amount in ’23.

And Jerome — I’ll ask Jerome to give you the specific numbers. But going forward, I think you can expect repurchases sort of in that range going forward. But, Jerome, do you want to give an update on the specifics?

Jerome UptonExecutive Vice President, Chief Financial Officer

Yes, Arthur, thank you for the question. We’re pleased with the modification of the replacement capital covenant. And I would say in the $21 million that you highlight on Slide 20, the majority of that was a 2034. So, that was part of what we agreed to as part of the consent, and there was a smaller piece of the 2066s.

And I would just say, as you think about adding shareholder value, I agree with Tom, our focus is going to be on share buybacks as you think about economic value. We just feel very good about where we’re buying. I think you’ve seen the ever-to-date results on our share repurchase program, which is just a little above five, and we’re very pleased with that. So, we’ll continue to allocate and focus on share buybacks at pricing levels that we’ve highlighted.

We’ll continue to be opportunistic. But proportionately, we’re in a good place from a leverage perspective. We’re well below our target right now, and you’ll see the preponderance of our capital allocation going to share buybacks.

Arthur TetyevskyCantor Fitzgerald — Analyst

Got it. Thank you so very much for clarifying that. Much appreciated.

Tom McInerneyPresident and Chief Executive Officer

Yep. Thank you. Thanks, Arthur. Thanks for your questions.

So, Jenny, back to you. I think it looks like that’s all the questions we have, but if you can confirm that, and then I’ll just wrap up.

Operator

OK. Ladies and gentlemen, as there are no further questions, I will now turn the call back over to Mr. McInerney, please, for closing comments.

Tom McInerneyPresident and Chief Executive Officer

Thank you very much, Jenny, and thanks to everybody on the call. Thanks to Ryan, Christopher, and Arthur for your great questions. I think they are very good ones. And hopefully, we gave you good responses.

But in closing, just to sum up, we’re very pleased with Enact’s strong performance. We’re very pleased with the move forward we’ve made with our MYRAP getting to $28 billion of net present value achieved. We’re pleased with the progress in CareScout, particularly with building the quality care network, now to 125 providers that are credentialed, have been approved for quality and our — we’re bending the cost curve by negotiating the discounts. And no other LTC insurers have ever really tried to do that.

So, we’re the first one. The health insurers have had a lot of success at that over time. So, we’re pleased with that. As I said, we hope, by the end of the year, to have 600 providers that are credentialed in our network.

And if we get to that level, we’ll have two-thirds of our policyholders and two-thirds across the country of 65 year olds covered by a quality care network provider — home care provider in their ZIP code. And then finally, we’ll continue to focus on share repurchases. As we said to Arthur, opportunistically, we’ll look to buy back a little bit of debt. But we’ve added value.

Hopefully, shareholders are pleased with the improvement in our share price over the last couple of years, and we look to continue to do that. And in the end, through CareScout, our goal is to — long term, increase value by expanding our long-term care services and insurance business through CareScout and helping many more families navigate the very challenging aging journey that they face with confidence. So, thank you, all, all of the investors, and others for your interest in support of Genworth and your investment in our company, and we’ll see you next quarter. And with that, Jenny will end the call.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Brian JohnsonSenior Vice President, Financial Planning and Analysis

Tom McInerneyPresident and Chief Executive Officer

Jerome UptonExecutive Vice President, Chief Financial Officer

Ryan KruegerKeefe, Bruyette and Woods — Analyst

Jamala ArlandPresident and Chief Executive Officer, U.S. Life Insurance

Christopher BoltonPrivate Investor

Arthur TetyevskyCantor Fitzgerald — Analyst

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