What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-09 compared with 2020-02-14 · 459 added, 603 removed, 1553 unchanged (41% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (OneMain Holdings, Inc.)

Report of Independent Registered Public Accounting Firm (Springleaf Finance Corporation)

Report of Independent Registered Public Accounting Firm (OneMain Finance Corporation )

Financial Statements of OneMain Holdings, Inc.

5 unchanged sentences

Consolidated Statements of Cash Flows

Financial Statements of Springleaf Finance Corporation and Subsidiaries:

Financial Statements of OneMain Finance Corporation and Subsidiaries:

Consolidated Balance Sheets

5 unchanged sentences

Nature of Operations

Reconciliation of Springleaf Finance Corporation Results to OneMain Holdings, Inc.

Reconciliation of OneMain Finance Corporation Results to OneMain Holdings, Inc.

Summary of Significant Accounting Policies

2 unchanged sentences

Allowance for Finance Receivable Losses

Finance Receivables Held for Sale

Investment Securities

4 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Lease s and Contingen c ies

Leases and Contingencies

Retirement Benefit Plan s

3 unchanged sentences

Selected Quarterly Financial Data (Unaudited)

Report of Independent Registered Public Accounting Firm (OneMain Holdings, Inc.)

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of OneMain Holdings, Inc.

5 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 4 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses in 2020.

Basis for Opinions

21 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Finance Receivable Losses for Loans Collectively Evaluated for Impairment – Loss Emergence Period

Allowance for Finance Receivable Losses for Loans Collectively Evaluated for Impairment – Forecasted Macroeconomic Conditions

As described in Notes 3 and 6 to the consolidated financial statements, the Company’s allowance for finance receivable losses for loans collectively evaluated for impairment was $1,955 million as of December 31, 2020.

Management bases the allowance for finance receivable losses primarily on historical loss experience using a roll rate-based model applied to the Company’s finance receivable portfolios collectively evaluated for impairment.

Losses are projected forward in one-month increments over the loss emergence period (the interval of time between the event which causes a borrower to default on a finance receivable and the recording of the charge-off).

The principal considerations for our determination that performing procedures relating to the allowance for finance receivable losses for loans collectively evaluated for impairment – loss emergence period is a critical audit matter are (i) there was significant judgment by management in determining the loss emergence period, which in turn led to a high degree of subjectivity and judgment in performing procedures relating to the loss emergence period, (ii) there was high degree of judgment in evaluating audit evidence relating to the loss emergence period, and (iii) significant audit effort was necessary to perform procedures related to the loss emergence period and involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.

Management estimates the allowance for finance receivable losses for loans collectively evaluated for impairment primarily on historical loss experience using a cumulative loss model applied to the Company’s finance receivable portfolios.

Management also considers forecasted macroeconomic conditions within the Company’s reasonable and supportable forecast period, which incorporated the projected impacts of COVID-19 on the U.S.

Management’s forecasted macroeconomic conditions leveraged economic projections that considered estimated impacts from known government stimulus measures, the involuntary unemployment insurance coverage of the Company’s portfolio, and management’s borrower assistance efforts.

The principal considerations for our determination that performing procedures relating to the allowance for finance receivable losses for loans collectively evaluated for impairment – forecasted macroeconomic conditions is a critical audit matter are (i) the significant judgment by management in determining adjustments to the results of the cumulative loss model to reflect forecasted macroeconomic conditions, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s determination of the impact of forecasted macroeconomic conditions, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the allowance for finance receivable losses, including controls over the determination of the loss emergence period.

These procedures also included, among others, testing management’s process for determining the loss emergence period, including testing the historical default and charge-off data inputs used in the determination of the loss emergence period, and evaluating the reasonableness of the loss emergence period, including consideration of underlying portfolio characteristics.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the methodology for determining the loss emergence period.

These procedures included testing the effectiveness of controls relating to the allowance for finance receivable losses, including controls over management’s determination of the impact of forecasted macroeconomic conditions.

These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in testing management's process for determining forecasted macroeconomic conditions and applying those forecasts to the results of the cumulative loss model, which included (i) evaluating the appropriateness of the methodology, (ii) testing the data used in the estimate and (iii) evaluating the reasonableness of management’s determination of the impact of forecasted macroeconomic conditions on the allowance for finance receivable losses.

/s/ PricewaterhouseCoopers LLP

2 unchanged sentences

We have served as the Company’s auditor since 2002.

Report of Independent Registered Public Accounting Firm (Springleaf Finance Corporation)

To the Board of Directors and Shareholder of Springleaf Finance Corporation

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of OneMain Finance Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Springleaf Finance Corporation and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income, of shareholder's equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of OneMain Finance Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income, of shareholder's equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 4 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses in 2020.

Basis for Opinion

12 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

Allowance for Finance Receivable Losses for Loans Collectively Evaluated for Impairment – Forecasted Macroeconomic Conditions

Management also considers forecasted macroeconomic conditions within the Company’s reasonable and supportable forecast period, which incorporated the projected impacts of COVID-19 on the U.S.

The principal considerations for our determination that performing procedures relating to the allowance for finance receivable losses for loans collectively evaluated for impairment – forecasted macroeconomic conditions is a critical audit matter are (i) the significant judgment by management in determining adjustments to the results of the cumulative loss model to reflect forecasted macroeconomic conditions, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s determination of the impact of forecasted macroeconomic conditions, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

2 unchanged sentences

We have served as the Company's auditor since 2002.

Financial Statements.

ONEMAIN HOLDINGS, INC.

4 unchanged sentences

Cash and cash equivalents $ 2,272 $ 1,227

Investment securities 1,884 1,694

Investment securities (includes available-for-sale securities with a fair value of $ 1.8 billion and

an amortized cost basis of $ 1.7 billion in 2020 and 2019)

Net finance receivables (includes loans of consolidated VIEs of $ 8.8 billion in 2020 and $ 8.4 billion

1 unchanged sentence

Unearned insurance premium and claim reserves ( 771 ) ( 793 )

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 340 million in

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 1.1 billion in

2020 and $ 340 million in 2019)

( 2,269 ) ( 829 )

Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance

receivable losses 16,767 14,771

Finance receivables held for sale 64 103

Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of

consolidated VIEs of $ 400 million in 2019 and $ 479 million in 2018)

Net finance receivables, less unearned insurance premium and claim reserves and allowance for

finance receivable losses 15,044 16,767

Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents

of consolidated VIEs of $ 441 million in 2020 and $ 400 million in 2019)

Goodwill 1,422 1,422

7 unchanged sentences

Deferred and accrued taxes 45 34

Other liabilities (includes other liabilities of consolidated VIEs of $ 14 million in 2019 and 2018)

Other liabilities (includes other liabilities of consolidated VIEs of $ 15 million in 2020 and $ 14 million

Total liabilities 19,030 18,487

Commitments and contingent liabilities (Note 16)

Contingencies (Note 15)

Shareholders’ equity:

Common stock, par value $ 0.01 per share;

2,000,000,000 shares authorized, 136,101,156 and 135,832,278 shares issued and outstanding at December 31, 2019 and 2018, respectively

2,000,000,000 shares authorized, 134,341,724 and 136,101,156 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

Additional paid-in capital 1,655 1,689

Accumulated other comprehensive income (loss) 44 ( 34 )

Accumulated other comprehensive income 94 44

Retained earnings 1,691 2,596

8 unchanged sentences

Interest income $ 4,368 $ 4,127 $ 3,658

Finance charges $ 4,116 $ 3,645 $ 3,183

Finance receivables held for sale 11 13 13

Total interest income 4,127 3,658 3,196

Interest expense 1,027 970 875

6 unchanged sentences

Net loss on repurchases and repayments of debt ( 39 ) ( 35 ) ( 9 )

Net gains on sales of real estate loans 3 18 —

Net gain on sale of real estate loans — 3 18

Other 47 99 70

26 unchanged sentences

Income tax effect:

Net unrealized gains (losses) on non-credit impaired available-for-sale securities ( 20 ) 9 ( 7 )

Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities ( 15 ) ( 20 ) 9

Retirement plan liability adjustments — ( 1 ) 3

2 unchanged sentences

Reclassification adjustments included in net income, net of tax:

Net realized losses (gains) on available-for-sale securities, net of tax 1 1 ( 9 )

Retirement plan liability adjustments, net of tax — — ( 1 )

Net realized gains (losses) on available-for-sale securities, net of tax ( 1 ) 1 1

Reclassification adjustments included in net income, net of tax ( 1 ) 1 1

13 unchanged sentences

Earnings Total Shareholders’ Equity

Balance, January 1, 2019 $ 1 $ 1,681 $ ( 34 ) $ 2,151 $ 3,799

Balance, January 1, 2020 (pre-adoption) $ 1 $ 1,689 $ 44 $ 2,596 $ 4,330

Net impact of adoption of ASU 2016-13 (see Note 4)

— — — ( 828 ) ( 828 )

Balance, January 1, 2020 (post-adoption) 1 1,689 44 1,768 3,502

Common stock repurchased and retired — ( 45 ) — — ( 45 )

Share-based compensation expense, net of forfeitures

7 unchanged sentences

Balance, January 1, 2019 $ 1 $ 1,681 $ ( 34 ) $ 2,151 $ 3,799

Non-cash incentive compensation from SFH

— 110 — — 110

Share-based compensation expense, net of forfeitures

1 unchanged sentence

— ( 5 ) — — ( 5 )

Other comprehensive loss — — ( 47 ) — ( 47 )

Impact of AOCI reclassification due to the Tax Act — — 2 ( 2 ) —

Other comprehensive income — — 78 — 78

Cash dividends * — — — ( 410 ) ( 410 )

Net income — — — 855 855

1 unchanged sentence

Balance, January 1, 2018 $ 1 $ 1,560 $ 11 $ 1,706 $ 3,278

Non-cash incentive compensation from SFH — 110 — — 110

Share-based compensation expense, net of forfeitures

1 unchanged sentence

— ( 10 ) — — ( 10 )

Other comprehensive income

Other comprehensive loss

— — ( 47 ) — ( 47 )

Impact of AOCI reclassification due to the Tax Act — — 2 ( 2 ) —

— — — 447 447

Balance, December 31, 2018 $ 1 $ 1,681 $ ( 34 ) $ 2,151 $ 3,799

* Cash dividends declared were $ 0.25 per share in the first, second, and fourth quarters, and $ 2.25 per share in the third quarter of 2019.

* Cash dividends declared were $ 5.94 per share in 2020 and $ 3.00 per share in 2019.

See Notes to the Consolidated Financial Statements.

9 unchanged sentences

Depreciation and amortization 264 271 289

Deferred income tax charge 1 23 30

Deferred income tax charge (benefit) ( 42 ) 1 23

Net loss on repurchases and repayments of debt 39 35 9

6 unchanged sentences

Net principal originations of finance receivables held for investment and held for sale ( 748 ) ( 3,305 ) ( 2,373 )

Proceeds on sales of finance receivables held for sale originated as held for investment 19 100 —

Proceeds on sale of finance receivables held for sale originated as held for investment — 19 100

Available-for-sale securities purchased ( 456 ) ( 718 ) ( 680 )

5 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of long-term debt, net of commissions 5,895 5,525 5,427

Proceeds from issuance of long-term debt, net of issuance costs 7,279 5,895 5,525

Repayment of long-term debt ( 6,792 ) ( 3,961 ) ( 5,471 )

Cash dividends ( 806 ) ( 408 ) —

Common stock repurchased and retired ( 45 ) — —

Withholding tax on share-based compensation ( 6 ) ( 5 ) ( 10 )

Net cash provided by financing activities 1,521 44 975

Net cash provided by (used for) financing activities ( 370 ) 1,521 44

Net change in cash and cash equivalents and restricted cash and restricted cash equivalents 1,091 454 ( 307 )

13 unchanged sentences

Right-of-use assets obtained in exchange for operating lease obligations $ 47 $ 233 $ —

Transfer of finance receivables to real estate owned 8 7 9

Transfer of net finance receivables held for investment to finance receivables held for sale

(prior to deducting allowance for finance receivable losses) — — 111

Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions and escrow deposits.

Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions.

See Notes to the Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

2 unchanged sentences

Cash and cash equivalents $ 2,272 $ 1,227

Investment securities 1,884 1,694

Investment securities (includes available-for-sale securities with a fair value of $ 1.8 billion and

an amortized cost basis of $ 1.7 billion in 2020 and 2019)

Net finance receivables (includes loans of consolidated VIEs of $ 8.8 billion in 2020 and $ 8.4 billion

1 unchanged sentence

Unearned insurance premium and claim reserves ( 771 ) ( 793 )

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 340 million in

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 1.1 billion in

2020 and $ 340 million in 2019)

2 unchanged sentences

receivable losses 15,044 16,767

Finance receivables held for sale 64 103

Notes receivable from parent — 260

Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of

consolidated VIEs of $ 400 million in 2019 and $ 479 million in 2018)

Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents

of consolidated VIEs of $ 441 million in 2020 and $ 400 million in 2019)

Goodwill 1,422 1,422

7 unchanged sentences

Deferred and accrued taxes 47 35

Other liabilities (includes other liabilities of consolidated VIEs of $ 14 million in 2019 and 2018)

Other liabilities (includes other liabilities of consolidated VIEs of $ 15 million in 2020 and $ 14 million

Total liabilities 19,031 18,491

Commitments and contingent liabilities (Note 16)

Contingencies (Note 15)

Shareholder's equity:

Common stock, par value $ 0.50 per share;

25,000,000 shares authorized, 10,160,021 shares

issued and outstanding at December 31, 2019 and 2018

25,000,000 shares authorized, 10,160,021 shares issued and

outstanding at December 31, 2020 and December 31, 2019

Additional paid-in capital 1,899 1,888

Accumulated other comprehensive income (loss) 44 ( 34 )

Accumulated other comprehensive income 94 44

Retained earnings 1,442 2,388

2 unchanged sentences

See Notes to the Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

2 unchanged sentences

Interest income $ 4,368 $ 4,127 $ 3,648

Finance charges $ 4,116 $ 3,635 $ 3,174

Finance receivables held for sale 11 13 13

Total interest income 4,127 3,648 3,187

Interest expense 1,027 972 876

5 unchanged sentences

Investment 75 95 66

Interest income on notes receivable from parent 7 18 23

Net loss on repurchases and repayments of debt ( 39 ) ( 35 ) ( 9 )

Net gains on sales of real estate loans 3 18 —

Net gain on sale of real estate loans — 3 18

Other 47 106 56

9 unchanged sentences

See Notes to the Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

7 unchanged sentences

Income tax effect:

Net unrealized gains (losses) on non-credit impaired available-for-sale securities ( 20 ) 9 ( 7 )

Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities ( 15 ) ( 20 ) 9

Retirement plan liability adjustments — ( 1 ) 3

2 unchanged sentences

Reclassification adjustments included in net income, net of tax:

Net realized losses (gains) on available-for-sale securities, net of tax 1 1 ( 9 )

Net realized gains (losses) on available-for-sale securities, net of tax ( 1 ) 1 1

Reclassification adjustments included in net income, net of tax ( 1 ) 1 1

2 unchanged sentences

See Notes to the Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholder's Equity

Springleaf Finance Corporation Shareholder's Equity

OneMain Finance Corporation Shareholder's Equity

(dollars in millions) Common

3 unchanged sentences

Income (Loss) Retained

Earnings Total Shareholders’ Equity

Balance, January 1, 2019 $ 5 $ 2,110 $ ( 34 ) $ 1,940 $ 4,021

Earnings Total Shareholder’s Equity

Balance, January 1, 2020 (pre-adoption) $ 5 $ 1,888 $ 44 $ 2,388 $ 4,325

Net impact of adoption of ASU 2016-13 (see Note 4)

— — — ( 828 ) ( 828 )

Balance, January 1, 2020 (post-adoption) 5 1,888 44 1,560 3,497

Share-based compensation expense, net of forfeitures — 17 — — 17

1 unchanged sentence

Other comprehensive income — — 50 — 50

Contribution of SCLH to SFC from SFI — 34 — — 34

Merger of SFI with SFC — ( 408 ) — — ( 408 )

Cash contribution from OMH — 144 — — 144

Cash dividends — — — ( 848 ) ( 848 )

2 unchanged sentences

Balance, January 1, 2019 $ 5 $ 2,110 $ ( 34 ) $ 1,940 $ 4,021

Non-cash incentive compensation from SFH — 110 — — 110

Contribution of OGSC to SFC from SFI — 53 5 — 58

Contribution of SMHC to SFC from SFI — 30 — — 30

Merger of SFI with OMFC — ( 408 ) — — ( 408 )

Cash contribution from OMH — 144 — — 144

Contribution of SCHC to OMFC from SFI — 34 — — 34

Share-based compensation expense, net of forfeitures — 13 — — 13

Withholding tax on shared-based compensation — ( 5 ) — — ( 5 )

Other comprehensive loss — — ( 48 ) — ( 48 )

Impact of AOCI reclassification due to the Tax Act — — 3 ( 3 ) —

Other comprehensive income — — 78 — 78

Cash dividends — — — ( 410 ) ( 410 )

Net income — — — 858 858

1 unchanged sentence

Balance, January 1, 2018 $ 5 $ 1,909 $ 6 $ 1,482 $ 3,402

Non-cash incentive compensation from SFH — 110 — — 110

Contribution of OGSC to OMFC from SFI — 53 5 — 58

Contribution of SMHC to OMFC from SFI — 30 — — 30

Share-based compensation expense, net of forfeitures — 10 — — 10

Withholding tax on RSUs converted — ( 2 ) — — ( 2 )

Withholding tax on share-based compensation — ( 2 ) — — ( 2 )

Other comprehensive income — — ( 48 ) — ( 48 )

Dividend of SFMC to SFI — — — ( 38 ) ( 38 )

Impact of AOCI reclassification due to the Tax Act — — 3 ( 3 ) —

Net income — — — 461 461

1 unchanged sentence

See Notes to the Consolidated Financial Statements.

SPRINGLEAF FINANCE CORPORATION AND SUBSIDIARIES

ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

6 unchanged sentences

Depreciation and amortization 264 271 279

Deferred income tax charge 3 21 43

Deferred income tax charge (benefit) ( 42 ) 3 21

Net loss on repurchases and repayments of debt 39 35 9

6 unchanged sentences

Net principal originations of finance receivables held for investment and held for sale ( 748 ) ( 3,305 ) ( 2,372 )

Proceeds on sales of finance receivables held for sale originated as held for investment 19 100 —

Proceeds on sale of finance receivables held for sale originated as held for investment — 19 100

Cash advances on intercompany notes receivables — ( 3 ) ( 34 )

7 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of long-term debt, net of commissions 5,895 5,525 5,427

Proceeds from issuance of long-term debt, net of issuance costs 7,279 5,895 5,525

Repayment of long-term debt ( 6,792 ) ( 3,961 ) ( 5,471 )

4 unchanged sentences

Cash contribution of OGSC — — 11

Cash dividends of SFMC — — ( 10 )

Payments on intercompany note payable ( 170 ) ( 99 ) —

Payments on intercompany notes payable — ( 170 ) ( 99 )

Withholding tax on share-based compensation ( 6 ) ( 5 ) ( 2 )

Net cash provided by (used by) financing activities 1,507 ( 23 ) 968

Consolidated Statements of Cash Flows (Continued)

(dollars in millions)

Years Ended December 31, 2019 2018 2017

Net cash provided by (used for) financing activities ( 365 ) 1,507 ( 23 )

Net change in cash and cash equivalents and restricted cash and restricted cash equivalents 1,091 470 ( 294 )

1 unchanged sentence

Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period $ 2,723 $ 1,632 $ 1,162

Consolidated Statements of Cash Flows (Continued)

(dollars in millions)

Years Ended December 31, 2020 2019 2018

Supplemental cash flow information

7 unchanged sentences

Right-of-use assets obtained in exchange for operating lease obligations $ 47 $ 233 $ —

Transfer of finance receivables to real estate owned 8 7 9

Non-cash merger of SFI with OMFC — ( 408 ) —

Non-cash contribution of SCLH — 22 —

Transfer of net finance receivables held for investment to finance receivables held

for sale (prior to deducting allowance for finance receivable losses) — — 111

Non-cash merger of SFI with SFC ( 408 ) — —

Non-cash contribution of SCLH 22 — —

Non-cash contribution of OGSC — — 47

Non-cash contribution of SMHC — — 17

Non-cash dividend of SFMC — — ( 28 )

Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions and escrow deposits.

Restricted cash and restricted cash equivalents primarily represent funds required to be used for future debt payments relating to our securitization transactions.

See Notes to the Consolidated Financial Statements.

5 unchanged sentences

OneMain Holdings, Inc.

is referred to in this report as “OMH” or, collectively with its subsidiaries, whether directly or indirectly owned, the “Company,” “we,” “us,” or “our.” OMH is a Delaware corporation.

OMH is a financial services holding company whose subsidiaries engage in the consumer finance and insurance businesses.

(“OMH”), and its wholly-owned direct subsidiary, OneMain Finance Corporation (“OMFC”) (formerly known as Springleaf Finance Corporation (“SFC”)) are financial services holding companies whose subsidiaries engage in the consumer finance and insurance businesses.

Prior to the completion of the merger described below, OMH’s direct subsidiary was Springleaf Finance, Inc.

On September 20, 2019, Springleaf Finance Corporation (“SFC”) entered into a merger agreement with its direct parent, SFI, to merge SFI with and into SFC, with SFC as the surviving entity.

On September 20, 2019, SFC entered into a merger agreement with SFI, its direct parent at the time, to merge SFI with and into SFC, with SFC as the surviving entity.

The merger was effective in SFC's consolidated financial statements as of July 1, 2019.

As a result of the merger with SFI, SFC became a wholly-owned direct subsidiary of OMH.

Effective July 1, 2020, SFC was renamed to OneMain Finance Corporation (“OMFC”).

The name change did not affect OMFC’s legal entity structure, nor did it have an impact on OMH’s or OMFC’s financial statements.

OMFC is used in this report to include references to transactions and arrangements occurring prior to the name change.

OMH and OMFC are referred to in this report, collectively with their subsidiaries, whether directly or indirectly owned, as “the Company,” “we,” “us,” or “our.” The information in this Annual Report on Form 10-K is equally applicable to OMH and OMFC, except where otherwise indicated.

At December 31, 2020, the Apollo-Värde Group owned approximately 40.9 % of OMH’s common stock.

2018 Share Sale Transactions

As disclosed in Note 21 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K, certain executives of the Company had previously been granted incentive units that only provided benefits (in the form of distributions) if Springleaf Financial Holdings, LLC ("SFH") made distributions to one or more of its common members that exceeded specified threshold amounts.

In connection with the Fortress Transaction resulting from the Apollo-Värde Transaction described in Note 2 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K, certain executive officers who were holders of SFH incentive units received a distribution of approximately $ 106 million in the aggregate from SFH.

Prior to the Fortress Transaction, certain executives of the Company held incentive units that only provided benefits (in the form of distributions) if Springleaf Financial Holdings, LLC ("SFH") made distributions to one or more of its common members that exceeded specified threshold amounts.

In connection with the Fortress Transaction, certain executive officers who were holders of SFH incentive units received a distribution of approximately $ 106 million in the aggregate from SFH.

Although the distribution was not made by the Company or its subsidiaries, in accordance with Accounting Standards Codification ("ASC") 710, Compensation-General , we recorded non-cash incentive compensation expense of approximately $ 106 million, with an equal and offsetting increase to additional paid-in-capital.

The impact to the Company was non-cash, equity neutral, and not tax deductible.

In addition, in connection with the distributions by SFH to AIG resulting from the AIG Share Sale Transaction described in Note 2 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K, these same executive officers holding the incentive units described above, received a distribution of approximately $ 4 million in the aggregate from SFH in respect of their incentive interests in SFH.

In addition, in connection with the distributions by SFH to AIG resulting from the AIG Share Sale Transaction, these same executive officers holding the incentive units described above, received a distribution of approximately $ 4 million in the aggregate from SFH in respect of their incentive interests in SFH.

Consistent with the Fortress Transaction, we recorded non-cash incentive compensation expense of approximately $ 4 million, with an equal and offsetting increase to additional paid-in-capital.

Again, the impact to the Company was non-cash, equity neutral, and not tax deductible.

Reconciliation of Springleaf Finance Corporation Results to OneMain Holdings, Inc.

The results of SFC are consolidated into the results of OMH.

Due to the nominal differences between SFC and OMH, content throughout this filing relates to both OMH and SFC.

SFC disclosures relate only to itself and not to any other company.

Except where otherwise indicated, and excluding certain insignificant cash and non-cash transactions at the OMH level, these notes relate to the consolidated financial statements for both companies, OMH and SFC.

In addition to certain intercompany payable and receivable amounts between the entities, the following is a reconciliation of the consolidated balance sheets and results of our consolidated statements of operations of SFC to OMH:

Reconciliation of OneMain Finance Corporation Results to OneMain Holdings, Inc.

The results of OMFC are consolidated into the results of OMH.

Due to the nominal differences between OMFC and OMH, content throughout this filing relates to both OMH and OMFC.

OMFC disclosures relate only to itself and not to any other company.

December 31, 2020 2019

(dollars in millions) OMH SFC Difference OMH SFC Difference

Cash and cash equivalents $ 1,227 $ 1,227 $ — $ 679 $ 663 $ 16

Net finance receivables (a) 18,389 18,389 — 16,164 16,122 42

Allowance for finance receivable losses (a) ( 829 ) ( 829 ) — ( 731 ) ( 726 ) ( 5 )

Notes receivables from parent (b) — — — — 260 ( 260 )

Other intangible assets 343 343 — 388 387 1

(dollars in millions) OMH OMFC Difference OMH OMFC Difference

Other assets $ 1,054 $ 1,054 $ — $ 769 $ 768 $ 1

1 unchanged sentence

Other liabilities 564 563 1 592 595 ( 3 )

Total shareholders' equity (c) 4,330 4,325 5 3,799 4,021 ( 222 )

Total shareholders' equity 3,441 3,440 1 4,330 4,325 5

Years Ended December 31, 2020 2019 2018

(dollars in millions) OMH SFC Difference OMH SFC Difference OMH SFC Difference

Finance charges (a) $ 4,116 $ 4,116 $ — $ 3,645 $ 3,635 $ 10 $ 3,183 $ 3,174 $ 9

(dollars in millions) OMH OMFC Difference OMH OMFC Difference OMH OMFC Difference

Interest income $ 4,368 $ 4,368 $ — $ 4,127 $ 4,127 $ — $ 3,658 $ 3,648 $ 10

Interest expense 1,027 1,027 — 970 972 ( 2 ) 875 876 ( 1 )

Provision for finance receivable losses (a) 1,129 1,129 — 1,048 1,043 5 955 947 8

Interest income on note receivables from parent (b) — 7 ( 7 ) — 18 ( 18 ) — 23 ( 23 )

Other revenue (d) 99 99 — 70 38 32 96 53 43

Provision for finance receivable losses 1,319 1,319 — 1,129 1,129 — 1,048 1,043 5

Other revenues 47 47 — 99 106 ( 7 ) 70 56 14

Salaries and benefits 756 756 — 808 808 — 917 877 40

3 unchanged sentences

Net Income 730 730 — 855 858 ( 3 ) 447 461 ( 14 )

(a) The differences in the 2018 and 2017 periods are related to Springleaf Consumer Loan Holding Company (“SCLH”) finance receivables and the related allowance for finance receivable losses.

On March 10, 2019, all of the outstanding capital stock of SCLH, a subsidiary of SFI, was contributed to SFC, and SCLH became a wholly-owned direct subsidiary of SFC.

The contribution was effective as of January 1, 2019.

See below for further details related to the Contribution of SCLH to SFC.

(b) Included in the notes receivables from parent were notes from SFI held by SFC and Springleaf Mortgage Holding Company’s (“SMHC”), a wholly-owned direct subsidiary, of SFC.

See Note 1 and below for further discussion of the merger between SFI and SFC.

(c) The differences between total shareholders’ equity in the years ended December 31, 2019 and 2018 were due to historical differences in results of operations of the companies and differences in equity awards.

(d) The primary difference between OMH and SFC for other revenue relate to the servicing revenue from the SpringCastle Portfolio.

The servicing fee revenue totaled $ 29 million and $ 37 million during 2018 and 2017 periods, respectively.

The following transactions are related to SFC and have no impact on OMH's consolidated financial results.

Merger of SFI into SFC

On September 20, 2019, SFC entered into a merger agreement with its direct parent SFI, to merge SFI with and into SFC, with SFC as the surviving entity.

The merger was effective in SFC's consolidated financial statements as of July 1, 2019.

In conjunction with the merger, the net deficiency of SFI, after elimination of its investment in SFC, was absorbed by SFC resulting in an equity reduction of $ 408 million to SFC, which includes the elimination of the intercompany notes and receivables between SFC and SFI, as discussed below.

The net deficiency of SFI included an intercompany note payable plus accrued interest of $ 166 million from SFI to OMH which SFC assumed through the merger.

On September 23, 2019, SFC repaid SFI’s note to OMH.

Concurrently, OMH paid $ 22 million in other payables due to SFC and made an equity contribution of $ 144 million to SFC.

The transactions noted above resulted in a net $ 264 million reduction to SFC's equity.

SFC's Notes Receivable from Parent

The notes receivable from parent was $ 260 million at December 31, 2018 and was comprised of a $ 232 million note receivable from SFI to SFC and a $ 28 million note receivable due to SMHC, a wholly-owned subsidiary of SFC, after the contribution of SMHC from SFI to SFC on December 15, 2018.

As a result of the merger between SFI and SFC, described in Note 1 and above, the note receivable from SFI to SFC was dissolved effective July 1, 2019 and the SFI note payable to SMHC was assumed by SFC and subsequently paid off on September 23, 2019.

Interest income on the notes receivable from SFC totaled $ 8 million during 2019, $ 18 million during 2018, and $ 23 million during 2017, which we report in interest income on notes receivable from parent.

The following transactions are related to OMFC and have no impact on OMH's consolidated financial results.

Merger of SFI into OMFC

On September 20, 2019, OMFC entered into a merger agreement with its direct parent SFI, to merge SFI with and into OMFC, with OMFC as the surviving entity.

The merger was effective in OMFC's condensed consolidated financial statements as of July 1, 2019.

In conjunction with the merger, the net deficiency of SFI, after elimination of its investment in OMFC, was absorbed by OMFC resulting in an equity reduction of $ 408 million to OMFC, which included the elimination of the intercompany notes and receivables between OMFC and SFI, as discussed below.

The net deficiency of SFI included an intercompany note payable plus accrued interest of $ 166 million from SFI to OMH, which OMFC assumed through the merger.

On September 23, 2019, OMFC repaid SFI’s note to OMH.

Concurrently, OMH paid $ 22 million in other payables due to OMFC and made an equity contribution of $ 144 million to OMFC.

The transactions noted above resulted in a net $ 264 million reduction to OMFC's equity.

OMFC's Notes Receivable from Parent

As a result of the merger between SFI and OMFC, described in Note 1 and above, a $ 232 million note receivable from SFI to OMFC was dissolved effective July 1, 2019.

Additionally, OMFC assumed a $ 28 million note payable from SFI to SMHC, a wholly-owned subsidiary of OMFC, and OMFC subsequently paid off the note on September 23, 2019.

Interest income on these notes totaled $ 8 million during 2019 and $ 18 million during 2018, which we report in other revenues.

Springleaf Consumer Loan Holding Company (“SCLH”) Contribution

On March 10, 2019, all of the outstanding capital stock of SCLH, a subsidiary of SFI, was contributed to SFC and SCLH became a wholly-owned direct subsidiary of SFC.

The contribution was effective as of January 1, 2019 and increased SFC’s total shareholder’s equity and total assets by $ 34 million and $ 53 million, respectively.

On March 10, 2019, all of the outstanding capital stock of SCLH, a subsidiary of SFI, was contributed to OMFC, and SCLH became a wholly-owned direct subsidiary of OMFC.

The contribution was effective as of January 1, 2019 and increased OMFC’s total shareholder’s equity and total assets by $ 34 million and $ 53 million, respectively.

The contribution is presented prospectively because it is deemed to be a contribution of net assets.

1 unchanged sentence

(“OCLI”) Loan Referral Fees

Through June 30, 2018, OCLI, a wholly-owned direct subsidiary of SCLH, provided personal loan application and credit underwriting services on behalf of SFC for personal loan applications that are submitted online.

SFC was charged a fee of $ 35 for each underwritten approved application processed, as well as any other fees agreed to by the parties.

On July 1, 2018, SFC terminated its agreement with OCLI to provide these services.

Prior to the termination, during 2018 and 2017, SFC recorded $ 29 million and $ 56 million of referral fee expense, respectively.

Certain costs incurred by OCLI to provide these services are a component of deferred origination costs, which are included in net finance receivables.

Through June 30, 2018, OCLI, a wholly-owned direct subsidiary of SCLH, provided personal loan application and credit underwriting services on behalf of OMFC for personal loan applications that are submitted online.

OMFC was charged a fee of $ 35 for each underwritten approved application processed, as well as any other fees agreed to by the parties.

On July 1, 2018, OMFC terminated its agreement with OCLI to provide these services.

Prior to the termination, during 2018, OMFC recorded $ 29 million of referral fee expense.

Certain costs incurred by OCLI to provide these services were a component of deferred origination costs, which are included in net finance receivables.

OneMain General Services Corporation (“OGSC”) Services Agreement

OGSC provides a variety of services to affiliates under a services agreement, including SFC.

OGSC was contributed to SFC by OMH effective July 1, 2018, and all activity between OGSC and SFC under the agreement is eliminated from SFC’s results as of July 1, 2018.

Prior to the contribution, during 2018 and 2017, SFC recorded $ 265 million and $ 460 million, respectively, of service fee expenses, which are included in operating expenses.

Parent and Affiliate Receivables and Payables

Receivables from parent and affiliate totaled $ 18 million at December 31, 2018 and were included in other assets.

There were no receivables from parent and affiliates at December 31, 2019 as the balances were eliminated due to the merger of SFI and SFC, and the SCLH contribution noted above.

Payables to parent and affiliate are included in other liabilities and were immaterial at December 31, 2019 and 2018.

OGSC provides a variety of services to affiliates under a services agreement, including OMFC.

OGSC was contributed to OMFC by OMH effective July 1, 2018, and all activity between OGSC and OMFC under the agreement is eliminated from OMFC’s results as of July 1, 2018.

Prior to the contribution, during 2018, OMFC recorded $ 265 million of service fee expenses, which are included in operating expenses.

Summary of Significant Accounting Policies

11 unchanged sentences

At December 31, 2020, Consumer and Insurance (“C&I”) is our only reportable segment.

The remaining components (which we refer to as “Other”) consist of (i) our liquidating SpringCastle Portfolio servicing activity and (ii) our non-originating legacy operations, which include our liquidating real estate loans and liquidating retail sales finance receivables.

Previously, the servicing revenues and related expenses from the SpringCastle Portfolio were presented as a distinct reporting and operating segment, Acquisitions and Servicing (“A&S”).

However, due to the continued decline in servicing revenues and related expenses, management no longer views the servicing activity from the SpringCastle Portfolio as a separate reportable segment.

Therefore, we are now including A&S in Other.

We have revised our prior period segment disclosures to conform to this new alignment.

The remaining components (which we refer to as “Other”) consist of our liquidating SpringCastle Portfolio servicing activity and our non-originating legacy operations, which primarily include our liquidating real estate loans.

Finance Receivables

17 unchanged sentences

At that time, we also resume accretion of any unamortized premium or discount resulting from a previous purchase premium or discount.

We accrete the amount required to adjust the initial fair value of our purchased finance receivables to their contractual amounts over the life of the related finance receivable for non-credit impaired finance receivables and over the life of a pool of finance receivables for purchased credit impaired finance receivables as described in our policy for purchase credit impaired finance receivables.

Troubled Debt Restructured Finance Receivables

7 unchanged sentences

Additionally, as part of the modification, we may require trial payments.

If the account is delinquent at the time of modification, the account is brought current for delinquency reporting.

If the account is delinquent at the time of modification, the account is generally brought current for delinquency reporting.

Account modifications that are deemed to be a TDR finance receivable are measured for impairment.

4 unchanged sentences

We establish the allowance for finance receivable losses through the provision for finance receivable losses.

We evaluate our finance receivable portfolio by finance receivable type.

Our finance receivables (personal loans and other receivables) consist of a large number of relatively small, homogeneous accounts.

We evaluate our finance receivable portfolio by level of contractual delinquency in the portfolio, specifically in the late stage delinquency buckets and inclusive of the migration of the loans through the delinquency buckets.

Our finance receivables consist of a large number of relatively small, homogeneous accounts.

We evaluate our finance receivables for impairment as pools.

None of our accounts are large enough to warrant individual evaluation for impairment.

Management considers numerous internal and external factors in estimating probable incurred losses in our finance receivable portfolio, including the following:

• prior finance receivable loss and delinquency experience;

• underlying collateral;

• the composition of our finance receivable portfolio;

• current economic conditions, including the levels of unemployment and personal bankruptcies.

We base the allowance for finance receivable losses primarily on historical loss experience using a roll rate-based model applied to our finance receivable portfolios.

In our roll rate-based model, our finance receivable types are stratified by contractual delinquency stages and projected forward in one-month increments using historical roll rates.

In each month of the simulation, losses on our finance receivable types are captured, and the ending delinquency stratification serves as the beginning point of the next iteration.

We estimate the allowance for finance receivable losses primarily on historical loss experience using a cumulative loss model applied to our finance receivable portfolios.

Our gross credit loss expectation is offset by the estimate of future recoveries using historical recovery curves.

Our finance receivables are primarily segmented in the loss model by contractual delinquency status.

Other attributes in the model include collateral mix and recent credit score.

To estimate the gross credit losses, the model utilizes a roll rate matrix to project the first 12 months of losses and historical cohort performance to project the expected losses over the remaining term.

Our methodology relies on historical loss experience to forecast the corresponding future outcomes.

These patterns are then applied to the current portfolio to obtain an estimate of future losses.

We also consider key economic trends including unemployment rates and bankruptcy filings.

Forecasted macroeconomic conditions extend to our reasonable and supportable forecast period and revert to a historical average.

No new volume is assumed.

This process is repeated until the number of iterations equals the loss emergence period (the interval of time between the event which causes a borrower to default on a finance receivable and our recording of the charge-off) for our finance receivable types.

As delinquency is a primary input into our roll rate-based model, we inherently consider nonaccrual loans in our estimate of the allowance for finance receivable losses.

Management exercises its judgment, based on quantitative analyses, qualitative factors, such as recent delinquency, underlying collateral, recoverability of collateral securing our finance receivables, other credit trends, and experience in the consumer finance industry, when determining the amount of the allowance for finance receivable losses.

We adjust the amounts determined by the roll rate-based model for management’s estimate of the effects of model imprecision, any changes to underwriting criteria, portfolio seasoning, and current economic conditions, including levels of unemployment and personal bankruptcies.

We charge or credit this adjustment to expense through the provision for finance receivable losses.

Renewals are a significant piece of our new volume and are considered a terminal event of the previous loan.

We have elected not to measure an allowance on accrued finance charges as it is our policy to reverse finance charge amounts previously accrued after four contractual payments become past due.

Management exercises its judgment when determining the amount of allowance for finance receivable losses.

Our judgment is based on quantitative analyses, qualitative factors, such as recent portfolio, industry, and other economic trends, and experience in the consumer finance industry.

We adjust the amounts determined by our model for management’s estimate of the effects of model imprecision which include but are not limited to, any changes to underwriting criteria and portfolio seasoning.

We generally charge off to the allowance for finance receivable losses personal loans that are beyond seven payments (approximately 180 days) past due.

Generally, we start repossession of the titled personal property when the customer becomes two payments (approximately 30 days) past due and may charge-off prior to the account becoming seven payments (approximately 180 days) past due.

Generally, we charge-off loans with bankruptcy filings at the earlier of notice of discharge or when the customer becomes seven payments past due.

We infrequently extend the charge-off period for individual personal loan accounts when, in our opinion, such treatment is warranted and consistent with our credit risk policies.

5 unchanged sentences

The account must be current after granting the deferment.

To evaluate whether a borrower’s financial difficulties are temporary or other than temporary we review the terms of each deferment to ensure that the borrower has the financial ability to repay the outstanding principal and associated interest in full following the deferment and after the customer is brought current.

If, following this analysis, we believe a borrower’s financial difficulties are other than temporary, we will not grant deferment, and the loans may continue to age until they are charged off.

To evaluate whether a borrower’s financial difficulties are temporary, we review the terms of each deferment to ensure that the borrower has the financial ability to repay the outstanding principal and associated interest in full following the deferment and after the customer is brought current.

If, following this analysis, we believe a borrower’s financial difficulties are not temporary, we will not grant deferment, and the loans may continue to age until they are charged off.

We generally limit a customer to two deferments in a rolling twelve month period unless we determine that an exception is warranted and is consistent with our credit risk policies.

Additionally, for borrowers that do not meet the qualifications of a deferment, we may also offer a cure agreement, settlement or a loan modification.

Accounts that are granted a deferment are not classified as TDRs.

We do not consider deferments granted as a TDR because the customer is not experiencing an other than temporary financial difficulty, and the concession granted is immaterial to the contractual cash flows.

We pool accounts that have been granted a deferment together with accounts that have not been granted a deferment for measuring impairment in accordance with the authoritative guidance for the accounting for contingencies.

The allowance for finance receivable losses related to our purchased credit impaired finance receivables is calculated using updated cash flows expected to be collected, incorporating assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that are reflective of current market conditions.

Probable decreases in expected finance receivable cash flows result in the recognition of impairment.

Probable and significant increases in expected cash flows to be collected would first reverse any previously recorded allowance for finance receivable losses.

We also establish reserves for TDR finance receivables, which are included in our allowance for finance receivable losses.

2 unchanged sentences

We use certain assumptions to estimate the expected cash flows from our TDR finance receivables.

The primary assumptions to estimate these expected cash flows are prepayment speeds, default rates, and severity rates.

Finance Receivables Held for Sale

Depending on market conditions or certain of management’s capital sourcing strategies, which may impact our ability and/or intent to hold our finance receivables until maturity or for the foreseeable future, we may decide to sell finance receivables originally intended for investment.

Our ability to hold finance receivables for the foreseeable future is subject to a number of factors, including economic and liquidity conditions, and therefore may change.

As of each reporting period, management determines our ability to hold finance receivables for the foreseeable future based on assumptions for liquidity requirements or other strategic goals.

When it is probable that management’s intent or ability is to no longer hold finance receivables for the foreseeable future and we subsequently decide to sell specifically identified finance receivables that were originally classified as held for investment, the net finance receivables, less allowance for finance receivable losses, are reclassified as finance receivables held for sale and are carried at the lower of cost or fair value.

Any amount by which cost exceeds fair value is accounted for as a valuation allowance and is recognized in other revenues in the consolidated statements of operations.

We base the fair value estimates on negotiations with prospective purchasers (if any) or by using a discounted cash flows approach.

Cash flows resulting from the sale of the finance receivables that were originally classified as held for investment are recorded as an investing activity in the consolidated statements of cash flows.

When sold, we record the sales price we receive less our carrying value of these finance receivables held for sale in other revenues.

When it is determined that management no longer intends to sell finance receivables which had previously been classified as finance receivables held for sale and we have the ability to hold the finance receivables for the foreseeable future, we reclassify the finance receivables to finance receivables held for investment at the lower of cost or fair value and we accrete any fair value adjustment over the remaining life of the related finance receivables.

The primary assumptions to estimate these expected cash flows are prepayment speeds, default rates, and loss severity rates.

Goodwill represents the amount of purchase price over the fair value of net assets we acquired in connection with the OneMain Acquisition.

2 unchanged sentences

If the qualitative assessment indicates that it is more likely than not that the reporting unit’s fair value is less than its carrying amount, we proceed with the quantitative impairment test.

When necessary, the fair value of the reporting unit is calculated using the income approach based upon prospective financial information of the reporting unit discounted at a rate we estimate a market participant would use.

When necessary, the fair value of the reporting unit is calculated utilizing the income approach, which uses prospective financial information of the reporting unit discounted at a rate we estimate a market participant would use.

Intangible Assets other than Goodwill

4 unchanged sentences

Impairment is permanently recognized by writing down the asset to the extent that the carrying value exceeds the estimated fair value.

The value of business acquired ("VOBA") is the present value of future profits ("PVFP") of purchased insurance contracts.

The PVFP is dynamically amortized over the lifetime of the block of business and is subject to premium deficiency testing in accordance with ASC 944, Financial Services — Insurance .

For indefinite-lived intangible assets, we review for impairment at least annually and whenever events occur or circumstances change that would indicate the assets are more likely than not to be impaired.

15 unchanged sentences

In addition to rent, we pay taxes, insurance, and maintenance expenses under certain leases as variable lease payments.

The operating lease right-of-use assets are included in “Other assets” and the operating lease liabilities are included in “Other liabilities” in our consolidated balance sheet.

The lease right-of-use assets are included in “ Other assets ” and the lease liabilities are included in “ Other liabilities ” in our consolidated balance sheet.

Insurance Premiums

We recognize revenue for short-duration contracts over the related contract period.

Short-duration contracts primarily include credit life, credit disability, credit involuntary unemployment insurance, and collateral protection policies.

Short-duration contracts primarily consist of credit life, credit disability, credit involuntary unemployment insurance, and collateral protection policies.

We defer single premium credit insurance premiums from affiliates in unearned premium reserves, which we include as a reduction to net finance receivables.

3 unchanged sentences

Long-duration contracts include term life, accidental death and dismemberment, and disability income protection.

For single premium long-duration contracts a liability is accrued, that represents the present value of estimated future policy benefits to be paid to or on behalf of policyholders and related expenses, when premium revenue is recognized.

For single premium long-duration contracts, a liability is accrued, which represents the present value of estimated future policy benefits to be paid to or on behalf of policyholders and related expenses, when premium revenue is recognized.

The effects of changes in such estimated future policy benefit reserves are classified in insurance policy benefits and claims in the consolidated statements of operations.

1 unchanged sentence

We may finance certain insurance products offered to our customers as part of finance receivables.

In such cases, unearned premiums and certain unpaid claim liabilities related to our borrowers are netted and classified as contra-assets in the net finance receivables in the consolidated balance sheets, and the insurance premium is included as an operating cash inflow and the financing of the insurance premium is included as part of the finance receivable as an investing cash flow in the consolidated statements of cash flows.

In such cases, unearned premiums and certain unpaid claim liabilities related to our borrowers are netted and classified as contra-assets in net finance receivables in the consolidated balance sheets.

The insurance premium is included as an operating cash inflow and the financing of the insurance premium is included as part of the finance receivable as an investing cash flow in the consolidated statements of cash flows.

Policy and Claim Reserves

13 unchanged sentences

We generally classify our investment securities as available-for-sale or other, depending on management’s intent.

Other securities primarily consist of equity securities and those securities for which the fair value option was elected.

Our investment securities classified as available-for-sale are recorded at fair value.

7 unchanged sentences

Impairments on Investment Securities

Available-for-sale.

We evaluate our available-for-sale securities on an individual basis to identify any instances where the fair value of the investment security is below its amortized cost.

For these securities, we then evaluate whether an other-than-temporary impairment exists if any of the following conditions are present:

For these securities, we then evaluate whether an impairment exists if any of the following conditions are present:

• we intend to sell the security;

1 unchanged sentence

• we do not expect to recover the security’s entire amortized cost basis (even if we do not intend to sell the security).

If we intend to sell an impaired investment security or we will likely be required to sell the security before recovery of its amortized cost basis less any current period credit loss, we recognize an other-than-temporary impairment in investment revenues equal to the difference between the investment security’s amortized cost and its fair value at the balance sheet date.

If we intend to sell an impaired investment security or we will likely be required to sell the security before recovery of its amortized cost basis less any current period credit loss, we recognize the impairment as a direct write-down in investment revenues equal to the difference between the investment security’s amortized cost and its fair value at the balance sheet date.

Once the impairment is recorded, we adjust the investment security to a new amortized cost basis equal to the previous amortized cost basis less the impairment write-down recognized in the current period.

In determining whether a credit loss exists, we compare our best estimate of the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security.

Any shortfall in this comparison represents a credit loss.

The cash flows expected to be collected are determined by assessing all available information, including length and severity of unrealized loss, issuer default rate, ratings changes and adverse conditions related to the industry sector, financial condition of issuer, credit enhancements, collateral default rates, and other relevant criteria.

If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses is recorded, not to exceed the total unrealized loss on the security.

The cash flows expected to be collected are determined by assessing all available information, including issuer default rate, ratings changes and adverse conditions related to the industry sector, financial condition of issuer, credit enhancements, collateral default rates, and other relevant criteria.

Management considers factors such as our investment strategy, liquidity requirements, overall business plans, and recovery periods for securities in previous periods of broad market declines.

If a credit loss exists with respect to an investment in a security (i.e., we do not expect to recover the entire amortized cost basis of the security), we would be unable to assert that we will recover our amortized cost basis even if we do not intend to sell the security.

Therefore, in these situations, an other-than-temporary impairment is considered to have occurred.

If a credit loss exists, but we do not intend to sell the security and we will likely not be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the impairment is classified as:

Therefore, in these situations, a credit impairment is considered to have occurred.

If a credit impairment exists, but we do not intend to sell the security and we will likely not be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the impairment is bifurcated as:

(i) the estimated amount relating to credit loss;

and (ii) the amount relating to all other factors.

We recognize the estimated credit loss in investment revenues, and the non-credit loss amount in accumulated other comprehensive income or loss.

Once a credit loss is recognized, we adjust the investment security to a new amortized cost basis equal to the previous amortized cost basis less the credit losses recognized in investment revenues.

For investment securities for which other-than-temporary impairments were recognized in investment revenues, the difference between the new amortized cost basis and the cash flows expected to be collected is accreted to investment income.

We recognize subsequent increases and decreases in the fair value of our available-for-sale securities in accumulated other comprehensive income or loss, unless the decrease is considered other than temporary.

and (ii) the amount relating to non-credit related factors.

We recognize the estimated credit loss as an allowance on the balance sheet in investment securities, with a corresponding loss in investment revenues, and the non-credit loss amount in accumulated other comprehensive income or loss.

For investment securities in which a credit impairment was recorded through an allowance, we record subsequent increases and decreases in the allowance for credit losses as credit loss expense or reversal of credit loss expense in investment revenues.

We will not reverse a previously recorded allowance to an amount below zero.

We recognize subsequent increases and decreases in the fair value of our available-for-sale securities from non-credit related factors in accumulated other comprehensive income or loss.

Interest receivables on our investment securities are excluded from the amortized cost and fair value and are recorded in “Other assets.” We have elected not to measure an allowance on interest receivables due to our policy to reverse interest receivable at the time collectability is uncertain.

The reversal of interest receivable is recorded in investment revenue.

Investment Revenue Recognition

20 unchanged sentences

Restricted Cash and Cash Equivalents

We include funds to be used for future debt payments relating to our securitization transactions and escrow deposits in restricted cash and cash equivalents.

We include funds to be used for future debt payments relating to our securitization transactions, insurance regulatory deposits and reinsurance trusts with third parties, in each case , in restricted cash and cash equivalents.

Long-term Debt

40 unchanged sentences

In certain cases, the inputs we use to measure the fair value of an asset may fall into different levels of the fair value hierarchy.

In such cases, we determine the level in the fair value hierarchy within which the fair value measurement in its entirety falls based on the lowest level input that is significant to the fair value measurement in its entirety.

In such cases, we determine the level in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

13 unchanged sentences

ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED

In February of 2016, the FASB issued ASU 2016-02, Leases , which requires lessees to recognize a right-of-use asset and a liability for the obligation to make payments on leases with terms greater than 12 months and to disclose information related to the amount, timing and uncertainty of cash flows arising from leases, including various qualitative and quantitative requirements.

Financial Instruments - Credit Losses

In June of 2016, the FASB issued Accounting Standard Update 2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which significantly changed the way that entities are required to measure credit losses.

The new standard required that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred loss” approach previously required.

The new approach required entities to measure all expected credit losses for financial assets over their expected lives based on historical experience, current conditions, and reasonable and supportable forecasts of collectability.

The expected credit loss model required earlier recognition of credit losses than the incurred loss approach.

We expect ongoing changes in the allowance for finance receivable losses will be driven primarily by the growth of our loan portfolio, mix of secured and unsecured loans, credit quality, and the economic environment at that time.

In addition, the Accounting Standard Update (“ASU”) developed a new accounting treatment for purchased financial assets with credit deterioration.

The ASU also modified the other-than-temporary impairment model for available-for-sale debt securities by requiring companies to record an allowance for credit impairment rather than write-downs of such assets.

Management has reviewed this update and other ASUs that were subsequently issued to further clarify the implementation guidance outlined in ASU 2016-13.

We adopted the amendments of these ASUs as of January 1, 2019, using the optional transition approach.

As a result of this election, the prior periods presented have not been adjusted.

See Note 16 for additional information on the adoption of ASU 2016-02.

We adopted the amendments of these ASUs as of January 1, 2020.

Upon adoption, we recorded an increase to the allowance for finance receivable losses of $ 1.12 billion, an increase to deferred tax assets of $ 0.28 billion, and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $ 0.83 billion in the consolidated balance sheet as of January 1, 2020.

The adoption of this ASU, as it relates to available-for-sale debt securities, did not have a material impact on the consolidated financial statements as of January 1, 2020.

As a result of the adoption of ASU 2016-13, several of our significant accounting policies have changed to reflect the requirements of the new standard.

Refer to Note 3 for the Summary of Significant Accounting Policies.

See Notes 5, 6, and 7 for additional information on the adoption of ASU 2016-13.

ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED

Financial Instruments - Credit Losses

In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments , which significantly changes the way that entities are required to measure credit losses.

The new standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred loss” approach.

The new approach requires entities to measure all expected credit losses for financial assets over their expected lives based on historical experience, current conditions, and reasonable forecasts of collectability.

The expected credit loss model requires earlier recognition of credit losses than the incurred loss approach.

We expect ongoing changes in the allowance for finance receivable losses will be driven primarily by the growth of the Company’s loan portfolio, mix of secured and unsecured loans, credit quality, and the economic environment at that time.

The ASU also modifies the other-than-temporary impairment model for available-for-sale debt securities by requiring companies to record an allowance for credit impairment rather than write-downs of such assets.

In addition, the ASU requires qualitative and quantitative disclosures that provide information about the allowance and the significant factors that influenced management’s estimate of the allowance.

The ASU is effective for the Company beginning January 1, 2020.

The Company’s cross-functional implementation team has completed the implementation of this ASU.

Based on the December 31, 2019 loan portfolio and current expectations of future economic conditions, this ASU resulted in an increase to the allowance for finance receivable losses of $ 1.12 billion, an increase to deferred tax assets of $ 0.28 billion, and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $ 0.83 billion in the consolidated balance sheets at January 1, 2020.

In addition, the Company’s implementation team worked with our investment advisor to develop a new process to comply with this ASU as it relates to available-for-sale debt securities and the related disclosure requirements.

The adoption of this ASU, as it relates to available-for-sale debt securities, will not have a material impact on the consolidated financial statements.

In August of 2018, the FASB issued ASU 2018-12, Financial Services - Insurance:

5 unchanged sentences

We have a cross-functional implementation team and a project plan to ensure we comply with all the amendments in this ASU at the time of adoption.

We continue to make progress in evaluating the potential impact of the adoption of the ASU on our consolidated financial statements.

We have selected a vendor for a software solution to meet the new accounting and disclosure requirements of the ASU and continue to make progress in evaluating the potential impact of the adoption of the ASU on our consolidated financial statements.

We do not believe that any other accounting pronouncements issued, but not yet effective, would have a material impact on our consolidated financial statements or disclosures, if adopted.

Finance Receivables

Our finance receivables consist of personal loans, which are non-revolving, with a fixed-rate, a fixed term of three to six years , and are secured by automobiles, other titled collateral, or are unsecured.

Prior to September 30, 2018, our finance receivables also included other receivables, which consist of our liquidating loan portfolios:

real estate loans, retail sales finance contracts, and revolving retail accounts.

We continue to service or sub-service our liquidating real estate loans and retail sales finance contracts.

Effective September 30, 2018, our real estate loans were transferred from held for investment to held for sale due to management's intent to no longer hold these finance receivables for the foreseeable future.

Our finance receivables consist of personal loans, which are non-revolving, with a fixed-rate, fixed terms generally between three and six years , and are secured by automobiles, other titled collateral, or are unsecured.

Net finance receivables consist of our total portfolio of personal loans.

2 unchanged sentences

December 31, 2020 2019

Gross receivables * $ 18,195 $ 15,978

Gross finance receivables * $ 17,860 $ 18,195

Unearned points and fees

3 unchanged sentences

Total $ 18,084 $ 18,389

* Gross receivables equal the UPB except for the following:

• Finance receivables purchased as a performing receivable — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase to reflect the finance receivable balance at its initial fair value;

• Purchased credit impaired finance receivables — gross receivables equal the remaining estimated cash flows less the current balance of accretable yield on the purchased credit impaired accounts

* Gross finance receivables equal the unpaid principal balance of our personal loans.

For precompute loans, unpaid principal balance is the gross contractual payments less the unaccreted balance of unearned finance charges.

GEOGRAPHIC DIVERSIFICATION

4 unchanged sentences

Texas $ 1,614 9 % $ 1,606 9 %

North Carolina 1,217 7 1,178 7

California 1,196 7 1,193 6

North Carolina 1,130 6 1,217 7

Pennsylvania 1,123 6 1,097 6

2 unchanged sentences

Illinois 739 4 787 4

Georgia 748 4 650 4

Indiana 728 4 741 4

Georgia 712 4 748 4

Virginia 666 4 710 4

Tennessee 602 3 547 3

New York 580 3 573 3

Other 7,614 42 7,779 42

2 unchanged sentences

CREDIT QUALITY INDICATOR

We consider the concentration of secured loans, the underlying value of collateral of secured loans, and the delinquency status of our finance receivables as our primary credit quality indicators.

At December 31, 2019 and December 31, 2018, 52 % and 48 %, respectively, of our personal loans were secured by titled collateral.

We monitor delinquency trends to manage our exposure to credit risk.

We consider the delinquency status of our finance receivables as our key credit quality indicator.

We monitor the delinquency of our finance receivable portfolio, including the migration between the delinquency buckets and changes in the delinquency trends to manage our exposure to credit risk in the portfolio.

When finance receivables are 60 days contractually past due, we consider these accounts to be at an increased risk for loss and we transfer collection of these accounts to our centralized operations.

At 90 days or more contractually past due, we consider our finance receivables to be nonperforming.

The following is a summary of our personal loans held for investment by number of days delinquent:

We stop accruing finance charges and reverse finance charges previously accrued on nonperforming loans.

We reversed net accrued finance charges of $ 86 million during the year ended December 31, 2020.

Finance charges recognized from the contractual interest portion of payments received on nonaccrual finance receivables totaled $ 14 million during the year ended December 31, 2020.

All loans in nonaccrual status are considered in our estimate of allowance for finance receivable losses.

The following is a summary of our personal loans held for investment by the year of origination and number of days delinquent, our key credit quality indicator, at December 31, 2020:

(dollars in millions) 2020 2019 2018 2017 2016 Prior Total

Current $ 8,659 $ 5,691 $ 2,064 $ 651 $ 184 $ 106 $ 17,355

30-59 days past due 72 106 44 18 6 5 251

60-89 days past due 44 72 28 11 4 3 162

Total performing 8,775 5,869 2,136 680 194 114 17,768

Nonperforming (Nonaccrual)

90-179 days past due 62 154 59 22 8 5 310

180 days or more past due 1 3 1 1 — — 6

Total nonperforming 63 157 60 23 8 5 316

Total $ 8,838 $ 6,026 $ 2,196 $ 703 $ 202 $ 119 $ 18,084

The following is a summary of our personal loans held for investment by number of days delinquent at December 31, 2019, which is prior to the adoption of ASU 2016-13 on January 1, 2020 and continues to be reported under ASC 310, Receivables :

(dollars in millions)

10 unchanged sentences

PURCHASED CREDIT IMPAIRED FINANCE RECEIVABLES

Our purchased credit impaired finance receivables consist of personal loans and real estate loans purchased in connection with the OneMain Acquisition and the Fortress Acquisition, respectively.

We report the carrying amount of our purchased credit impaired personal loans in net finance receivables, less allowance for finance receivable losses, and our purchased credit impaired real estate loans in finance receivables held for sale as discussed below.

At December 31, 2019 and 2018, finance receivables held for sale totaled $ 64 million and $ 103 million, respectively, which include purchased credit impaired real estate loans, as well as TDR real estate loans.

See Note 7 for further information on our finance receivables held for sale.

Information regarding our purchased credit impaired finance receivables were as follows:

(dollars in millions)

December 31, 2019 2018

Personal Loans

Carrying amount, net of allowance $ 40 $ 89

Outstanding balance (a) 74 135

Allowance for purchased credit impaired finance receivable losses (b)

Real Estate Loans - Held for Sale

Carrying amount $ 19 $ 28

Outstanding balance (a) 35 48

(a) Outstanding balance is defined as UPB of the loans with a net carrying amount.

(b) The allowance for purchased credit impaired finance receivable losses reflects the carrying value of the purchased credit impaired loans held for investment exceeding the present value of the expected cash flows.

As indicated above, no allowance was required as of December 31, 2019 or 2018.

Changes in accretable yield for purchased credit impaired finance receivables were as follows:

(dollars in millions)

Years Ended December 31, 2019 2018 2017

Personal Loans

Balance at beginning of period $ 39 $ 47 $ 59

Accretion ( 20 ) ( 27 ) ( 34 )

Reclassifications from nonaccretable difference * 16 19 22

Balance at end of period $ 35 $ 39 $ 47

Real Estate Loans - Held for Sale

Balance at beginning of period $ 27 $ 53 $ 60

Accretion ( 2 ) ( 4 ) ( 5 )

Reclassifications to nonaccretable difference * — — ( 2 )

Transfer due to finance receivables sold ( 3 ) ( 22 ) —

Balance at end of period $ 22 $ 27 $ 53

* Reclassifications from (to) nonaccretable difference represents the increases (decreases) in accretable yield resulting from higher (lower) estimated undiscounted cash flows.

ASU 2016-13 superseded the accounting for purchased credit impaired finance receivables with purchase credit deteriorated finance receivables.

As a result, we converted all purchased credit impaired finance receivables to purchased credit deteriorated finance receivables in accordance with ASC Topic 326, which resulted in the gross-up of net finance receivables and allowance for finance receivable losses of $ 15 million on January 1, 2020.

Due to the adoption of ASU 2016-13, the disclosures related to purchase credit impaired finance receivables are no longer applicable for reporting periods beginning in 2020.

TDR FINANCE RECEIVABLES

1 unchanged sentence

(dollars in millions)

December 31, 2019 2018

Personal Loans

TDR gross receivables (a) $ 655 $ 450

TDR net receivables (b) 658 453

TDR gross finance receivables $ 689 $ 655

TDR net finance receivables * 691 658

Allowance for TDR finance receivable losses 314 272

Real Estate Loans - Held for Sale

TDR gross receivables (a) $ 52 $ 89

TDR net receivables (b) 53 75

(a) TDR gross receivables — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase if previously purchased as a performing receivable.

(b) TDR net receivables — TDR gross receivables net of unearned points and fees, accrued finance charges, and deferred origination costs.

TDR average net receivables held for investment and held for sale and finance charges recognized on TDR finance receivables held for investment and held for sale were as follows:

* TDR net finance receivables — TDR gross finance receivables net of unearned points and fees, accrued finance charges, and deferred origination costs.

TDR average net finance receivables and finance charges recognized on TDR finance receivables for our personal loans that are held for investment and our real estate loans that are held for sale were as follows:

(dollars in millions) Personal

Loans Other Receivables * Total

Loans Real Estate Loans Total

Year Ended December 31, 2020

TDR average net receivables $ 550 $ 58 $ 608

TDR average net finance receivables $ 693 $ 50 $ 743

TDR finance charges recognized 50 3 53

Year Ended December 31, 2019

TDR average net receivables $ 383 $ 130 $ 513

TDR average net finance receivables $ 550 $ 58 $ 608

TDR finance charges recognized 45 3 48

Year Ended December 31, 2018

TDR average net receivables $ 231 $ 140 $ 371

TDR finance charges recognized 33 9 42

* Other receivables held for sale included in the table above consist of real estate loans and were as follows:

(dollars in millions)

Years Ended December 31, 2019 2018 2017

TDR average net receivables $ 58 $ 98 $ 91

TDR average net finance receivables $ 383 $ 130 $ 513

TDR finance charges recognized 45 7 52

Information regarding the new volume of the TDR finance receivables held for investment and held for sale are reflected in the following table.

Information regarding the new volume of the TDR finance receivables held for investment were as follows:

(dollars in millions) 2020 2019 2018

Years Ended December 31, 2019 2018 2017

Personal Loans

2 unchanged sentences

Rate reduction 312 370 289

Other (a) 166 88 75

Total post-modification TDR net finance receivables $ 536 $ 377 $ 326

Number of TDR accounts 78,257 57,324 45,560

Other Receivables (b)

Pre-modification TDR net finance receivables $ 1 $ 3 $ 16

Post-modification TDR net finance receivables:

Rate reduction 1 3 16

Other * 187 166 88

Total post-modification TDR net finance receivables $ 499 $ 536 $ 377

Number of TDR accounts 66,484 78,257 57,324

(a) “Other” modifications primarily include potential principal and interest forgiveness contingent on future payment performance by the borrower under the modified terms.

(b) TDR "other receivable" loans held for sale include in the table above were immaterial.

* “Other” modifications primarily consist of potential principal and interest forgiveness contingent on future payment performance by the borrower under the modified terms.

New volume of TDR finance receivables held for sale are not included in the table above as they were immaterial for the years ended December 31, 2020, 2019, and 2018.

Personal loans held for investment that were modified as TDR finance receivables within the previous 12 months and for which there was a default during the period to cause the TDR finance receivables to be considered nonperforming (90 days or more past due) are reflected in the following table.

5 unchanged sentences

* Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted.

TDR other receivables for the years ended December 31, 2019, 2018 and 2017 that defaulted during the previous 12-month period are immaterial.

Real estate loans held for sale that were modified as TDR finance receivables within the previous 12 months and for which there was a default during the period to cause the TDR finance receivables to be considered nonperforming (90 days or more past due) were immaterial for the years ended December 31, 2020, 2019, and 2018.

Allowance for Finance Receivable Losses

Changes in the allowance for finance receivable losses by finance receivable type were as follows:

We establish an allowance for finance receivable losses through the provision for finance receivable losses.

We evaluate our finance receivable portfolio by the level of contractual delinquency in the portfolio, specifically in the late stage delinquency buckets and inclusive of the migration of the loans through the delinquency buckets.

We estimate and record an allowance for finance receivable losses to cover the estimated lifetime expected credit losses on our finance receivables, pursuant to the adoption of ASU 2016-13 on January 1, 2020.

Prior to the adoption of ASU 2016-13, we estimated and recorded an allowance for finance receivable losses to cover estimated incurred losses on our finance receivables.

Our allowance for finance receivable losses may fluctuate based upon changes in portfolio growth, credit quality, and economic conditions.

See Note 3 for additional information regarding our policy for allowance for finance receivable losses.

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the projected impacts of the global outbreak of a novel strain of coronavirus (“COVID-19”) on the U.S.

We also considered known government stimulus measures, the involuntary unemployment insurance coverage of our portfolio, and our borrower assistance efforts.

Our forecast leveraged economic projections from an industry leading forecast provider.

At December 31, 2020, our economic forecast used a reasonable and supportable period of 12 months.

The increase in our allowance for finance receivable losses for the year ended December 31, 2020 was largely due to the adoption of ASU 2016-13 along with the economic considerations relating to COVID-19.

In the near-term, we may experience further changes to the macroeconomic assumptions within our forecast, as well as changes to our loan loss performance outlook, both of which could lead to further changes in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.

Changes in the allowance for finance receivable losses were as follows:

(dollars in millions) Personal

2 unchanged sentences

Balance at beginning of period $ 829 $ — $ 829

Impact of adoption of ASU 2016-13 (a) 1,118 — 1,118

Provision for finance receivable losses 1,319 — 1,319

7 unchanged sentences

Recoveries 126 — 126

Other * — ( 23 ) ( 23 )

Balance at end of period $ 829 $ — $ 829

4 unchanged sentences

Recoveries 110 3 113

Other (b) — ( 23 ) ( 23 )

Balance at end of period $ 731 $ — $ 731

* Other consists primarily of the reclassification of allowance for finance receivable losses due to the transfer of the real estate loans in other receivables from held for investment to finance receivables held for sale on September 30, 2018.

See Notes 5 and 7 included in this report for further information.

(a) As a result of the adoption of ASU 2016-13 on January 1, 2020, we recorded a one-time adjustment to the allowance for finance receivable losses.

See Notes 4 and 5 for additional information on the adoption of ASU 2016-13.

(b) Other consists primarily of the reclassification of allowance for finance receivable losses due to the transfer of the real estate loans in other receivables from held for investment to finance receivables held for sale on September 30, 2018.

The allowance for finance receivable losses and net finance receivables by impairment method were as follows:

3 unchanged sentences

Collectively evaluated for impairment

$ 1,955 $ 557

Purchased credit impaired finance receivables * — —

9 unchanged sentences

12.55 % 4.51 %

Finance Receivables Held for Sale

We reported finance receivables held for sale of $ 64 million at December 31, 2019 and $ 103 million at December 31, 2018, which consist entirely of real estate loans, and are carried at the lower of cost or fair value, applied on an aggregate basis.

See Note 3 for more information regarding our accounting policy for finance receivables held for sale.

In February 2019, we sold a portfolio of real estate loans with a carrying value of $ 16 million for aggregate cash proceeds of $ 19 million and recorded a net gain in other revenues of $ 3 million (“February 2019 Real Estate Loan Sale”).

After the recognition of the February 2019 Real Estate Loan Sale, the carrying value of the remaining loans classified in finance receivables held for sale exceeded their fair value and, accordingly, we marked the remaining loans to fair value and recorded an impairment in other revenue of $ 3 million.

During 2018, we transferred $ 88 million of real estate loans (net of allowance for finance receivable losses) from held for investment to held for sale due to management’s intent to no longer hold these finance receivables for the foreseeable future.

In December 2018, we sold a portfolio of real estate loans with a carrying value of $ 82 million for aggregate cash proceeds of $ 100 million and recorded a net gain in other revenues of $ 18 million (“December 2018 Real Estate Loan Sale”).

After the recognition of the December 2018 Real Estate Loan Sale, the carrying value of the remaining loans classified in finance receivables held for sale exceeded their fair value and, accordingly, we marked the remaining loans to fair value and recorded an impairment in other revenue of $ 16 million.

At December 31, 2019, the carrying value of our finance receivables held for sale was not impaired.

We did not have any other material transfers to or from finance receivables held for sale during 2019, 2018 and 2017.

* As a result of the adoption of ASU 2016-13 on January 1, 2020, the accounting for purchased credit impaired finance receivables was superseded with purchase credit deteriorated finance receivables which are collectively evaluated for impairment.

See Notes 4 and 5 for additional information on the adoption of ASU 2016-13.

Investment Securities

AVAILABLE-FOR-SALE SECURITIES

Cost/amortized cost, unrealized gains and losses, and fair value of fixed maturity available-for-sale securities by type were as follows:

Cost/amortized cost, allowance for credit losses, unrealized gains and losses, and fair value of fixed maturity available-for-sale securities by type were as follows:

(dollars in millions) Cost/

5 unchanged sentences

Obligations of states, municipalities, and political subdivisions

91 2 ( 1 ) 92

Commercial paper

3 unchanged sentences

Mortgage-backed, asset-backed, and collateralized:

77 2 ( 1 ) 78

Total $ 1,728 $ 121 $ ( 2 ) $ 1,847

* There was no allowance for credit losses related to our investment securities as of December 31, 2020.

(dollars in millions) Cost/

Cost Unrealized

Gains Unrealized

December 31, 2019*

4 unchanged sentences

91 2 ( 1 ) 92

Certificates of deposit and commercial paper 63 — — 63

Commercial paper 91 — — 91

government and government sponsored entities 144 3 — 147

5 unchanged sentences

Total $ 1,745 $ 55 $ ( 2 ) $ 1,798

Fair value and unrealized losses on available-for-sale securities by type and length of time in a continuous unrealized loss position were as follows:

* The balances reported as of December 31, 2019 are not subject to ASU 2016-13 which was adopted on January 1, 2020 and continue to be reported under ASC 320, Investments – Debt and Equity Securities .

As of December 31, 2020, interest receivables reported in “Other assets” totaled $ 12 million.

Amounts reversed from investment revenue for available-for-sale securities were immaterial.

Fair value and unrealized losses on available-for-sale securities by type and length of time in a continuous unrealized loss position without an allowance for credit losses were as follows:

Less Than 12 Months 12 Months or Longer Total

4 unchanged sentences

December 31, 2020

government and government sponsored entities

$ — $ — $ 3 $ — $ 3 $ —

Obligations of states, municipalities, and political subdivisions

3 unchanged sentences

government and government sponsored entities

19 — 14 — 33 —

Corporate debt 45 ( 1 ) 8 — 53 ( 1 )

Mortgage-backed, asset-backed, and collateralized:

RMBS 45 — — — 45 —

CMBS 8 — — — 8 —

6 unchanged sentences

29 ( 1 ) 4 — 33 ( 1 )

Commercial paper

76 — — — 76 —

government and government sponsored entities

6 unchanged sentences

Total $ 261 $ ( 2 ) $ 41 $ — $ 302 $ ( 2 )

On a lot basis, we had 148 and 398 investment securities in an unrealized loss position at December 31, 2020 and 2019, respectively.

We do not consider the unrealized losses to be credit-related, as these unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase.

Additionally, at December 31, 2019, other-than-temporary impairments on investment securities that we intend to sell were immaterial.

Additionally, at December 31, 2020, there were no credit impairments on investment securities that we intend to sell.

We do not have plans to sell any of the remaining investment securities with unrealized losses as of December 31, 2020, and we believe it is more likely than not that we would not be required to sell such investment securities before recovery of their amortized cost.

We continue to monitor unrealized loss positions for potential impairments.

During 2019 and 2018, other-than-temporary impairment credit losses, primarily on corporate debt, in investment revenues were immaterial.

No impairment was recognized during 2017.

We continue to monitor unrealized loss positions for potential credit impairments.

During 2020, there were no material credit impairments related to our investment securities.

Therefore, there were no material additions or reductions in the allowance for credit losses (impairments recognized or reversed in earnings) on credit impaired available-for-sale securities during 2020.

Prior to the adoption of ASU 2016-13, other-than-temporary impairment losses, primarily on corporate debt, in investment revenues were immaterial during 2019 and 2018.

There were no material additions or reductions in the cumulative amount of credit losses (recognized in earnings) on other-than-temporarily impaired available-for-sale securities during 2019 and 2018.

The proceeds of available-for-sale securities sold or redeemed during 2019, 2018, and 2017 totaled $ 284 million, $ 341 million, and $ 508 million, respectively.

The net realized gains and losses were immaterial during 2019 and 2018, and the net realized gains were $ 14 million during 2017.

The proceeds of available-for-sale securities sold or redeemed totaled $ 259 million, $ 284 million, and $ 341 million during 2020, 2019, and 2018, respectively.

The net realized gains and losses were immaterial during 2020, 2019, and 2018.

Contractual maturities of fixed-maturity available-for-sale securities at December 31, 2020 were as follows:

14 unchanged sentences

(dollars in millions)

December 31, 2020 2019

Fixed maturity other securities:

7 unchanged sentences

Total $ 75 $ 86

* The Company employs an income equity strategy targeting investments in stocks with strong current dividend yields.

* We employ an income equity strategy targeting investments in stocks with strong current dividend yields.

Stocks included have a history of stable or increasing dividend payments.

Net unrealized gains on other securities held at December 31, 2019 were $ 6 million.

Net unrealized losses were $ 7 million at December 31, 2018 and immaterial at December 31, 2017.

Net realized gains and losses on other securities sold or redeemed are included in investment revenue and were immaterial during 2019, 2018, and 2017.

Other securities include equity securities and those securities for which the fair value option was elected.

Net unrealized losses on other securities held were immaterial at December 31, 2020.

Net unrealized gains were $ 6 million and net unrealized losses were $ 7 million on other securities held at December 31, 2019 and 2018, respectively.

Net realized gains and losses on other securities sold or redeemed were immaterial during 2020, 2019, and 2018.

Other securities primarily consist of equity securities and those securities for which the fair value option was elected.

We report net unrealized and realized gains and losses on other securities held, sold, or redeemed in investment revenue.

Goodwill and Other Intangible Assets

7 unchanged sentences

Trade names 220 — 220

VOBA 105 ( 71 ) 34

Value of business acquired (“VOBA”)

105 ( 74 ) 31

Licenses 25 — 25

11 unchanged sentences

(dollars in millions) Estimated Aggregate Amortization Expense

During 2019, we wrote off the net carrying amount on our indefinite-lived insurance license intangibles and VOBA of $ 6 million in connection with the sale of our former insurance subsidiary, Merit Life Insurance Co.

During 2018, we recorded an impairment loss of $ 8 million on our indefinite-lived licenses in connection with the sale of our former insurance subsidiary, Yosemite Insurance Company ("Yosemite").

See Note 12 for further information on the sales.

Long-term Debt

12 unchanged sentences

Total 5.68 5.93 5.66 5.68 5.87

Principal maturities of long-term debt (excluding projected repayments on securitizations and revolving conduit facilities by period) by type of debt at December 31, 2019 were as follows:

Principal maturities of long-term debt (excluding projected repayments on securitizations by period) by type of debt at December 31, 2020 were as follows:

(dollars in millions) Securitizations Unsecured

13 unchanged sentences

Debt issuance costs (d) ( 30 ) ( 87 ) — ( 117 )

(a) Pursuant to the SFC Base Indenture, the SFC supplemental indentures and the SFC Guaranty Agreements, OMH agreed to fully and unconditionally guarantee, on a senior unsecured basis, payments of principal, premium and interest on the SFC Unsecured Senior Notes and Junior Subordinated Debenture.

The OMH guarantees of SFC’s long-term debt are subject to customary release provisions.

(a) Pursuant to the Base Indenture, the Supplemental Indentures and the Guaranty Agreements, OMH agreed to fully and unconditionally guarantee, on a senior unsecured basis, payments of principal, premium and interest on the Unsecured Notes and Junior Subordinated Debenture.

The OMH guarantees of OMFC’s long-term debt are subject to customary release provisions.

(b) The interest rates shown are the range of contractual rates in effect at December 31, 2020.

The interest rate on the remaining principal balance of the Junior Subordinated Debenture consists of a variable floating rate (determined quarterly) equal to 3-month LIBOR plus 1.75 %, or 3.74 % as of December 31, 2019.

(c) Securitizations have a stated maturity date but are not included in the above maturities by period due to their variable monthly repayments, which may result in pay-off prior to the stated maturity date.

(c) Securitizations are not included in the above maturities by period due to their variable monthly repayments, which may result in pay-off prior to the stated maturity date.

At December 31, 2020, there were no amounts drawn under our revolving conduit facilities.

1 unchanged sentence

(d) Debt issuance costs are reported as a direct deduction from long-term debt, with the exception of debt issuance costs associated with our revolving conduit facilities, which totaled $ 33 million at December 31, 2020 and are reported in “Other assets.”

SFC’S 6.125 % SENIOR NOTES DUE 2024 OFFERINGS

On February 22, 2019, SFC issued $ 1.0 billion aggregate principal amount and on July 2, 2019, SFC issued an additional $ 300 million aggregate principal amount of 6.125 % Senior Notes due 2024 (the “ 6.125 % SFC Notes due 2024”) under the SFC Senior Notes Indentures, as supplemented by the SFC Seventh Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

REDEMPTION OF SFC'S 5.25 % SENIOR NOTES DUE 2019

As a result of the February 2019 offering of the 6.125 % SFC Notes due 2024 as described above, SFC issued a notice of redemption to redeem all of the outstanding principal amount of its 5.25 % Senior Notes due 2019 (the " 5.25 % SFC Notes due 2019").

On March 25, 2019, SFC paid an aggregate amount of $ 706 million, inclusive of accrued interest and premiums, to complete the redemption.

In connection with the redemption, we recognized $ 21 million of net loss on the repurchases and repayments of debt for the year ended December 31, 2019.

REDEMPTION OF SFC'S 6.00 % SENIOR NOTES DUE 2020

On March 15, 2019, SFC issued a notice of redemption of its 6.00 % Senior Notes due 2020 (the " 6.00 % SFC Notes due 2020").

On April 15, 2019, SFC paid an aggregate amount of $ 317 million, inclusive of accrued interest and premiums, to complete the redemption.

In connection with the redemption, we recognized $ 11 million of net loss on repurchases and repayments of debt for the year ended December 31, 2019.

SFC’S 6.625 % SENIOR NOTES DUE 2028 OFFERING

On May 9, 2019, SFC issued a total of $ 800 million aggregate principal amount of 6.625 % Senior Notes due 2028 (the “ 6.625 % SFC Notes due 2028”) under the SFC Senior Notes Indentures, as supplemented by the SFC Eighth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

SFC’S 5.375 % SENIOR NOTES DUE 2029 OFFERING

On November 7, 2019, SFC issued a total of $ 750 million aggregate principal amount of 5.375 % Senior Notes due 2029 (the “ 5.375 % SFC Notes due 2029”) under the SFC Senior Notes Indentures, as supplemented by the SFC Ninth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

During 2018, OMFH redeemed all $ 700 million outstanding principal amount of OMFH Notes due 2019 and, through two separate redemptions, all $ 800 million outstanding principal amount of OMFH Notes due 2021 at a redemption price equal to 103.375 % for the OMFH Notes due 2019 and 103.625 % for the OMFH Notes due 2021, plus accrued and unpaid interest to the redemption date.

In connection with these redemptions, we recognized $ 8 million of net loss on repurchases and repayments of debt for the year ended December 31, 2018.

2020 DEBT ISSUANCES AND REDEMPTIONS

8.875 % Senior Notes Due 2025 Offering

On May 14, 2020, OMFC issued a total of $ 600 million aggregate principal amount of 8.875 % Senior Notes due 2025 under the Base Indenture, as supplemented by the Tenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

Redemption of 8.25 % Senior Notes Due 2020

On June 29, 2020, OMFC issued a notice of full redemption of its 8.25 % Senior Notes due 2020.

On July 29, 2020, OMFC paid an aggregate amount of $ 1.0 billion, inclusive of accrued interest and premiums, to complete the redemption.

In connection with the redemption, we recognized a $ 35 million net loss on repurchases and repayments of debt for the year ended December 31, 2020.

4.00 % Senior Notes Due 2030 Offering

On December 17, 2020, OMFC issued a total of $ 850 million aggregate principal amount of 4.00 % Senior Notes due 2030 under the Base Indenture, as supplemented by the Eleventh Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

Redemption of 7.75 % Senior Notes Due 2021

On December 9, 2020, OMFC issued a notice of full redemption of its 7.75 % Senior Notes due 2021.

On January 8, 2021, OMFC paid a net aggregate amount of $ 681 million, inclusive of accrued interest and premiums, to complete the redemption.

In connection with the redemption, we will recognize $ 47 million of net loss on repurchases and repayments of debt in the first quarter of 2021.

DEBT COVENANTS

SFC Debt Agreements

The debt agreements to which SFC and its subsidiaries are a party include customary terms and conditions, including covenants and representations and warranties.

Some or all of these agreements also contain certain restrictions, including (i) restrictions on the ability to create senior liens on property and assets in connection with any new debt financings and (ii) SFC’s ability to sell or convey all or substantially all of its assets, unless the transferee assumes SFC’s obligations under the applicable debt agreement.

In addition, the OMH guarantees of SFC’s long-term debt discussed above are subject to customary release provisions.

With the exception of SFC’s junior subordinated debenture, none of our debt agreements requires SFC or any of its subsidiaries to meet or maintain any specific financial targets or ratios.

OMFC Debt Agreements

The debt agreements to which OMFC and its subsidiaries are a party include customary terms and conditions, including covenants and representations and warranties.

Some or all of these agreements also contain certain restrictions, including (i) restrictions on the ability to create senior liens on property and assets in connection with any new debt financings and (ii) OMFC’s ability to sell or convey all or substantially all of its assets, unless the transferee assumes OMFC’s obligations under the applicable debt agreement.

In addition, the OMH guarantees of OMFC’s long-term debt discussed above are subject to customary release provisions.

With the exception of OMFC’s junior subordinated debenture, none of our debt agreements requires OMFC or any of its subsidiaries to meet or maintain any specific financial targets or ratios.

However, certain events, including non-payment of principal or interest, bankruptcy or insolvency, or a breach of a covenant or a representation or warranty, may constitute an event of default and trigger an acceleration of payments.

In some cases, an event of default or acceleration of payments under one debt agreement may constitute a cross-default under other debt agreements resulting in an acceleration of payments under the other agreements.

As of December 31, 2019, SFC was in compliance with all of the covenants under its debt agreements.

As of December 31, 2020, OMFC was in compliance with all of the covenants under its debt agreements.

Junior Subordinated Debenture

In January of 2007, SFC issued the Junior Subordinated Debenture, consisting of $ 350 million aggregate principal amount of 60 -year junior subordinated debt.

The Junior Subordinated Debenture underlies the trust preferred securities sold by a trust sponsored by SFC.

SFC can redeem the Junior Subordinated Debenture at par beginning in January of 2017.

In January of 2007, OMFC issued the Junior Subordinated Debenture, consisting of $ 350 million aggregate principal amount of 60-year junior subordinated debt.

The Junior Subordinated Debenture underlies the trust preferred securities sold by a trust sponsored by OMFC.

OMFC can redeem the Junior Subordinated Debenture at par beginning in January of 2017.

On December 30, 2013, OMH entered into a guaranty agreement whereby it agreed to fully and unconditionally guarantee, on a junior subordinated basis, the payment of principle of, premium (if any), and interest on the Junior Subordinated Debenture.

Pursuant to the terms of the Junior Subordinated Debenture, SFC, upon the occurrence of a mandatory trigger event, is required to defer interest payments to the holders of the Junior Subordinated Debenture (and not make dividend payments) unless SFC obtains non-debt capital funding in an amount equal to all accrued and unpaid interest on the Junior Subordinated Debenture otherwise payable on the next interest payment date and pays such amount to the holders of the Junior Subordinated Debenture.

A mandatory trigger event occurs if SFC’s (i) tangible equity to tangible managed assets is less than 5.5 % or (ii) average fixed charge ratio is not more than 1.10 x for the trailing four quarters.

Based upon SFC’s financial results for the 12 months ended December 31, 2019, a mandatory trigger event did not occur with respect to the interest payment due in January of 2020, as SFC was in compliance with both required ratios discussed above.

OMFH Debt Agreements

On June 13, 2018, OMFH redeemed the remaining principal amount of the OMFH Notes due 2021 and received notice of satisfaction and discharge with respect to the OMFH Notes.

As such, OMFH is no longer subject to the covenants or other terms of the OMFH Indenture or the OMFH Supplemental Indenture.

Pursuant to the terms of the Junior Subordinated Debenture, OMFC, upon the occurrence of a mandatory trigger event, is required to defer interest payments to the holders of the Junior Subordinated Debenture (and not make dividend payments) unless OMFC obtains non-debt capital funding in an amount equal to all accrued and unpaid interest on the Junior Subordinated Debenture otherwise payable on the next interest payment date and pays such amount to the holders of the Junior Subordinated Debenture.

A mandatory trigger event occurs if OMFC’s (i) tangible equity to tangible managed assets is less than 5.5 % or (ii) average fixed charge ratio is not more than 1.10 x for the trailing four quarters.

Based upon OMFC’s financial results for the 12 months ended December 31, 2020, a mandatory trigger event did not occur with respect to the interest payment due in January of 2021, as OMFC was in compliance with both required ratios discussed above.

Variable Interest Entities

CONSOLIDATED VIES

As part of our overall funding strategy and as part of our efforts to support our liquidity from sources other than our traditional capital market sources, we have transferred certain finance receivables to VIEs for asset-backed financing transactions, including securitization and conduit transactions.

We have determined that SFC or OMFH is the primary beneficiary of these VIEs and, as a result, we include each VIE’s assets, including any finance receivables securing the VIE’s debt obligations, and related liabilities in our consolidated financial statements and each VIE’s asset-backed debt obligations are accounted for as secured borrowings.

SFC or OMFH is deemed to be the primary beneficiary of each VIE because SFC or OMFH, as applicable, has the ability to direct the activities of the VIE that most significantly impact its economic performance, including the losses it absorbs and its right to receive economic benefits that are potentially significant.

Such ability arises from SFC’s or OMFH’s and their affiliates’ contractual right to service the finance receivables securing the VIEs’ debt obligations.

We have determined that OMFC or OMFH is the primary beneficiary of these VIEs and, as a result, we include each VIE’s assets, including any finance receivables securing the VIE’s debt obligations, and related liabilities in our consolidated financial statements and each VIE’s asset-backed debt obligations are accounted for as secured borrowings.

OMFC or OMFH is deemed to be the primary beneficiary of each VIE because OMFC or OMFH, as applicable, has the ability to direct the activities of the VIE that most significantly impact its economic performance, including the losses it absorbs and its right to receive economic benefits that are potentially significant.

Such ability arises from OMFC’s or OMFH’s and their affiliates’ contractual right to service the finance receivables securing the VIEs’ debt obligations.

To the extent we retain any debt obligation or residual interest in an asset-backed financing facility, we are exposed to potentially significant losses and potentially significant returns.

3 unchanged sentences

We retain an interest and credit risk in these financing transactions through our ownership of the residual interest in each VIE and, in some cases, the most subordinate class of debt obligations issued by the VIE, which are the first to absorb credit losses on the finance receivables securing the debt obligations.

In addition, with respect to each financing transaction that is subject to the risk retention requirements of Section 941 of the Dodd-Frank Act, we retain at least 5% of the economic interest in the credit risk of the securitized assets in satisfaction of the risk retention requirements.

With respect to each financing transaction that is subject to the risk retention requirements of the Dodd-Frank Act, we either retain at least 5% of the balance of each such class of debt obligations and at least 5% of the residual interest in each related VIE or retain at least 5% of the fair value of all ABS interests (as defined in the risk retention requirements), which is satisfied by retention of the residual interest in each related VIE, which, in each case, collectively, represents at least 5% of the economic interest in the credit risk of the securitized assets in satisfaction of the risk retention requirements.

We expect that any credit losses in the pools of finance receivables securing the asset-backed debt obligations will likely be limited to our retained interests described above.

3 unchanged sentences

(dollars in millions)

December 31, 2019 2018

Cash and cash equivalents $ 2 $ 4

Finance receivables - Personal loans 8,428 8,480

Net finance receivables 8,772 8,428

Allowance for finance receivable losses 1,085 340

6 unchanged sentences

SECURITIZED BORROWINGS

Each of our securitizations contains a revolving period ranging from one to seven years during which no principal payments are required to be made on the related asset-backed notes.

Each of our securitizations contains a revolving period ranging from two to seven years during which no principal payments are required to be made on the related asset-backed notes.

The indentures governing our securitization borrowings contain early amortization events and events of default, that, if triggered, may result in the acceleration of the obligation to pay principal and interest on the related asset-backed notes.

REVOLVING CONDUIT FACILITIES

We had access to 14 conduit facilities with a total borrowing capacity of $ 7.1 billion as of December 31, 2019.

Our conduit facilities’ revolving period end ranges from approximately one to three years .

Principal balances of outstanding loans, if any, are due and payable in full ranging from approximately three to nine years as of December 31, 2019.

We had access to 13 revolving conduit facilities with a total maximum borrowing capacity of $ 7.2 billion as of December 31, 2020.

Our conduit facilities contain revolving periods during which time no principal payments are required, but may be made without penalty, followed by a subsequent amortization period.

Principal balances of outstanding loans, if any, are due and payable in full over periods ranging up to ten years as of December 31, 2020.

Amounts drawn on these facilities are collateralized by our personal loans.

At December 31, 2020, no amounts were drawn under these facilities.

As part of our continuing integration efforts in connection with the OneMain Acquisition, on March 7, 2019, we entered into a share purchase agreement to sell all of the issued and outstanding shares of our former insurance subsidiary, Merit.

The transaction closed on December 31, 2019.

We recorded a net gain of $ 9 million in other operating expenses in the fourth quarter of 2019.

On May 29, 2018, we entered into a share purchase agreement to sell all of the issued and outstanding shares of our former insurance subsidiary, Yosemite.

We recorded an impairment loss of $ 14 million on the transfer to held for sale in other operating expenses in the second quarter of 2018.

The transaction closed in 2018.

Our insurance business is conducted through our wholly-owned insurance subsidiaries, American Health and Life Insurance Company ("AHL") and Triton Insurance Company ("Triton").

AHL is a life and health insurance company licensed in 49 states, the District of Columbia, and Canada to write credit life, credit disability, and non-credit insurance products.

Triton is a property and casualty insurance company licensed in 50 states, the District of Columbia, and Canada to write credit involuntary unemployment, credit disability, and collateral protection insurance.

As part of our continuing integration efforts in connection with the OneMain Acquisition, we sold all of the issued and outstanding shares of our former insurance subsidiaries, Merit Life Insurance Co.

(“Merit”) and Yosemite Insurance Company (“Yosemite”) during the 2019 and 2018 periods, respectively.

INSURANCE RESERVES

Components of unearned insurance premium reserves, claim reserves and benefit reserves were as follows:

Components of our insurance reserves were as follows:

(dollars in millions)

5 unchanged sentences

Subtotal (a) 771 793

Payable to third-party beneficiaries:

Unearned premium reserves 121 100

Benefit reserves 107 106

Claim reserves 18 17

Subtotal (b) 246 223

Non-finance receivable related:

Unearned premium reserves 74 77

Benefit reserves 311 364

Claim reserves 18 21

Subtotal (b) 403 462

Payable to third-party beneficiaries (b) 236 246

Non-finance receivable related (b) 385 403

Total $ 1,392 $ 1,442

* The 2019 presentation has been conformed to the 2020 presentation.

(a) Reported as a contra-asset to net finance receivables.

3 unchanged sentences

Reserves related to unearned premiums, claims and benefits ceded to non-affiliated insurance companies totaled $ 66 million and $ 71 million at December 31, 2020 and 2019, respectively.

Changes in the reserve for unpaid claims and loss adjustment expenses (not considering reinsurance recoverable):

Changes in the reserve for unpaid claims and loss adjustment expenses (net of reinsurance recoverables):

(dollars in millions)

16 unchanged sentences

Balance at end of period $ 148 $ 117 $ 117

* Reflects (i) a redundancy in the prior years’ net reserves of $ 15 million at December 31, 2019, primarily due to favorable development of credit life, disability, and unemployment claims during the year, (ii) a redundancy in the prior years’ net reserves of $ 10 million at December 31, 2018, primarily due to a favorable development of credit life, disability, and unemployment claims during the year, and (iii) a shortfall in the prior years’ net reserves of $ 5 million at December 31, 2017, primarily due to an unfavorable development on previously disclosed property and casualty policies and an unfavorable development on certain assumed credit disability policies.

* Reflects a redundancy in the prior years’ net reserves of $ 11 million, $ 15 million, and $ 10 million at December 31, 2020, 2019, and 2018, respectively, primarily due to net favorable developments of term life, credit life, and credit disability during 2020, and favorable developments of credit life, disability, and unemployment claims during 2019 and 2018.

Incurred claims and allocated claim adjustment expenses, net of reinsurance, as of December 31, 2020, were as follows:

30 unchanged sentences

Credit insurance

$ 96 $ 94 $ 90

Other short-duration insurance lines

Total 99 96 112

Reinsurance recoverable on unpaid claims:

Other short-duration insurance lines

Insurance lines other than short-duration 16

10 unchanged sentences

We are not required and did not apply purchase accounting to the insurance subsidiaries on a statutory basis.

Statutory net income for our insurance companies by type of insurance was as follows:

Statutory net income (loss) for our insurance companies by type of insurance was as follows:

(dollars in millions)

1 unchanged sentence

Property and casualty:

Yosemite $ — $ — $ 19

Triton $ ( 7 ) $ 16 $ 18

1 unchanged sentence

Merit $ — $ — $ 53

AHL 114 56 32

Statutory capital and surplus for our insurance companies by type of insurance were as follows:

4 unchanged sentences

Life and health:

Merit $ — $ 94

Our insurance companies are also subject to risk-based capital requirements adopted by the Texas DOI.

3 unchanged sentences

Our insurance subsidiaries are subject to domiciliary state regulations that limit their ability to pay dividends.

Merit and Yosemite were domiciled in Indiana, with Merit redomesticating to Texas on January 28, 2019.

Our previously owned insurance subsidiaries, Merit and Yosemite, were domiciled in Indiana, with Merit redomesticating to Texas on January 28, 2019.

AHL and Triton are domiciled in Texas.

6 unchanged sentences

Any amount greater must be approved by the state of domicile DOI.

These approved dividends are called “extraordinary dividends.” During 2018, ordinary dividends of $ 34 million and $ 37 million were paid by AHL and Merit, respectively.

There were no ordinary dividends paid by any of our insurance subsidiaries during 2019 or 2017.

Extraordinary dividends paid were as follows:

These approved dividends are called “extraordinary dividends.”

Ordinary dividends paid were as follows:

(dollars in millions)

1 unchanged sentence

AHL $ 48 $ — $ 34

Extraordinary dividends paid were as follows:

(dollars in millions)

Years Ended December 31, 2020 2019 2018

Triton $ — $ — $ 70

5 unchanged sentences

preferred stock and common stock.

SFC has two classes of authorized capital stock:

OMFC has two classes of authorized capital stock:

special stock and common stock.

OMH and SFC may issue preferred stock and special stock, respectively, in one or more series.

The OMH Board of Directors and the SFC Board of Directors determine the dividend, liquidation, redemption, conversion, voting, and other rights prior to issuance.

OMH and OMFC may issue preferred stock and special stock, respectively, in one or more series.

The OMH Board of Directors and the OMFC Board of Directors determine the dividend, liquidation, redemption, conversion, voting, and other rights prior to issuance.

During the first quarter of 2020, the OMH Board of Directors approved a stock repurchase program, which allows us to repurchase up to $ 200 million of OMH’s outstanding common stock with no stated expiration.

On March 20, 2020, OMH temporarily suspended its stock repurchase program.

OMH retains the right to reinstate the stock repurchase program as circumstances change.

Prior to the suspension of the program, OMH repurchased and retired 2,031,698 shares of its common stock with an average price paid per share of $ 22.30 , for an aggregate total of approximately $ 45 million, including commissions and fees.

The aggregate purchase price in excess of the par value of the repurchased OMH common stock is recorded as a reduction to additional paid-in-capital.

To provide funding for the OMH stock repurchase and retirement program, the OMFC Board of Directors authorized multiple dividend payments in the aggregate amount of $ 45 million.

Par value and shares authorized at December 31, 2020 were as follows:

2 unchanged sentences

Shares authorized 300,000,000 2,000,000,000 25,000,000 25,000,000

* No shares of OMH preferred stock or SFC special stock were issued and outstanding at December 31, 2019 or 2018.

* No shares of OMH preferred stock or OMFC special stock were issued and outstanding at December 31, 2020 or 2019.

Changes in OMH shares of common stock issued and outstanding were as follows:

2 unchanged sentences

Common shares issued 272,266 268,878 482,640

Common shares retired ( 2,031,698 ) — —

Balance at end of period 134,341,724 136,101,156 135,832,278

SFC shares issued and outstanding were as follows:

OMFC shares issued and outstanding were as follows:

Special Stock Common Stock

13 unchanged sentences

Diluted $ 5.41 $ 6.27 $ 3.29

* We have excluded the following shares in the diluted earnings per share calculation for 2019, 2018, and 2017 because these shares would be anti-dilutive, which could impact the earnings per share calculation in the future:

Years Ended December 31, 2019 2018 2017

Performance-based shares 173,944 40,593 59,863

Service-based shares 97,011 246,913 674,472

* We have excluded weighted-average unvested restricted stock units totaling 231,125 , 270,955 , and 287,506 for 2020, 2019, and 2018, respectively, from the fully-diluted earnings per share calculations as these shares would be anti-dilutive, which could impact the earnings per share calculation in the future.

Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during each period.

13 unchanged sentences

Balance at beginning of period $ 41 $ 3 $ — $ 44

Other comprehensive income before reclassifications

Other comprehensive income (loss) before reclassifications

51 ( 2 ) 2 51

Reclassification adjustments from accumulated other

3 unchanged sentences

Balance at beginning of period $ ( 28 ) $ ( 3 ) $ ( 3 ) $ ( 34 )

Other comprehensive loss before reclassifications

( 35 ) ( 4 ) ( 9 ) ( 48 )

Other comprehensive income before reclassifications

Reclassification adjustments from accumulated other comprehensive income

Impact of AOCI reclassification due to the Tax Act

Balance at end of period $ 41 $ 3 $ — $ 44

1 unchanged sentence

Balance at beginning of period $ 4 $ 4 $ 3 $ 11

Other comprehensive income before reclassifications 14 9 4 27

Reclassification adjustments from accumulated other comprehensive loss

( 9 ) ( 1 ) — ( 10 )

Other comprehensive loss before reclassifications ( 35 ) ( 4 ) ( 9 ) ( 48 )

Reclassification adjustments from accumulated other comprehensive income

Impact of AOCI reclassification due to the Tax Act

Balance at end of period $ ( 28 ) $ ( 3 ) $ ( 3 ) $ ( 34 )

Reclassification adjustments from accumulated other comprehensive income (loss) to the applicable line item on our consolidated statements of operations were as follows:

(dollars in millions)

Years Ended December 31, 2019 2018 2017

Unrealized gains (losses) on available-for-sale securities:

Reclassification from accumulated other comprehensive income (loss) to investment revenues, before taxes $ ( 1 ) $ ( 2 ) $ 14

Income tax effect — 1 ( 5 )

Reclassification from accumulated other comprehensive income (loss) to investment revenues, net of taxes ( 1 ) ( 1 ) 9

Unrealized gains (losses) on retirement plan liabilities:

Reclassification from accumulated other comprehensive income (loss) to retirement plan liabilities adjustments, before taxes $ — $ — $ 2

Income tax effect — — ( 1 )

Reclassification from accumulated other comprehensive income (loss) to retirement plan liabilities adjustments, net of taxes — — 1

Total $ ( 1 ) $ ( 1 ) $ 10

* There were no amounts related to available-for-sale debt securities for which an allowance for credit losses was recorded during the year ended December 31, 2020.

Reclassification adjustments from accumulated other comprehensive income (loss) to the applicable line item on our consolidated statements of operations were immaterial for the years ended December 31, 2020, 2019, and 2018.

OMH and all of its eligible domestic U.S.

32 unchanged sentences

Nondeductible compensation 0.25 0.13 3.85

Excess tax expense on share-based compensation 0.04 0.02 0.41

Impact of Tax Act — — 18.65

Other, net 0.48 ( 0.39 ) ( 0.13 )

Effective income tax rate 25.33 % 22.16 % 28.37 %

SFC's reconciliations of the statutory federal income tax rate to the effective income tax rate were as follows:

OMFC's reconciliations of the statutory federal income tax rate to the effective income tax rate were as follows:

Years Ended December 31, 2020 2019 2018

3 unchanged sentences

Nondeductible compensation 0.25 0.13 3.73

Excess tax expense on share-based compensation 0.04 0.02 0.33

Return to provision adjustment 0.08 — 0.81

Impact of Tax Act — — 21.69

Other, net 0.48 ( 0.29 ) ( 0.06 )

Effective income tax rate 25.33 % 22.27 % 28.35 %

The lower effective income tax rate in 2019 as compared to 2018 is primarily due to the release of the valuation allowance against certain state deferred taxes in 2019 and the effect of discrete tax expense for the non-deductible compensation expense in 2018.

The lower effective income tax rate in 2018 as compared to 2017 is primarily due to the lower federal statutory rate of 21 % in 2018 and the recognition of the impact of the Tax Act which increased our 2017 effective tax rate by 18.65 %.

As a result of the Tax Act, we recognized an $ 81 million tax charge in 2017.

This charge is primarily the result of the lower corporate tax rate, which required us to remeasure our net deferred tax asset to reflect the lower corporate tax rate.

The higher effective income tax rate in 2020 as compared to 2019 is primarily due to the release of the valuation allowance against certain state deferred taxes in 2019.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits (all of which would affect the effective income tax rate if recognized) is as follows:

10 unchanged sentences

The amount of any change in the balance of uncertain tax liabilities over the next 12 months is not expected to be material to our consolidated financial statements.

We are currently under examination of our U.S.

federal tax return for the years 2014 to 2016 by the IRS.

We are also under examination of various states for the years 2011 to 2018.

We are under examination by various states for the years 2014 to 2018.

Management believes it has adequately provided for taxes for such years.

10 unchanged sentences

Acquisition costs 5 6

Fair value of equity and securities investments — 8

Total $ 665 $ 322

3 unchanged sentences

Deferred loan fees 21 19

Mark-to-market 2 —

Fair value of equity and securities investments 27 12

5 unchanged sentences

Net deferred tax assets $ 405 $ 104

* To conform to the 2019 presentation, we reclassified certain items in the prior period.

The gross deferred tax liabilities are expected to reverse in time, and projected taxable income is expected to be sufficient to create positive taxable income, which will allow for the realization of all of our gross federal deferred tax assets and a portion of the state deferred tax assets.

The decrease in net deferred tax asset of $ 25 million was mainly attributable to the favorable movement of mark-to-market basis difference on our loan receivables and tax amortization of goodwill which was partly offset by the increase of loan loss reserve.

The increase in net deferred tax asset of $ 301 million was primarily due to the tax effect of the increase in the allowance for finance receivable losses from both the adoption of ASU 2016-13 on January 1, 2020 and the current period activity.

See Note 6 for further information on the increase in allowance.

The increase was partly offset by tax amortization of goodwill.

At December 31, 2020, we had state net operating loss carryforwards of $ 451 million compared to $ 551 million at December 31, 2019.

2 unchanged sentences

The total valuation allowance was established based on management’s determination that the deferred tax assets are more likely than not to not be realized.

During 2019, we released $ 23 million of valuation allowance against certain state deferred tax assets.

This release was primarily due to the impact of our ongoing legal entity simplification project, in which we consolidated our various operating subsidiaries, and continued earnings growth.

During 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Consolidated Appropriations Act of 2021 (the “CAA”) were signed into law.

Among other things, the provisions of these laws relate to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, and technical corrections to tax depreciation methods for qualified improvement property.

We do not anticipate the CARES Act or the CAA will have a material impact on our consolidated financial statements.

We will continue to monitor legislative developments related to the COVID-19 pandemic.

Leases and Contingencies

As described in Note 4, we have adopted ASU 2016-02, Leases , as of January 1, 2019, using the optional transition approach.

As a result of this election, the prior periods presented have not been adjusted.

Our operating leases primarily consist of leased office space, automobiles, and information technology equipment and have remaining lease terms of one year to ten years .

At December 31, 2019, our operating right-of-use asset balance was $ 163 million, and our operating lease liability balance was $ 176 million.

Our operating lease costs totaled $ 61 million, and our variable lease costs totaled $ 16 million for the year ended December 31, 2019.

Our sublease income was immaterial for 2019.

Our operating right-of-use asset and liability balances were $ 153 million and $ 165 million, respectively, at December 31, 2020 and $ 163 million and $ 176 million, respectively, at December 31, 2019.

At December 31, 2020, maturities of lease liabilities, excluding leases on a month-to-month basis, were as follows:

(dollars in millions) Operating Leases

Thereafter 11

Total lease payments 179

2 unchanged sentences

Weighted Average Discount Rate 3.81 %

As of December 31, 2018, under ASC 840, Leases, annual rental commitments for leased office space, automobiles and information technology equipment accounted for as operating leases, excluding leases on a month-to-month basis, were as follows:

(dollars in millions) Lease Commitments

Rental expense totaled $ 74 million in 2018 and $ 79 million in 2017.

Operating lease cost and variable lease cost, which are recorded in other operating expenses, for the years ended December 31, 2020 and 2019, were as follows:

(dollars in millions)

December 31, 2020 2019

Operating lease cost $ 63 $ 61

Variable lease cost 15 16

Our sublease income was immaterial for 2020 and 2019.

LEGAL CONTINGENCIES

7 unchanged sentences

For certain legal actions, we cannot reasonably estimate such losses, particularly for actions that are in their early stages of development or where plaintiffs seek substantial or indeterminate damages.

Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the actions in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for any given action.

Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the actions in question, before a loss or additional loss or range of loss or range of additional loss can be reasonably estimated for any given action.

For certain other legal actions, we can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued, but do not believe, based on current knowledge and after consultation with counsel, that such losses will have a material adverse effect on our consolidated financial statements as a whole.

Federal Securities Class Action (OMH only)

On February 10, 2017, a putative class action lawsuit, Galestan v.

OneMain Holdings, Inc., et al.

, was filed in the U.S.

District Court for the Southern District of New York, naming as defendants OMH and two of its officers.

The lawsuit alleged violations of the Exchange Act for allegedly making materially misleading statements and/or omitting material information concerning alleged integration issues after the OneMain Acquisition in November 2015, and was filed on behalf of a putative class of persons who purchased or otherwise acquired OMH’s common stock between February 25, 2016 and November 7, 2016.

The complaint sought an award of unspecified compensatory damages, an award of interest, reasonable attorney’s fees, expert fees and other costs, and equitable relief as the court may deem just and proper.

On April 23, 2019, the parties executed a settlement agreement, which received final approval from the Court on August 9, 2019.

Pursuant to the settlement agreement, the action was dismissed with prejudice.

The settlement contained no admission of liability by OMH and the other defendants.

Retirement Benefit Plans

3 unchanged sentences

The OneMain 401(k) Plan (the “401(k) Plan”), previously known as the Springleaf Financial Services 401(k) Plan, provided for a 100 % Company matching on the first 4 % of the salary reduction contributions of the employees for 2020, 2019, and 2018.

The salaries and benefits expense associated with this plan was $ 17 million in 2019 and 2018, and $ 16 million in 2017.

The salaries and benefits expense associated with this plan was $ 18 million in 2020 and $ 17 million in 2019 and 2018.

In addition, the Company may make a discretionary profit sharing contribution to the 401(k) Plan.

4 unchanged sentences

Springleaf Financial Services Retirement Plan

The Springleaf Financial Services Retirement Plan (the “Springleaf Retirement Plan”) is a qualified non-contributory defined benefit plan which is subject to the provisions of ERISA.

Effective December 31, 2012, the Springleaf Retirement Plan was frozen with respect to both benefits accruals and new participation.

The Springleaf Financial Services Retirement Plan (the “Springleaf Retirement Plan”) is a qualified non-contributory defined benefit plan, which is subject to the provisions of Employee Retirement Income Security Act of 1974 (“ERISA”).

Effective December 31, 2012, the Springleaf Retirement Plan was frozen with respect to both benefits accrual and new participation.

salaried employees who were employed by a participating company, had attained age 21 , and completed twelve months of continuous service were eligible to participate in the plan.

20 unchanged sentences

Interest cost 10 12 11

Actuarial loss (gain) 47 ( 30 ) 17

Actuarial loss (gain) (a) 42 47 ( 30 )

Benefits paid:

Plan assets ( 15 ) ( 15 ) ( 15 )

Settlement — — ( 47 )

Projected benefit obligation, end of period 364 320 354

Projected benefit obligation, end of period (b) 401 364 320

Fair value of plan assets, beginning of period 363 308 341

3 unchanged sentences

Plan assets ( 15 ) ( 15 ) ( 15 )

Settlement — — ( 47 )

Fair value of plan assets, end of period 363 308 341

Fair value of plan assets, end of period (b) 405 363 308

Funded status, end of period $ 4 $ ( 1 ) $ ( 12 )

Other liabilities recognized in the consolidated balance sheet

Other assets (other liabilities) recognized in the consolidated balance sheet

$ 4 $ ( 1 ) $ ( 12 )

1 unchanged sentence

$ 3 $ 4 $ ( 3 )

* Includes non-qualified unfunded plans, for which the aggregate projected benefit obligation was $ 10 million, $ 9 million and $ 10 million at December 31, 2019, 2018 and 2017, respectively.

Defined benefit pension plan obligations in which the PBO was in excess of the related plan assets and the ABO was in excess of the related plan assets were as follows:

(dollars in millions) PBO and ABO Exceeds

Fair Value of Plan Assets

December 31, 2019 2018

Projected benefit obligation $ 364 $ 320

Accumulated benefit obligation 364 320

Fair value of plan assets 363 308

(a) For the years ended December 31, 2020, 2019, and 2018, the actuarial gains or losses were primarily due to year-over-year fluctuations in discount rates used to calculate the present value of benefit obligations for the defined benefit plans.

Adoption of updated mortality assumptions had additional impacts on calculation of gains or losses as did the implementation of refined plan demographic assumptions at December 31, 2019.

(b) Includes three underfunded benefit plans, for which the aggregate projected benefit obligation and accumulated benefit obligation exceeded the related plan assets by $ 14 million, $ 13 million, and $ 14 million at December 31, 2020, 2019, and 2018, respectively.

The following table presents the components of net periodic benefit cost recognized in income and other amounts recognized in accumulated other comprehensive income or loss with respect to the defined benefit pension plans:

4 unchanged sentences

Expected return on assets ( 15 ) ( 15 ) ( 18 )

Settlement gain — — ( 2 )

Net periodic benefit cost ( 5 ) ( 3 ) ( 7 )

1 unchanged sentence

Net actuarial loss (gain) 2 ( 7 ) 7

Amortization of net actuarial gain (loss)

Total recognized in other comprehensive income or loss

( 7 ) 7 ( 10 )

Total recognized in net periodic benefit cost and other comprehensive income

$ ( 3 ) $ ( 10 ) $ —

We have estimated the net loss that will be amortized from accumulated other comprehensive income or loss into net periodic benefit cost over the next fiscal year will be immaterial for our combined defined benefit pension plans.

The following table summarizes the weighted average assumptions used to determine the projected benefit obligations and the net periodic benefit costs:

6 unchanged sentences

Discount Rate Methodology

The projected benefit cash flows were discounted using the spot rates derived from the unadjusted FTSE Pension Discount Curve (formerly the Citigroup Pension Discount Curve) at December 31, 2019 and an equivalent weighted average discount rate was derived that resulted in the same liability.

The projected benefit cash flows were discounted using the spot rates derived from the unadjusted FTSE Pension Discount Curve at December 31, 2020 and December 31, 2019, and an equivalent weighted average discount rate was derived that resulted in the same liability.

Investment Strategy

32 unchanged sentences

Equity securities:

International (a) 1 — — 1

International (b) 1 — — 1

Fixed income securities:

investment grade (b) 49 290 — 339

high yield (c) — 5 — 5

investment grade (c) 45 307 — 352

high yield (d) — 4 — 4

Total $ 52 $ 311 $ — $ 363

Investments measured at NAV (d) 14

Investments measured at NAV (e) 42

Total investments at fair value $ 405

2 unchanged sentences

Equity securities:

International (a) — 6 — 6

International (b) 1 — — 1

Fixed income securities:

investment grade (b) — 287 — 287

high yield (c) — 4 — 4

investment grade (c) 49 290 — 339

high yield (d) — 5 — 5

Total $ 54 $ 295 $ — $ 349

(a) Includes investment mutual funds in companies in emerging and developed markets.

(b) Includes investment mutual funds in U.S.

Investments measured at NAV (e) 14

Total investments at fair value $ 363

(a) Includes index mutual funds that primarily track several indices, including S&P 500 and S&P 600, in addition to other actively managed accounts, comprised of investments in small cap and large cap companies.

(b) Includes investment mutual funds in companies in emerging and developed markets.

government issued bonds, U.S.

government agency or sponsored agency bonds, and investment grade corporate bonds.

(d) We have elected the practical expedient to exclude certain investments that were measured at net asset value ("NAV") per share (or equivalent) from the fair value hierarchy.

(e) Includes index mutual funds that primarily track several indices including S&P 500 and S&P 600 in addition to other actively managed accounts, comprised of investments in small cap and large cap companies.

(d) Includes investment mutual funds in securities or debt obligations that have a rating below investment grade.

(e) We have elected the practical expedient to exclude certain investments that were measured at net asset value ("NAV") per share (or equivalent) from the fair value hierarchy.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities.

2 unchanged sentences

ONEMAIN HOLDINGS, INC.

AMENDED AND RESTATED 2013 OMNIBUS INCENTIVE PLAN

AMENDED 2013 OMNIBUS INCENTIVE PLAN

In 2013, OMH adopted the OneMain Holdings, Inc.

Amended and Restated 2013 Omnibus Incentive Plan (the "Omnibus Plan"), which was effective as of May 25, 2016, under which equity-based awards are granted to selected management employees, non-employee directors, independent contractors, and consultants.

The amendment and restatement of the Omnibus Plan (i) extended the term of the Omnibus Plan from October 2023 to May 2026 and (ii) limited the number of cash-settled and equity-based awards under the Omnibus Plan valued at more than $ 500,000 to non-employee directors during the calendar year.

Amended 2013 Omnibus Incentive Plan (the “Omnibus Plan”).

As of December 31, 2020, 13,139,204 shares of common stock were reserved for issuance under the Omnibus Plan, including 714,193 shares subject to outstanding equity awards.

1 unchanged sentence

The Omnibus Plan allows for issuance of stock options, RSUs, RSAs, stock appreciation rights, and other stock-based awards and cash awards.

During 2019, OMH amended certain cash-settled and equity-based award agreements, to provide for the right to accrue cash dividend equivalents.

Approximately 450 employees were affected by the amendments and the share-based compensation expense recognized as a result of amending the awards was immaterial during 2019.

Total share-based compensation expense, net of forfeitures, for all equity-based awards totaled $ 15 million, $ 13 million, and $ 21 million during 2020, 2019, and 2018, respectively.

The total income tax benefit recognized for stock-based compensation was $ 3 million in 2019 and $ 6 million in 2018 and 2017.

As of December 31, 2019, there was total unrecognized compensation expense of $ 10 million related to unvested stock-based awards that are expected to be recognized over a weighted average period of one year .

The total income tax benefit recognized for stock-based compensation was $ 4 million, $ 3 million, and $ 6 million in 2020, 2019, and 2018, respectively.

As of December 31, 2020, there was total unrecognized compensation expense of $ 15 million related to unvested stock-based awards that are expected to be recognized over a weighted average period of less than two years .

Service-based Awards

In connection with the initial public offering on October 16, 2013 and subsequent to the offering, OMH has granted service-based RSUs and RSAs to certain of our non-employee directors, executives and employees.

The RSUs are granted with varying service terms of one year to four years and do not provide the holders with any rights as shareholders, except with respect to dividend equivalents.

As of December 31, 2019, OMH had no outstanding RSAs.

The grant date fair value for RSUs and RSAs is generally the closing market price of OMH’s common stock on the date of the award.

OMH has granted service-based RSUs to certain non-employee directors, executives and employees.

The RSUs are granted with varying service terms of one year to five years and do not provide the holders with any rights as shareholders, except with respect to dividend equivalents.

The grant date fair value for RSUs is generally the closing market price of OMH’s common stock on the date of the award.

Expense for service-based awards is amortized on a straight-line basis over the vesting period, based on the number of awards that are ultimately expected to vest.

13 unchanged sentences

These awards are subject to the achievement of performance goals during a one-year period or a cumulative three-year period.

The awards are considered earned after the attainment of the performance goal, that occurs after the performance period when results have been evaluated and approved by the committee of the OMH Board of Directors, which oversees OMH's compensation programs (the "Compensation Committee"), and vest according to their certain terms and conditions.

The awards are considered earned after the attainment of the performance goal, which occurs after the performance period when results have been evaluated and approved by the committee of the OMH Board of Directors, which oversees OMH's compensation programs (the "Compensation Committee"), and vest according to their certain terms and conditions.

The fair value for all performance-based awards is based on the closing market price of OMH's stock on the date of the award.

2 unchanged sentences

If minimum targets are not achieved by the end of the respective performance periods, all unvested shares related to those targets will be forfeited and canceled, and all expense recognized to that date is reversed.

The weighted average grant date fair value of performance-based awards issued in 2019 was $ 31.86 .

The weighted average grant date fair value of performance-based awards issued in 2018 and 2017 was $ 24.98 .

The total fair value of performance-based awards that vested during 2019, 2018, and 2017 was $ 3 million, $ 3 million, and $ 2 million, respectively.

The weighted average grant date fair value of performance-based awards issued in 2020, 2019, and 2018 was $ 42.86 , $ 31.86 , and $ 24.98 , respectively.

The total fair value of performance-based awards that vested was immaterial during 2020, 2019, and 2018.

The following table summarizes the performance-based stock activity and related information for the Omnibus Plan for 2020:

8 unchanged sentences

Cash-settled Stock-based Awards

OMH has granted cash-settled stock-based awards to certain of our executives.

OMH has granted cash-settled stock-based awards to certain executives.

These awards are granted with vesting conditions relating to the trading price of OMH's common stock and the portion of OMH's common stock owned by stockholders other than the Apollo-Värde Group, and certain other terms and conditions.

5 unchanged sentences

SFH Incentive Units

In connection with the sale of OMH's common stock by SFH in 2018, as described in Note 1 of the Notes to the Consolidated Financial Statements, certain of the specified thresholds were satisfied.

In connection with the sale of OMH's common stock by SFH in 2018, as described in Note 1 of the Notes to the Consolidated Financial Statements, certain specified thresholds were satisfied.

In accordance with ASC 710, Compensation-General , we recorded non-cash incentive compensation expense of $ 106 million related to the Apollo-Värde Transaction and $ 4 million related to the AIG Share Sale Transaction with a capital contribution offset.

3 unchanged sentences

At December 31, 2020, Consumer and Insurance (“C&I”) is our only reportable segment.

Previously, the servicing revenues and related expenses from the SpringCastle Portfolio were presented as a distinct reporting and operating segment, Acquisitions and Servicing (“A&S”).

However, due to the continued decline in servicing revenues and related expenses, management no longer views the servicing activity from the SpringCastle Portfolio as a separate reportable segment.

Therefore, we are now including A&S in Other.

We have revised our prior period segment disclosures to conform to this new alignment.

The accounting policies of the C&I segment are the same as those disclosed in Note 3, except as described below.

Due to the nature of the OneMain Acquisition and the Fortress Acquisition, we applied purchase accounting.

However, we report the operating results of C&I and Other using the Segment Accounting Basis, which (i) reflects our allocation methodologies for certain costs, primarily interest expense and other expenses, to reflect the manner in which we assess our business results and (ii) excludes the impact of applying purchase accounting (eliminates premiums/discounts on our finance receivables and long-term debt at acquisition, as well as the amortization/accretion in future periods).

However, we report the operating results of C&I and Other using the Segment Accounting Basis, which (i) reflects our allocation methodologies for interest expense and operating costs, and (ii) excludes the impact of applying purchase accounting.

We allocate revenues and expenses on a Segment Accounting Basis to the C&I segment and Other using the following methodologies:

22 unchanged sentences

The "Segment to GAAP Adjustment” column in the following tables primarily consists of:

• Interest income - reverses the impact of premiums/discounts on purchased finance receivables and the interest income recognition under guidance in ASC 310-20, Nonrefundable Fees and Other Costs , and ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , and reestablishes interest income recognition on a historical cost basis;

• Interest income - reverses the impact of premiums/discounts on purchased finance receivables and the interest income recognition under guidance in ASC 310-20, Nonrefundable Fees and Other Costs , and ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , prior to the adoption of ASU 2016-13 on January 1, 2020, and reestablishes interest income recognition on a historical cost basis;

• Interest expense - reverses the impact of premiums/discounts on acquired long-term debt and reestablishes interest expense recognition on a historical cost basis;

• Provision for finance receivable losses - reverses the impact of providing an allowance for finance receivable losses upon acquisition and reestablishes the allowance on a historical cost basis and reverses the impact of recognition of net charge-offs on purchased credit impaired finance receivables and reestablishes the net charge-offs on a historical cost basis;

• Provision for finance receivable losses - reverses the impact of providing an allowance for finance receivable losses upon acquisition and reestablishes the allowance on a historical cost basis leveraging historical TDR receivables and reverses the impact of recognition of net charge-offs on purchased credit impaired finance receivables, prior to the adoption of ASU 2016-13 on January 1, 2020, and reestablishes the net charge-offs on a historical cost basis;

• Other revenues - reestablishes the historical cost basis of mark-to-market adjustments on finance receivables held for sale and on realized gains/losses associated with our investment portfolio;

29 unchanged sentences

Assets $ 20,705 $ 77 $ 2,035 $ 22,817

At or for the December 31, 2017

At or for the Year Ended December 31, 2018

Interest income $ 3,677 $ 17 $ ( 36 ) $ 3,658

Interest expense 844 17 14 875

Provision for finance receivable losses 963 7 ( 15 ) 955

Provision for finance receivables losses 1,047 ( 5 ) 6 1,048

Net interest income after provision for finance receivable losses 1,786 5 ( 56 ) 1,735

3 unchanged sentences

Assets $ 17,893 $ 120 $ 2,077 $ 20,090

* Other revenue in Other includes the gains on the February 2019 Real Estate Loan Sale and the December 2018 Real Estate Loan Sale as well as the impairment adjustments on the remaining loans in held for sale in 2019 and 2018, respectively.

* Other revenues in Other include the gains on the February 2019 Real Estate Loan Sale and the December 2018 Real Estate Loan Sale, as well as the impairment adjustments on the remaining loans in held for sale in 2019 and 2018, respectively.

Fair Value Measurements

4 unchanged sentences

An other-than-active market is one in which there are few transactions, the prices are not current, price quotations vary substantially either over time or among market makers, or little information is released publicly for the asset or liability being valued.

Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is listed on an exchange or traded over-the-counter or is new to the market and not yet established, the characteristics specific to the transaction, and general market conditions.

Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is listed on an exchange, traded over-the-counter, or is new to the market and not yet established, the characteristics specific to the transaction, and general market conditions.

See Note 3 for a discussion of the accounting policies related to fair value measurements, which includes the valuation process and the inputs used to develop our fair value measurements.

7 unchanged sentences

— — 18,629 18,629 15,815

Finance receivables held for sale — — 74 74 64

Restricted cash and restricted cash equivalents 451 — — 451 451

6 unchanged sentences

— — 19,319 19,319 17,560

Finance receivables held for sale — — 103 103 103

Restricted cash and restricted cash equivalents 405 — — 405 405

1 unchanged sentence

Long-term debt $ — $ 18,509 $ — $ 18,509 $ 17,212

* Other assets at December 31, 2019 and December 31, 2018 include miscellaneous receivables related to our liquidating loan portfolios.

* Other assets at December 31, 2020 and December 31, 2019 primarily consists of finance receivables held for sale.

FAIR VALUE MEASUREMENTS — RECURRING BASIS

23 unchanged sentences

Common stock 26 — 1 27

Other long-term investments — — 1 1

Total other securities 39 34 2 75

Total investment securities 44 1,870 8 1,922

Restricted cash in mutual funds 403 — — 403

Restricted cash equivalents in mutual funds 441 — — 441

Total $ 2,503 $ 1,887 $ 8 $ 4,398

* Due to the insignificant activity within the Level 3 assets during 2019, we have omitted the additional disclosures relating to the changes in Level 3 assets measured at fair value on a recurring basis and the quantitative information about Level 3 unobservable inputs.

Fair Value Measurements Using Total Carried At Fair Value

24 unchanged sentences

Total investment securities 45 1,835 4 1,884

Restricted cash in mutual funds 482 — — 482

Restricted cash equivalents in mutual funds 403 — — 403

Total $ 1,223 $ 1,903 $ 4 $ 3,130

* Due to the insignificant activity within the Level 3 assets during 2018, we have omitted the additional disclosures relating to the changes in Level 3 assets measured at fair value on a recurring basis and the quantitative information about Level 3 unobservable inputs.

Due to the insignificant activity within the Level 3 assets during 2020 and 2019, we have omitted the additional disclosures relating to the changes in Level 3 assets measured at fair value on a recurring basis and the quantitative information about Level 3 unobservable inputs.

FAIR VALUE MEASUREMENTS — NON-RECURRING BASIS

We measure the fair value of certain assets on a non-recurring basis when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Assets measured at fair value on a non-recurring basis on which we recorded impairment charges were as follows:

Fair Value Measurements Using * Impairment Charges

(dollars in millions) Level 1 Level 2 Level 3 Total

At or for the Year Ended December 31, 2019

Finance receivables held for sale $ — $ — $ 64 $ 64 $ 3

Real estate owned — — 6 6 3

At or for the Year Ended December 31, 2018

Finance receivables held for sale $ — $ — $ 103 $ 103 $ 16

Real estate owned — — 6 6 3

* The fair value information presented in the table is as of the date the fair value adjustment was recorded.

We wrote down finance receivables held for sale to their fair value during 2019 and 2018 and recorded the impairment in other revenues.

See Note 7 regarding the impairment losses recorded on the February 2019 and the December 2018 Real Estate Loan Sales.

The fair values of real estate owned disclosed in the table above are unadjusted for transaction costs as required by the authoritative guidance for fair value measurements.

The amounts of real estate owned recorded in other assets are net of transaction costs as required by the authoritative guidance for accounting for the impairment of long-lived assets.

The inputs and quantitative data used in our Level 3 valuations for our real estate owned are unobservable primarily due to the unique nature of specific real estate assets.

Therefore, we used independent third party providers, familiar with local markets, to determine the values used for fair value disclosures without adjustment.

Quantitative information about Level 3 inputs for our assets measured at fair value on a non-recurring basis at December 31, 2019 and 2018 was as follows:

December 31, 2019 December 31, 2018

Valuation Technique(s) Unobservable Input Range Weighted Average Range Weighted Average

Finance receivables held for sale Income approach Discount Rate 4.17 % - 8.50 %

6.36 % 4.23 % - 8.00 %

Default Rate 15.00 % - 65.00 %

36.36 % 13.50 % - 70.00 %

Real estate owned Market approach Third Party Valuation * * * *

* We applied the third-party exception which allows us to omit certain quantitative disclosures about unobservable inputs for the assets measured at fair value on a non-recurring basis included in the table above.

As a result, the weighted average ranges of the inputs for these assets are not applicable.

Net impairment charges recorded on assets measured at fair value on a non-recurring basis were immaterial during 2020 and 2019.

FAIR VALUE MEASUREMENTS — VALUATION METHODOLOGIES AND ASSUMPTIONS

6 unchanged sentences

Cash equivalents in securities are categorized as Level 2 within the fair value table.

Restricted Cash and Restricted Cash Equivalents

The carrying amount of restricted cash and restricted cash equivalents approximates fair value.

Investment Securities

We utilize third-party valuation service providers to measure the fair value of our investment securities, which are classified as available-for-sale or other and consist primarily of bonds.

We utilize third-party valuation service providers to measure the fair value of our investment securities, which are classified as available-for-sale or other securities and consist primarily of bonds.

Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure investment securities at fair value.

8 unchanged sentences

Finance Receivables

The fair value of net finance receivables, less allowance for finance receivable losses, for both non-impaired and purchased credit impaired finance receivables, is determined using discounted cash flow methodologies.

The fair value of net finance receivables, less allowance for finance receivable losses, is determined using discounted cash flow methodologies.

The application of these methodologies requires us to make certain judgments and estimates based on our perception of market participant views related to the economic and competitive environment, the characteristics of our finance receivables, and other similar factors.

3 unchanged sentences

Additionally, there may be inherent limitations in the valuation methodologies we employed, and changes in the underlying assumptions used could significantly affect the results of current or future values.

Finance Receivables Held for Sale

We determined the fair value of finance receivables held for sale that were originated as held for investment based on negotiations with prospective purchasers (if any) or by using projected cash flows discounted at the weighted-average interest rates offered by us in the market for similar finance receivables.

We based cash flows on contractual payment terms adjusted for estimates of prepayments and credit related losses.

Restricted Cash and Restricted Cash Equivalents

The carrying amount of restricted cash and restricted cash equivalents approximates fair value.

Real Estate Owned

We initially base our estimate of the fair value on independent third-party valuations at the time we take title to real estate owned.

Subsequent changes in fair value are based upon independent third-party valuations obtained periodically to estimate a price that would be received in a then current transaction to sell the asset.

Long-term Debt

42 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data