OneMain Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. An index to our financial statements and supplementary data follows: Topic Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) (OneMain Holdings, Inc.) 61 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) (OneMain Finance Corporation) 63 Financial Statements of OneMain Holdings, Inc. and Subsidiaries: Consolidated Balance Sheets 65 Consolidated Statements of Operations 66 Consolidated Statements of Comprehensive Income 67 Consolidated Statements of Shareholders’ Equity 68 Consolidated Statements of Cash Flows 69 Financial Statements of OneMain Finance Corporation and Subsidiaries: Consolidated Balance Sheets 70 Consolidated Statements of Operations 71 Consolidated Statements of Comprehensive Income 72 Consolidated Statements of Shareholder's Equity 73 Consolidated Statements of Cash Flows 74 Notes to the Consolidated Financial Statements: Note 1. Nature of Operations 76 Note 2 . Summary of Significant Accounting Policies 76 Note 3 . Recent Accounting Pronouncements 84 Note 4 . Finance Receivables 85 Note 5 . Allowance for Finance Receivable Losses 89 Note 6 . Investment Securities 91 Note 7 . Goodwill and Other Intangible Assets 94 Note 8 . Long-term Debt 95 Note 9 . Variable Interest Entities 97 Note 1 0 . Insurance 99 Note 1 1 . Capital Stock and Earnings Per Share (OMH Only) 103 Note 1 2 . Accumulated Other Comprehensive Income (Loss) 105 Note 1 3 . Income Taxes 106 Note 1 4 . Leases and Contingencies 109 Note 1 5 . Retirement Benefit Plan s 110 Note 1 6 . Share-Based Compensation 115 Note 1 7 . Segment Information 117 Note 1 8 . Fair Value Measurements 119 60 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of OneMain Holdings, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of OneMain Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 5 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses in 2020. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 61 Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 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. 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 Personal Loans Collectively Evaluated for Impairment – Forecasted Macroeconomic Conditions As described in Notes 2 and 5 to the consolidated financial statements, the Company’s allowance for finance receivable losses for personal loans collectively evaluated for impairment was $1,820 million as of December 31, 2021. Management estimates the allowance for finance receivable losses for personal 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 ongoing impacts of COVID-19 on the U.S. economy and the overall unemployment rate. The principal considerations for our determination that performing procedures relating to the allowance for finance receivable losses for personal 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 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 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 Dallas, Texas February 11, 2022 We have served as the Company’s auditor since 2002. 62 Table of Contents 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 OneMain Finance Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 5 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses in 2020. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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. 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 Personal Loans Collectively Evaluated for Impairment – Forecasted Macroeconomic Conditions As described in Notes 2 and 5 to the consolidated financial statements, the Company’s allowance for finance receivable losses for personal loans collectively evaluated for impairment was $1,820 million as of December 31, 2021. Management estimates the allowance for finance receivable losses for personal 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 ongoing impacts of COVID-19 on the U.S. economy and the overall unemployment rate. 63 Table of Contents The principal considerations for our determination that performing procedures relating to the allowance for finance receivable losses for personal 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 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 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 Dallas, Texas February 11, 2022 We have served as the Company's auditor since 2002. 64 Table of Contents ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (dollars in millions, except par value amount) December 31, 2021 2020 Assets Cash and cash equivalents $ 541 $ 2,272 Investment securities (includes available-for-sale securities with a fair value and an amortized cost basis of $ 1.9 billion and $ 1.8 billion in 2021, respectively, and $ 1.8 billion and $ 1.7 billion in 2020, respectively) 1,992 1,922 Net finance receivables (includes loans of consolidated VIEs of $ 8.8 billion in 2021 and 2020) 19,212 18,084 Unearned insurance premium and claim reserves ( 761 ) ( 771 ) Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 910 million in 2021 and $ 1.1 billion in 2020) ( 2,095 ) ( 2,269 ) Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses 16,356 15,044 Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $ 466 million in 2021 and $ 441 million in 2020) 476 451 Goodwill 1,437 1,422 Other intangible assets 274 306 Other assets 1,003 1,054 Total assets $ 22,079 $ 22,471 Liabilities and Shareholders’ Equity Long-term debt (includes debt of consolidated VIEs of $ 8.0 billion in 2021 and $ 7.8 billion in 2020) $ 17,750 $ 17,800 Insurance claims and policyholder liabilities 621 621 Deferred and accrued taxes 1 45 Other liabilities (includes other liabilities of consolidated VIEs of $ 13 million in 2021 and $ 15 million in 2020) 614 564 Total liabilities 18,986 19,030 Contingencies (Note 14) Shareholders’ equity: Common stock, par value $ 0.01 per share; 2,000,000,000 shares authorized, 127,809,640 and 134,341,724 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively 1 1 Additional paid-in capital 1,672 1,655 Accumulated other comprehensive income 61 94 Retained earnings 1,727 1,691 Treasury stock, at cost; 6,712,923 shares at December 31, 2021 and no shares at December 31, 2020, respectively ( 368 ) — Total shareholders’ equity 3,093 3,441 Total liabilities and shareholders’ equity $ 22,079 $ 22,471 See Notes to the Consolidated Financial Statements. 65 Table of Contents ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (dollars in millions, except per share amounts) Years Ended December 31, 2021 2020 2019 Interest income $ 4,364 $ 4,368 $ 4,127 Interest expense 937 1,027 970 Net interest income 3,427 3,341 3,157 Provision for finance receivable losses 593 1,319 1,129 Net interest income after provision for finance receivable losses 2,834 2,022 2,028 Other revenues: Insurance 434 443 460 Investment 65 75 95 Net loss on repurchases and repayments of debt ( 78 ) ( 39 ) ( 35 ) Other 110 47 102 Total other revenues 531 526 622 Other expenses: Salaries and benefits 839 756 808 Other operating expenses 609 573 559 Insurance policy benefits and claims 176 242 185 Total other expenses 1,624 1,571 1,552 Income before income taxes 1,741 977 1,098 Income taxes 427 247 243 Net income $ 1,314 $ 730 $ 855 Share Data: Weighted average number of shares outstanding: Basic 132,653,889 134,716,012 136,070,837 Diluted 133,054,494 134,919,258 136,326,911 Earnings per share: Basic $ 9.90 $ 5.42 $ 6.28 Diluted $ 9.87 $ 5.41 $ 6.27 See Notes to the Consolidated Financial Statements. 66 Table of Contents ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (dollars in millions) Years Ended December 31, 2021 2020 2019 Net income $ 1,314 $ 730 $ 855 Other comprehensive income (loss): Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities ( 53 ) 66 88 Retirement plan liability adjustments ( 1 ) ( 2 ) 7 Foreign currency translation adjustments 1 2 5 Other 11 — — Income tax effect: Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities 12 ( 15 ) ( 20 ) Retirement plan liability adjustments 1 — ( 1 ) Foreign currency translation adjustments — — ( 2 ) Other ( 3 ) — — Other comprehensive income (loss), net of tax, before reclassification adjustments ( 32 ) 51 77 Reclassification adjustments included in net income, net of tax: 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 Other comprehensive income (loss), net of tax ( 33 ) 50 78 Comprehensive income $ 1,281 $ 780 $ 933 See Notes to the Consolidated Financial Statements. 67 Table of Contents ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders’ Equity OneMain Holdings, Inc. Shareholders’ Equity (dollars in millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Shareholders’ Equity Balance, January 1, 2021 $ 1 $ 1,655 $ 94 $ 1,691 $ — $ 3,441 Common stock repurchased — — — — ( 368 ) ( 368 ) Share-based compensation expense, net of forfeitures — 23 — — — 23 Withholding tax on share-based compensation — ( 6 ) — — — ( 6 ) Other comprehensive loss — — ( 33 ) — — ( 33 ) Cash dividends (a) — — — ( 1,278 ) — ( 1,278 ) Net income — — — 1,314 — 1,314 Balance, December 31, 2021 $ 1 $ 1,672 $ 61 $ 1,727 $ ( 368 ) $ 3,093 Balance, January 1, 2020 (pre-adoption) $ 1 $ 1,689 $ 44 $ 2,596 $ — $ 4,330 Net impact of adoption of ASU 2016-13 (b) — — — ( 828 ) — ( 828 ) Balance, January 1, 2020 (post-adoption) 1 1,689 44 1,768 — 3,502 Common stock repurchased (c) — ( 45 ) — — — ( 45 ) Share-based compensation expense, net of forfeitures — 17 — — — 17 Withholding tax on share-based compensation — ( 6 ) — — — ( 6 ) Other comprehensive income — — 50 — — 50 Cash dividends (a) — — — ( 807 ) — ( 807 ) Net income — — — 730 — 730 Balance, December 31, 2020 $ 1 $ 1,655 $ 94 $ 1,691 $ — $ 3,441 Balance, January 1, 2019 $ 1 $ 1,681 $ ( 34 ) $ 2,151 $ — $ 3,799 Share-based compensation expense, net of forfeitures — 13 — — — 13 Withholding tax on share-based compensation — ( 5 ) — — — ( 5 ) Other comprehensive income — — 78 — — 78 Cash dividends (a) — — — ( 410 ) — ( 410 ) Net income — — — 855 — 855 Balance, December 31, 2019 $ 1 $ 1,689 $ 44 $ 2,596 $ — $ 4,330 (a) Cash dividends declared were $ 9.55 per share, $ 5.94 per share, and $ 3.00 per share in 2021, 2020, and 2019, respectively. (b) As a result of the adoption of ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments , on January 1, 2020, we recorded a one-time cumulative reduction to retained earnings, net of tax. (c) The common stock repurchased was retired in 2020. See Notes to the Consolidated Financial Statements. 68 Table of Contents ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (dollars in millions) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities Net income $ 1,314 $ 730 $ 855 Reconciling adjustments: Provision for finance receivable losses 593 1,319 1,129 Depreciation and amortization 264 264 271 Deferred income tax charge (benefit) 78 ( 42 ) 1 Net loss on repurchases and repayments of debt 78 39 35 Share-based compensation expense, net of forfeitures 23 17 13 Gain on sales of finance receivables ( 47 ) — — Other ( 8 ) 3 ( 9 ) Cash flows due to changes in other assets and other liabilities ( 48 ) ( 118 ) 67 Net cash provided by operating activities 2,247 2,212 2,362 Cash flows from investing activities Net principal originations and purchases of finance receivables ( 2,514 ) ( 748 ) ( 3,305 ) Proceeds from sales of finance receivables 560 — — Available-for-sale securities purchased ( 517 ) ( 456 ) ( 718 ) Available-for-sale securities called, sold, and matured 404 478 574 Other securities purchased ( 708 ) ( 538 ) ( 18 ) Other securities called, sold, and matured 701 542 31 Other, net ( 69 ) ( 29 ) 7 Net cash used for investing activities ( 2,143 ) ( 751 ) ( 3,429 ) Cash flows from financing activities Proceeds from issuance of long-term debt, net of issuance costs 3,759 7,279 5,895 Repayment of long-term debt ( 3,921 ) ( 6,792 ) ( 3,961 ) Cash dividends ( 1,274 ) ( 806 ) ( 408 ) Common stock repurchased ( 368 ) ( 45 ) — Withholding tax on share-based compensation ( 6 ) ( 6 ) ( 5 ) Net cash provided by (used for) financing activities ( 1,810 ) ( 370 ) 1,521 Net change in cash and cash equivalents and restricted cash and restricted cash equivalents ( 1,706 ) 1,091 454 Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period 2,723 1,632 1,178 Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period $ 1,017 $ 2,723 $ 1,632 Supplemental cash flow information Cash and cash equivalents $ 541 $ 2,272 $ 1,227 Restricted cash and restricted cash equivalents 476 451 405 Total cash and cash equivalents and restricted cash and restricted cash equivalents $ 1,017 $ 2,723 $ 1,632 Interest paid $ ( 891 ) $ ( 978 ) $ ( 845 ) Income taxes paid ( 403 ) ( 289 ) ( 261 ) Cash paid for amounts included in the measurement of operating lease liabilities ( 58 ) ( 57 ) ( 58 ) ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued) (dollars in millions) Years Ended December 31, 2021 2020 2019 Supplemental non-cash activities Right-of-use assets obtained in exchange for operating lease obligations $ 43 $ 47 $ 233 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. 69 Table of Contents ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (dollars in millions, except par value amount) December 31, 2021 2020 Assets Cash and cash equivalents $ 510 $ 2,272 Investment securities (includes available-for-sale securities with a fair value and an amortized cost basis of $ 1.9 billion and $ 1.8 billion in 2021, respectively, and $ 1.8 billion and $ 1.7 billion in 2020, respectively) 1,992 1,922 Net finance receivables (includes loans of consolidated VIEs of $ 8.8 billion in 2021 and 2020) 19,212 18,084 Unearned insurance premium and claim reserves ( 761 ) ( 771 ) Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 910 million in 2021 and $ 1.1 billion in 2020) ( 2,095 ) ( 2,269 ) Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses 16,356 15,044 Restricted cash and restricted cash equivalents (includes restricted cash and restricted cash equivalents of consolidated VIEs of $ 466 million in 2021 and $ 441 million in 2020) 476 451 Goodwill 1,437 1,422 Other intangible assets 274 306 Other assets 1,001 1,054 Total assets $ 22,046 $ 22,471 Liabilities and Shareholder’s Equity Long-term debt (includes debt of consolidated VIEs of $ 8.0 billion in 2021 and $ 7.8 billion in 2020) $ 17,750 $ 17,800 Insurance claims and policyholder liabilities 621 621 Deferred and accrued taxes 1 47 Other liabilities (includes other liabilities of consolidated VIEs of $ 13 million in 2021 and $ 15 million in 2020) 614 563 Total liabilities 18,986 19,031 Contingencies (Note 14) 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 , 2021 and December 31, 2020 5 5 Additional paid-in capital 1,916 1,899 Accumulated other comprehensive income 61 94 Retained earnings 1,078 1,442 Total shareholder’s equity 3,060 3,440 Total liabilities and shareholder’s equity $ 22,046 $ 22,471 See Notes to the Consolidated Financial Statements. 70 Table of Contents ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (dollars in millions) Years Ended December 31, 2021 2020 2019 Interest income $ 4,364 $ 4,368 $ 4,127 Interest expense 937 1,027 972 Net interest income 3,427 3,341 3,155 Provision for finance receivable losses 593 1,319 1,129 Net interest income after provision for finance receivable losses 2,834 2,022 2,026 Other revenues: Insurance 434 443 460 Investment 65 75 95 Net loss on repurchases and repayments of debt ( 78 ) ( 39 ) ( 35 ) Other 110 47 109 Total other revenues 531 526 629 Other expenses: Salaries and benefits 839 756 808 Other operating expenses 609 573 558 Insurance policy benefits and claims 176 242 185 Total other expenses 1,624 1,571 1,551 Income before income taxes 1,741 977 1,104 Income taxes 427 247 246 Net income $ 1,314 $ 730 $ 858 See Notes to the Consolidated Financial Statements. 71 Table of Contents ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (dollars in millions) Years Ended December 31, 2021 2020 2019 Net income $ 1,314 $ 730 $ 858 Other comprehensive income (loss): Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities ( 53 ) 66 88 Retirement plan liability adjustments ( 1 ) ( 2 ) 7 Foreign currency translation adjustments 1 2 5 Other 11 — — Income tax effect: Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities 12 ( 15 ) ( 20 ) Retirement plan liability adjustments 1 — ( 1 ) Foreign currency translation adjustments — — ( 2 ) Other ( 3 ) — — Other comprehensive income (loss), net of tax, before reclassification adjustments ( 32 ) 51 77 Reclassification adjustments included in net income, net of tax: 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 Other comprehensive income (loss), net of tax ( 33 ) 50 78 Comprehensive income $ 1,281 $ 780 $ 936 See Notes to the Consolidated Financial Statements. 72 Table of Contents ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Shareholder’s Equity OneMain Finance Corporation Shareholder’s Equity (dollars in millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shareholders’ Equity Balance, January 1, 2021 $ 5 $ 1,899 $ 94 $ 1,442 $ 3,440 Share-based compensation expense, net of forfeitures — 23 — — 23 Withholding tax on share-based compensation — ( 6 ) — — ( 6 ) Other comprehensive loss — — ( 33 ) — ( 33 ) Cash dividends — — — ( 1,678 ) ( 1,678 ) Net income — — — 1,314 1,314 Balance, December 31, 2021 $ 5 $ 1,916 $ 61 $ 1,078 $ 3,060 Balance, January 1, 2020 (pre-adoption) $ 5 $ 1,888 $ 44 $ 2,388 $ 4,325 Net impact of adoption of ASU 2016-13 * — — — ( 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 Withholding tax on shared-based compensation — ( 6 ) — — ( 6 ) Other comprehensive income — — 50 — 50 Cash dividends — — — ( 848 ) ( 848 ) Net income — — — 730 730 Balance, December 31, 2020 $ 5 $ 1,899 $ 94 $ 1,442 $ 3,440 Balance, January 1, 2019 $ 5 $ 2,110 $ ( 34 ) $ 1,940 $ 4,021 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 income — — 78 — 78 Cash dividends — — — ( 410 ) ( 410 ) Net income — — — 858 858 Balance, December 31, 2019 $ 5 $ 1,888 $ 44 $ 2,388 $ 4,325 * As a result of the adoption of ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments on January 1, 2020, we recorded a one-time cumulative reduction to retained earnings, net of tax. See Notes to the Consolidated Financial Statements. 73 Table of Contents ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (dollars in millions) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities Net income $ 1,314 $ 730 $ 858 Reconciling adjustments: Provision for finance receivable losses 593 1,319 1,129 Depreciation and amortization 264 264 271 Deferred income tax charge (benefit) 78 ( 42 ) 3 Net loss on repurchases and repayments of debt 78 39 35 Share-based compensation expense, net of forfeitures 23 17 13 Gain on sales of finance receivables ( 47 ) — — Other ( 8 ) 3 ( 9 ) Cash flows due to changes in other assets and other liabilities ( 44 ) ( 123 ) 92 Net cash provided by operating activities 2,251 2,207 2,392 Cash flows from investing activities Net principal originations and purchases of finance receivables ( 2,514 ) ( 748 ) ( 3,305 ) Proceeds from sales of finance receivables 560 — — Available-for-sale securities purchased ( 517 ) ( 456 ) ( 718 ) Available-for-sale securities called, sold, and matured 404 478 574 Other securities purchased ( 708 ) ( 538 ) ( 18 ) Other securities called, sold, and matured 701 542 31 Other, net ( 69 ) ( 29 ) 7 Net cash used for investing activities ( 2,143 ) ( 751 ) ( 3,429 ) Cash flows from financing activities Proceeds from issuance of long-term debt, net of issuance costs 3,759 7,279 5,895 Repayment of long-term debt ( 3,921 ) ( 6,792 ) ( 3,961 ) Cash contribution of SCLH — — 12 Cash contribution from OMH — — 144 Cash dividends ( 1,677 ) ( 846 ) ( 408 ) Payments on intercompany notes payable — — ( 170 ) Withholding tax on share-based compensation ( 6 ) ( 6 ) ( 5 ) Net cash provided by (used for) financing activities ( 1,845 ) ( 365 ) 1,507 Net change in cash and cash equivalents and restricted cash and restricted cash equivalents ( 1,737 ) 1,091 470 Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period 2,723 1,632 1,162 Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period $ 986 $ 2,723 $ 1,632 74 Table of Contents ONEMAIN FINANCE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Continued) (dollars in millions) Years Ended December 31, 2021 2020 2019 Supplemental cash flow information Cash and cash equivalents $ 510 $ 2,272 $ 1,227 Restricted cash and restricted cash equivalents 476 451 405 Total cash and cash equivalents and restricted cash and restricted cash equivalents $ 986 $ 2,723 $ 1,632 Interest paid $ ( 891 ) $ ( 978 ) $ ( 847 ) Income taxes paid ( 403 ) ( 289 ) ( 261 ) Cash paid for amounts included in the measurement of operating lease liabilities ( 58 ) ( 57 ) ( 58 ) Supplemental non-cash activities Right-of-use assets obtained in exchange for operating lease obligations $ 43 $ 47 $ 233 Non-cash merger of SFI with OMFC — — ( 408 ) Non-cash contribution of SCLH — — 22 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. 75 Table of Contents ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2021 1. Nature of Operations OneMain Holdings, Inc. (“OMH”) and its wholly owned direct subsidiary, OneMain Finance Corporation (“OMFC”), are financial services holding companies whose subsidiaries engage in the consumer finance and insurance businesses. 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, except where otherwise indicated. OMH and OMFC are referred to in this report, collectively with their subsidiaries, whether directly or indirectly owned, as “the Company,” “OneMain,” “we,” “us,” or “our.” 2. Summary of Significant Accounting Policies BASIS OF PRESENTATION We prepared our consolidated financial statements using generally accepted accounting principles in the United States of America ("GAAP"). The statements include the accounts of OMH, its subsidiaries (all of which are wholly owned), and variable interest entities ("VIEs") in which we hold a controlling financial interest and for which we are considered to be the primary beneficiary as of the financial statement date. We eliminated all material intercompany accounts and transactions. We made judgments, estimates, and assumptions that affect amounts reported in our consolidated financial statements and disclosures of contingent assets and liabilities. In management’s opinion, the consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of results. Ultimate results could differ from our estimates. We evaluated the effects of and the need to disclose events that occurred subsequent to the balance sheet date. To conform to the 2021 presentation, we reclassified certain items in prior periods of our consolidated financial statements. ACCOUNTING POLICIES Operating Segment At December 31, 2021, Consumer and Insurance (“C&I”) is our only reportable segment. 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 Generally, we classify finance receivables as held for investment based on management’s intent at the time of origination. We determine classification on a receivable-by-receivable basis. We classify finance receivables as held for investment due to our ability and intent to hold them until their contractual maturities. Our finance receivables held for investment consist of our personal loans and credit cards. We carry finance receivables at amortized cost which includes accrued finance charges, net unamortized deferred origination costs and unamortized fees, unamortized net premiums and discounts on purchased finance receivables, and unamortized finance charges on precomputed receivables. We include the cash flows from finance receivables held for investment in the consolidated statements of cash flows as investing activities, except for collections of interest, which we include as cash flows from operating activities. We may finance certain insurance products offered to our customers as part of finance receivables. In such cases, 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. 76 Table of Contents Finance Receivable Revenue Recognition We recognize finance charges as revenue on the accrual basis using the interest method, which we report in interest income. We defer and amortize the costs to originate certain finance receivables and the revenue from nonrefundable fees, along with any premiums or discounts, as an adjustment to finance charge income using the interest method. For credit cards, we amortize certain deferred costs on a straight-line basis over a twelve-month period. For our personal loans, we stop accruing finance charges when four payments (approximately 90 days) become contractually past due. We reverse finance charge amounts previously accrue d upon suspension of accrual of finance charges. For credit cards, we continue to accrue finance charges and fees until charge-off when seven payments (approximately 180 days) become contractually past due and reverse finance charges and fees previously accrued. For certain finance receivables that had a carrying value that included a purchase premium or discount, we stop accreting the premium or discount at the time we stop accruing finance charges. We do not reverse accretion of premium or discount that was previously recognized. For our personal loans, we recognize the contractual interest portion of payments received on nonaccrual finance receivables as finance charges at the time of receipt. We resume the accrual of interest on a nonaccrual personal loans when the past due status on the individual finance receivable improves to the point that the finance receivable no longer meets our policy for nonaccrual. At that time, we also resume accretion of any unamortized premium or discount resulting from a previous purchase premium or discount. Troubled Debt Restructured Finance Receivables We make modifications to our finance receivables to assist borrowers who are experiencing financial difficulty, are in bankruptcy or are participating in a consumer credit counseling arrangement. When we modify the contractual terms for economic or other reasons related to the borrower’s financial difficulties and grant a concession that we would not otherwise consider, we classify that receivable as a TDR finance receivable. We restructure finance receivables only if we believe the customer has the ability to pay under the restructured terms for the foreseeable future. We establish reserves on our TDR finance receivables by discounting the estimated cash flows associated with the respective receivables at the effective interest rate prior to the modification to the account and record any difference between the discounted cash flows and the carrying value as an allowance adjustment. We may modify the terms of existing accounts in certain circumstances, such as certain bankruptcy or other catastrophic situations or for economic or other reasons related to a borrower’s financial difficulties that justify modification. When we modify an account, we primarily use a combination of the following to reduce the borrower’s monthly payment: reduce interest rate, extend the term, defer or forgive past due interest or forgive principal. Additionally, as part of the modification, we may require trial payments. 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. Account modifications that are not classified as a TDR finance receivable are measured for impairment in accordance with our policy for allowance for finance receivable losses. Allowance for Finance Receivable Losses We establish the allowance for finance receivable losses through the provision for finance receivable losses. 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. 77 Table of Contents We estimate the allowance for finance receivable losses primarily on historical loss experience using a cumulative loss model applied to our personal loan portfolios. Our gross credit loss expectation is offset by the estimate of future recoveries using historical recovery curves. Our personal loans 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. Forecasted macroeconomic conditions extend to our reasonable and supportable forecast period and revert to a historical average. No new volume is assumed. Personal loan renewals are a significant piece of our new volume and are considered a terminal event of the previous loan. For our personal loans, 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. For credit cards, we measure an allowance on uncollected finance charges, but do not measure an allowance on the unfunded portion of the credit card lines as the accounts are unconditionally cancellable. 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 on personal loans and credit cards that are beyond seven payments (approximately 180 days) past due. Exceptions include accounts in bankruptcy, which are generally charged off at the earlier of notice of discharge or when the customer becomes seven payments past due, and accounts of deceased borrowers, which are generally charged off at the time of notice. Generally, we start repossession of any 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. We may renew delinquent secured or unsecured personal loan accounts if the customer meets current underwriting criteria and it does not appear that the cause of past delinquency will affect the customer’s ability to repay the renewed loan. We subject all renewals to the same credit risk underwriting process as we would a new application for credit. For our personal loans, we may offer those customers whose accounts are in good standing the opportunity of a deferment, which extends the term of an account. We also may extend this offer to customers when they are experiencing higher than normal personal expenses or to a delinquent customer who is experiencing a temporary financial problem. The account must be current after granting the deferment. 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 re-age, settlement, or a loan modification. We also establish reserves for TDR finance receivables, which are included in our allowance for finance receivable losses. The allowance for finance receivable losses related to our TDR finance receivables represents specific reserves based on an analysis of the present value of expected future cash flows. We establish our allowance for finance receivable losses related to our TDR finance receivables by calculating the present value (discounted at the loan’s effective interest rate prior to modification) of all expected cash flows less the recorded investment in the aggregated pool. 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 loss severity rates. Goodwill Goodwill represents the amount of purchase price over the fair value of net assets we acquired in connection with business combinations, primarily related to the OneMain Acquisition. We test goodwill for potential impairment annually as of October 1 of each year and whenever events occur or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. 78 Table of Contents We first complete a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. 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 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 At the time we initially recognize intangible assets, a determination is made with regard to each asset’s useful life. We have determined that each of our intangible assets have indefinite lives with the exception of value of business acquired (“VOBA”), which has a finite useful life. We amortize our finite useful life intangible assets in a manner that reflects the pattern of economic benefit used. For intangible assets with a finite useful life, we review for impairment at least annually and whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Impairment is indicated if the sum of undiscounted estimated future cash flows is less than the carrying value of the respective asset. Impairment is permanently recognized by writing down the asset to the extent that the carrying value exceeds the estimated fair value. 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. We first complete a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. If the qualitative assessment indicates that the assets are more likely than not to have been impaired, we proceed with the fair value calculation of the assets. The fair value is determined in accordance with our fair value measurement policy. If the fair value is less than the carrying value, an impairment loss will be recognized in an amount equal to the difference and the indefinite life classification will be evaluated to determine whether such classification remains appropriate. Leases All our leases are classified as operating leases, and we are the lessee or sublessor in all our lease arrangements. At inception of an arrangement, we determine if a lease exists. At lease commencement date, we recognize right-of-use assets and lease liabilities measured at the present value of lease payments over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Since our operating leases do not provide an implicit rate, we utilize the best available information to determine our incremental borrowing rate, which is used to calculate the present value of lease payments. The right-of-use asset also includes any prepaid fixed lease payments and excludes lease incentives. Options to extend or terminate a lease may be included in our lease arrangements. We reflect the renewal or termination option in the right-of-use asset and lease liability when it is reasonably certain that we will exercise those options. In the normal course of business, we will renew leases that expire or replace them with leases on other properties. We have elected the practical expedient to treat both the lease component and non-lease component for our leased office space portfolio as a single lease component. Operating lease costs for lease payments are recognized on a straight-line basis over the lease term and are included in “Other operating expenses” in our consolidated statement of operations. In addition to rent, we pay taxes, insurance, and maintenance expenses under certain leases as variable lease payments. 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 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. We recognize unearned premiums on credit life, credit disability, credit involuntary unemployment insurance, and collateral protection insurance as revenue using the sum-of-the-digits, straight-line or other appropriate methods over the terms of the policies. Premiums from reinsurance assumed are earned over the related contract period. We recognize revenue on long-duration contracts when due from policyholders. Long-duration contracts include term life, accidental death and dismemberment, and disability income protection. 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. 79 Table of Contents We recognize commissions on optional products as other revenue when earned. 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 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 Policy reserves for credit life, credit disability, credit involuntary unemployment, and collateral protection insurance equal related unearned premiums. Reserves for losses and loss adjustment expenses are based on claims experience, actual claims reported, and estimates of claims incurred but not reported. Assumptions utilized in determining appropriate reserves are based on historical experience, adjusted to provide for possible adverse deviation. These estimates are periodically reviewed and compared with actual experience and industry standards, and revised if it is determined that future experience will differ substantially from that previously assumed. Since reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are classified in insurance policy benefits and claims in the consolidated statements of operations in the period in which the estimates are changed. We accrue liabilities for future life insurance policy benefits associated with non-credit life contracts and base the amounts on assumptions as to investment yields, mortality, and surrenders. We base annuity reserves on assumptions as to investment yields and mortality. Ceded insurance reserves are included in other assets and include estimates of the amounts expected to be recovered from reinsurers on insurance claims and policyholder liabilities. Insurance Policy Acquisition Costs We defer insurance policy acquisition costs (primarily commissions, reinsurance fees, and premium taxes). We include deferred policy acquisition costs in other assets and amortize these costs over the terms of the related policies, whether directly written or reinsured. Investment Securities 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. We adjust related balance sheet accounts to reflect the current fair value of investment securities and record the adjustment, net of tax, in accumulated other comprehensive income or loss in shareholders’ equity. We record interest receivable on investment securities in other assets. Under the fair value option, we may elect to measure at fair value, financial assets that are not otherwise required to be carried at fair value. We elect the fair value option for available-for-sale securities that are deemed to incorporate an embedded derivative and for which it is impracticable for us to isolate and/or value the derivative. We recognize any changes in fair value in investment revenues. We classify our investment securities in the fair value hierarchy framework based on the observability of inputs. Inputs to the valuation techniques are described as being either observable (Level 1 or 2) or unobservable (Level 3) assumptions (as further described in “Fair Value Measurements” below) that market participants would use in pricing an asset or liability. 80 Table of Contents Impairments on Investment Securities 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 impairment exists if any of the following conditions are present: • we intend to sell the security; • it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or • 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 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. 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, 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 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 We recognize interest on interest bearing fixed-maturity investment securities as revenue on the accrual basis. We amortize any premiums or accrete any discounts as a revenue adjustment using the interest method. We stop accruing interest revenue when the collection of interest becomes uncertain. We record dividends on equity securities as revenue on ex-dividend dates. We recognize income on mortgage-backed and asset-backed securities as revenue using an effective yield based on estimated prepayments of the underlying collateral. If actual prepayments differ from estimated prepayments, we calculate a new effective yield and adjust the net investment in the security accordingly. We record the adjustment, along with all investment securities revenue, in investment revenues. We specifically identify realized gains and losses on investment securities and include them in investment revenues. 81 Table of Contents Variable Interest Entities An entity is a VIE if the entity does not have sufficient equity at risk for the entity to finance its activities without additional financial support or has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated into the financial statements of its primary beneficiary. When we have a variable interest in a VIE, we qualitatively assess whether we have a controlling financial interest in the entity and, if so, whether we are the primary beneficiary. In applying the qualitative assessment to identify the primary beneficiary of a VIE, we are determined to have a controlling financial interest if we have (i) the power to direct the activities that most significantly impact the economic performance of the VIE, and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We consider the VIE’s purpose and design, including the risks that the entity was designed to create and pass through to its variable interest holders. We continually reassess the VIE’s primary beneficiary and whether we have acquired or divested the power to direct the activities of the VIE through changes in governing documents or other circumstances. Cash and Cash Equivalents We consider unrestricted cash on hand and short-term investments having maturity dates within three months of their date of acquisition to be cash and cash equivalents. We typically maintain cash in financial institutions in excess of the Federal Deposit Insurance Corporation’s insurance limits. We evaluate the creditworthiness of these financial institutions in determining the risk associated with these cash balances. We do not believe that the Company is exposed to any significant credit risk on these accounts and have not experienced any losses in such accounts. Restricted Cash and Cash Equivalents We include funds to be used for future debt payments and collateral relating to our securitization and conduit transactions, insurance regulatory deposits and reinsurance trusts with third parties, in each case , in restricted cash and cash equivalents. Long-term Debt We generally report our long-term debt issuances at the face value of the debt instrument, which we adjust for any unaccreted discount, unamortized premium, or unamortized debt issuance costs associated with the debt. Other than securitized products, we generally accrete discounts, premiums, and debt issuance costs over the contractual life of the security using contractual payment terms. With respect to securitized products, we have elected to amortize deferred costs over the contractual life of the security. Accretion of discounts and premiums are recorded to interest expense. Income Taxes We recognize income taxes using the asset and liability method. We establish deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, using the tax rates expected to be in effect when the temporary differences reverse. Deferred tax assets are also recognized for tax attributes such as net operating loss carryforwards. Realization of our gross deferred tax asset depends on our ability to generate sufficient taxable income of the appropriate character within the carryforward periods of the jurisdictions in which the net operating and capital losses, deductible temporary differences and credits were generated. When we assess our ability to realize deferred tax assets, we consider all available evidence and we record valuation allowances to reduce deferred tax assets to the amounts that management conclude are more-likely-than-not to be realized. We recognize income tax benefits associated with uncertain tax positions, when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more likely than not recognition threshold, we initially and subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority. 82 Table of Contents Retirement Benefit Plans We have funded and unfunded noncontributory defined pension plans. We recognize the net pension asset or liability, also referred to herein as the funded status of the benefit plan, in other assets or other liabilities, depending on the funded status at the end of each reporting period. We recognize the net actuarial gains or losses and prior service cost or credit that arise during the period in other comprehensive income or loss. Many of our employees are participants in our 401(k) Plan. Our contributions to the plan are charged to salaries and benefits within operating expenses. Share-based Compensation Plans We measure compensation cost for service-based and performance-based awards at estimated fair value and recognize compensation expense over the requisite service period for awards expected to vest. The estimation of awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment to salaries and benefits in the period estimates are revised. For service-based awards subject to graded vesting, expense is recognized under the straight-line method. Expense for performance-based awards with graded vesting is recognized under the accelerated method, whereby each vesting is treated as a separate award with expense for each vesting recognized ratably over the requisite service period. Fair Value Measurements Management is responsible for the determination of the fair value of our financial assets and financial liabilities and the supporting methodologies and assumptions. We employ widely accepted internal valuation models or utilize third-party valuation service providers to gather, analyze, and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual instruments or pools of finance receivables. When our valuation service providers are unable to obtain sufficient market observable information upon which to estimate the fair value for a particular security, we determine fair value either by requesting brokers who are knowledgeable about these securities to provide a quote, which is generally non-binding, or by employing widely accepted internal valuation models. Our valuation process typically requires obtaining data about market transactions and other key valuation model inputs from internal or external sources and, through the use of widely accepted valuation models, provides a single fair value measurement for individual securities or pools of finance receivables. The inputs used in this process include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, bid-ask spreads, currency rates, and other market-observable information as of the measurement date as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector, and other issue or issuer-specific information. When market transactions or other market observable data is limited, the extent to which judgment is applied in determining fair value is greatly increased. We assess the reasonableness of individual security values received from our valuation service providers through various analytical techniques. As part of our internal price reviews, assets that fall outside a price change tolerance are sent to our third-party investment manager for further review. In addition, we may validate the reasonableness of fair values by comparing information obtained from our valuation service providers to other third-party valuation sources for selected securities. We measure and classify assets and liabilities in the consolidated balance sheets in a hierarchy for disclosure purposes consisting of three “Levels” based on the observability of inputs available in the marketplace used to measure the fair values. In general, we determine the fair value measurements classified as Level 1 based on inputs utilizing quoted prices in active markets for identical assets or liabilities that we have the ability to access. We generally obtain market price data from exchange or dealer markets. We do not adjust the quoted price for such instruments. We determine the fair value measurements classified as Level 2 based on inputs utilizing other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The use of observable and unobservable inputs is further discussed in Note 18. 83 Table of Contents 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 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. Our fair value processes include controls that are designed to ensure that fair values are appropriate. Such controls include model validation, review of key model inputs, analysis of period-over-period fluctuations, and reviews by senior management. Earnings Per Share (OMH Only) Basic earnings per share is computed by dividing net income or loss by the weighted-average number of shares outstanding during each period. Diluted earnings per share is computed based on the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares represent outstanding unvested restricted stock units and awards. 3. Recent Accounting Pronouncements ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED Insurance In August of 2018, the FASB issued ASU 2018-12, Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts , which provides targeted improvements to Topic 944 for the assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited-payment contracts; measurement of market risk benefits; amortization of deferred acquisition costs; and enhanced disclosures. Upon adoption, our cash flow assumptions used to measure the liability for future policy benefits will be updated at least annually. The guidance requires the discount rate used to measure the liability to be an upper-medium grade fixed-income instrument yield and updated at each reporting date with changes in the liability due to the discount rate recognized in other comprehensive income. The amendments in this ASU become effective for the Company beginning January 1, 2023. The Company’s cross-functional implementation team continues to make progress in line with the established project plan to ensure we comply with all the amendments in this ASU at the time of adoption. We will utilize an actuarial software solution to meet the new accounting and disclosure requirements, and we continue to refine the development of the actuarial model and assumptions. After the model has been subject to a parallel testing phase in 2022, the Company will provide further disclosure regarding the estimated 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. 84 Table of Contents 4. Finance Receivables At December 31, 2021, our finance receivables consisted of personal loans and credit cards. Personal loans 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. During the third quarter of 2021, we began offering credit cards. Credit cards are open-ended, revolving, with a fixed rate, and are unsecured. Components of our net finance receivables were as follows: (dollars in millions) Personal Loans Credit Cards Total December 31, 2021 Gross finance receivables (a) $ 18,944 $ 24 $ 18,968 Unearned fees ( 225 ) ( 1 ) ( 226 ) Accrued finance charges and fees 289 — 289 Deferred origination costs 179 2 181 Total $ 19,187 $ 25 $ 19,212 December 31, 2020 (b) Gross finance receivables (a) $ 17,860 $ — $ 17,860 Unearned fees ( 225 ) — ( 225 ) Accrued finance charges and fees 299 — 299 Deferred origination costs 150 — 150 Total $ 18,084 $ — $ 18,084 (a) Gross finance receivables equal the unpaid principal balance of our personal loans and credit cards. For precompute loans, unpaid principal balance is the gross contractual payments less the unaccreted balance of unearned finance charges. (b) There were no credit cards at December 31, 2020 as the product offering began in 2021. 85 Table of Contents GEOGRAPHIC DIVERSIFICATION Geographic diversification of finance receivables reduces the concentration of credit risk associated with economic stresses in any one region. The largest concentrations of net finance receivables were as follows: December 31, 2021 2020 (a) (dollars in millions) Amount Percent Amount Percent Personal Loans: Texas $ 1,812 9 % $ 1,614 9 % California 1,289 7 1,196 7 Florida 1,255 7 1,060 6 Pennsylvania 1,199 6 1,123 6 North Carolina 1,117 6 1,130 6 Ohio 960 5 922 5 Georgia 770 4 712 4 Illinois 765 4 739 4 Indiana 728 4 728 4 New York 681 4 580 3 Virginia 665 3 666 4 Other 7,946 41 7,614 42 Total personal loans $ 19,187 100 % $ 18,084 100 % Credit Cards (b): California $ 7 28 % $ — — % Texas 4 14 — — Florida 2 7 — — Other 12 51 — — Total credit cards $ 25 100 % $ — — % (a) December 31, 2020 concentrations of net finance receivables are presented in the order of December 31, 2021 state concentrations. (b) There were no credit cards at December 31, 2020 as the product offering began in 2021. WHOLE LOAN SALE TRANSACTIONS As of December 31, 2021, we have whole loan sale flow agreements with third parties, with remaining terms ranging between one to two years , in which we agreed to sell a combined total of $ 180 million gross receivables per quarter of newly originated unsecured personal loans along with any associated accrued interest. These unsecured personal loans are derecognized from our balance sheet at the time of sale. We service the personal loans sold and are entitled to a servicing fee and other fees commensurate with the services performed as part of the agreements. The gain on sales and servicing fees are recorded in other revenue. Our first sale was executed in the first quarter of 2021. During 2021, we sold $ 505 million of gross finance receivables and the gain on the sales was $ 47 million. 86 Table of Contents CREDIT QUALITY INDICATOR 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 personal loans are 60 days contractually past due, we consider these accounts to be at an increased risk for loss and collection of these accounts is handled by our centralized operations. At 90 days or more contractually past due, we consider our personal loans to be nonperforming and stop accruing finance charges. We reverse finance charges previously accrued. For our personal loans, we reversed net accrued finance charges of $ 77 million and $ 86 million during the years ended December 31, 2021 and 2020, respectively. Finance charges recognized from the contractual interest portion of payments received on nonaccrual personal loans totaled $ 13 million and $ 14 million during the years ended December 31, 2021 and 2020, respectively. All personal loans in nonaccrual status are considered in our estimate of allowance for finance receivable losses. We accrue finance charges and fees on credit cards until charge-off at approximately 180 days past due and reverse finance charges and fees previously accrued. For credit cards, there were no net accrued finance charges and fees reversed for the year ended December 31, 2021. The following tables below are a summary of our personal loans by the year of origination and number of days delinquent, our key credit quality indicator: (dollars in millions) 2021 2020 2019 2018 2017 Prior Total December 31, 2021 Performing Current $ 10,645 $ 3,935 $ 2,641 $ 814 $ 193 $ 109 $ 18,337 30-59 days past due 125 74 53 19 6 5 282 60-89 days past due 81 53 33 11 4 3 185 Total performing 10,851 4,062 2,727 844 203 117 18,804 Nonperforming (Nonaccrual) 90+ days past due 125 130 85 28 9 6 383 Total $ 10,976 $ 4,192 $ 2,812 $ 872 $ 212 $ 123 $ 19,187 (dollars in millions) 2020 2019 2018 2017 2016 Prior Total December 31, 2020 Performing 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+ days past due 63 157 60 23 8 5 316 Total $ 8,838 $ 6,026 $ 2,196 $ 703 $ 202 $ 119 $ 18,084 87 Table of Contents The following is a summary of credit cards by number of days delinquent, our key credit quality indicator: (dollars in millions) December 31, 2021 Current $ 25 30-59 days past due — 60-89 days past due — 90+ days past due — Total $ 25 There were no credit cards converted to term loans for the year ended December 31, 2021. TROUBLED DEBT RESTRUCTURED FINANCE RECEIVABLES Information regarding TDR finance receivables were as follows: (dollars in millions) December 31, 2021 2020 TDR gross finance receivables $ 646 $ 689 TDR net finance receivables * 650 691 Allowance for TDR finance receivable losses 270 314 * TDR net finance receivables are TDR gross finance receivables net of unearned fees, accrued finance charges, and deferred origination costs. There were no credit cards classified as TDR finance receivables for the year ended December 31, 2021. Information regarding the new volume of the TDR finance receivables were as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 Pre-modification TDR net finance receivables $ 453 $ 499 $ 536 Post-modification TDR net finance receivables: Rate reduction 310 312 370 Other * 143 187 166 Total post-modification TDR net finance receivables $ 453 $ 499 $ 536 Number of TDR accounts 55,229 66,484 78,257 * “Other” modifications primarily consist of potential principal and interest forgiveness contingent on future payment performance by the borrower under the modified terms. Finance receivables 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: (dollars in millions) Years Ended December 31, 2021 2020 2019 TDR net finance receivables * $ 117 $ 105 $ 96 Number of TDR accounts 16,046 15,229 14,732 * Represents the corresponding balance of TDR net finance receivables at the end of the month in which they defaulted. 88 Table of Contents UNFUNDED LENDING COMMITMENTS Our unfunded lending commitments consist of the unused credit card lines, which are unconditionally cancellable. We do not anticipate that all of our customers will access their entire available line at any given point in time. The unused credit card lines totaled $ 54 million at December 31, 2021. 5. Allowance for Finance Receivable Losses 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 finance receivables 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 2 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 ongoing impacts of the global outbreak of a novel strain of coronavirus (“COVID-19”) on the U.S. economy and the overall unemployment rate. We also considered inflationary pressures, supply chain concerns, and businesses’ ability to remain open. Our forecast leveraged economic projections from industry leading forecast providers. At December 31, 2021, our economic forecast used a reasonable and supportable period of 12 months. The decrease in our allowance for finance receivable losses for the year ended December 31, 2021 was largely due an improved outlook for unemployment and macroeconomic conditions, partially offset by growth in our loan portfolio. 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 Loans Credit Cards Total Year Ended December 31, 2021 Balance at beginning of period $ 2,269 $ — $ 2,269 Provision for finance receivable losses 588 5 593 Charge-offs ( 989 ) — ( 989 ) Recoveries 222 — 222 Balance at end of period $ 2,090 $ 5 $ 2,095 Year Ended December 31, 2020 (a) Balance at beginning of period $ 829 $ — $ 829 Impact of adoption of ASU 2016-13 (b) 1,118 — 1,118 Provision for finance receivable losses 1,319 — 1,319 Charge-offs ( 1,162 ) — ( 1,162 ) Recoveries 165 — 165 Balance at end of period $ 2,269 $ — $ 2,269 Year Ended December 31, 2019 (a) Balance at beginning of period $ 731 $ — $ 731 Provision for finance receivable losses 1,129 — 1,129 Charge-offs ( 1,157 ) — ( 1,157 ) Recoveries 126 — 126 Balance at end of period $ 829 $ — $ 829 (a) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021. 89 Table of Contents (b) 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. The allowance for finance receivable losses and net finance receivables by impairment method were as follows: (dollars in millions) Personal Loans Credit Cards Total December 31, 2021 Allowance for finance receivable losses: Collectively evaluated for impairment $ 1,820 $ 5 $ 1,825 TDR finance receivables 270 — 270 Total $ 2,090 $ 5 $ 2,095 Finance receivables: Collectively evaluated for impairment $ 18,537 $ 25 $ 18,562 TDR finance receivables 650 — 650 Total $ 19,187 $ 25 $ 19,212 Allowance for finance receivable losses as a percentage of finance receivables 10.89 % 19.91 % 10.90 % December 31, 2020 (a) Allowance for finance receivable losses: Collectively evaluated for impairment $ 1,955 $ — $ 1,955 TDR finance receivables 314 — 314 Total $ 2,269 $ — $ 2,269 Finance receivables: Collectively evaluated for impairment $ 17,393 $ — $ 17,393 TDR finance receivables 691 — 691 Total $ 18,084 $ — $ 18,084 Allowance for finance receivable losses as a percentage of finance receivables 12.55 % — % 12.55 % (a) There were no credit cards for the year ended December 31, 2020 as the product offering began in 2021. 90 Table of Contents 6. Investment Securities AVAILABLE-FOR-SALE SECURITIES 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/ Amortized Cost Unrealized Gains Unrealized Losses Fair Value December 31, 2021* Fixed maturity available-for-sale securities: U.S. government and government sponsored entities $ 16 $ — $ — $ 16 Obligations of states, municipalities, and political subdivisions 76 3 — 79 Commercial paper 50 — — 50 Non-U.S. government and government sponsored entities 151 4 — 155 Corporate debt 1,246 61 ( 5 ) 1,302 Mortgage-backed, asset-backed, and collateralized: RMBS 169 3 ( 2 ) 170 CMBS 44 1 — 45 CDO/ABS 90 1 ( 1 ) 90 Total $ 1,842 $ 73 $ ( 8 ) $ 1,907 December 31, 2020* Fixed maturity available-for-sale securities: U.S. government and government sponsored entities $ 12 $ — $ — $ 12 Obligations of states, municipalities, and political subdivisions 87 5 — 92 Commercial paper 28 — — 28 Non-U.S. government and government sponsored entities 137 9 — 146 Corporate debt 1,124 95 ( 1 ) 1,218 Mortgage-backed, asset-backed, and collateralized: RMBS 208 7 — 215 CMBS 55 3 — 58 CDO/ABS 77 2 ( 1 ) 78 Total $ 1,728 $ 121 $ ( 2 ) $ 1,847 * There was no material allowance for credit losses related to our investment securities as of December 31, 2021 and there was no allowance for credit losses as of December 31, 2020. Interest receivables reported in “Other assets” totaled $ 13 million and $ 12 million as of December 31, 2021 and 2020, respectively. There were no material amounts reversed from investment revenue for available-for-sale securities for the year ended December 31, 2021 and no amounts reversed from investment revenue for available-for-sale securities for the year ended December 31, 2020. 91 Table of Contents 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 (dollars in millions) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2021 U.S. government and government sponsored entities $ 6 $ — $ — $ — $ 6 $ — Obligations of states, municipalities, and political subdivisions 10 — — — 10 — Commercial paper 46 — — — 46 — Non-U.S. government and government sponsored entities 19 — 5 — 24 — Corporate debt 208 ( 3 ) 38 ( 2 ) 246 ( 5 ) Mortgage-backed, asset-backed, and collateralized: RMBS 81 ( 1 ) 15 ( 1 ) 96 ( 2 ) CMBS 7 — — — 7 — CDO/ABS 41 ( 1 ) 3 — 44 ( 1 ) Total $ 418 $ ( 5 ) $ 61 $ ( 3 ) $ 479 $ ( 8 ) December 31, 2020 Obligations of states, municipalities, and political subdivisions $ 2 $ — $ — $ — $ 2 $ — Commercial paper 19 — — — 19 — Non-U.S. government and government sponsored entities 1 — — — 1 — Corporate debt 45 ( 1 ) 8 — 53 ( 1 ) Mortgage-backed, asset-backed, and collateralized: CMBS 8 — — — 8 — CDO/ABS 17 ( 1 ) — — 17 ( 1 ) Total $ 92 $ ( 2 ) $ 8 $ — $ 100 $ ( 2 ) On a lot basis, we had 570 and 148 investment securities in an unrealized loss position at December 31, 2021 and 2020, 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, as of December 31, 2021, 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, 2021, 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 credit impairments. During the years ended December 31, 2021 and 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 for the years ended December 31, 2021 and 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. 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. The proceeds of available-for-sale securities sold or redeemed totaled $ 250 million, $ 259 million and $ 284 million during 2021, 2020, and 2019, respectively. The net realized gains and losses were immaterial during 2021, 2020, and 2019. 92 Table of Contents Contractual maturities of fixed-maturity available-for-sale securities at December 31, 2021 were as follows: (dollars in millions) Fair Value Amortized Cost Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities: Due in 1 year or less $ 170 $ 169 Due after 1 year through 5 years 573 552 Due after 5 years through 10 years 677 652 Due after 10 years 182 166 Mortgage-backed, asset-backed, and collateralized securities 305 303 Total $ 1,907 $ 1,842 Actual maturities may differ from contractual maturities since issuers and borrowers may have the right to call or prepay obligations. We may sell investment securities before maturity for general corporate and working capital purposes and to achieve certain investment strategies. The fair value of securities on deposit with third parties totaled $ 587 million and $ 604 million at December 31, 2021 and 2020, respectively. OTHER SECURITIES The fair value of other securities by type was as follows: (dollars in millions) December 31, 2021 2020 Fixed maturity other securities: Bonds $ 30 $ 35 Preferred stock * 22 13 Common stock * 33 27 Total $ 85 $ 75 * 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 and losses on other securities held were immaterial at December 31, 2021, 2020, and 2019. Net realized gains and losses on other securities sold or redeemed were immaterial during 2021, 2020, and 2019. 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. 93 Table of Contents 7. Goodwill and Other Intangible Assets GOODWILL The carrying amount of goodwill totaled $ 1.4 billion at December 31, 2021 and 2020. We did no t record any impairments to goodwill during 2021, 2020 and 2019. OTHER INTANGIBLE ASSETS The gross carrying amount and accumulated amortization, in total and by major intangible asset class were as follows: (dollars in millions) Gross Carrying Amount Accumulated Amortization Net Other Intangible Assets December 31, 2021 Trade names $ 220 $ — $ 220 VOBA 105 ( 77 ) 28 Licenses 25 — 25 Customer relationships 223 ( 223 ) — Other 13 ( 12 ) 1 Total $ 586 $ ( 312 ) $ 274 December 31, 2020 Trade names $ 220 $ — $ 220 VOBA 105 ( 74 ) 31 Licenses 25 — 25 Customer relationships 223 ( 194 ) 29 Other 13 ( 12 ) 1 Total $ 586 $ ( 280 ) $ 306 Amortization expense totaled $ 32 million in 2021, $ 37 million in 2020, and $ 39 million in 2019. The estimated aggregate amortization of other intangible assets for each of the next five years is immaterial. 94 Table of Contents 8. Long-term Debt Carrying value and fair value of long-term debt by type were as follows: December 31, 2021 December 31, 2020 (dollars in millions) Carrying Value Fair Value Carrying Value Fair Value Senior debt $ 17,578 $ 18,574 $ 17,628 $ 19,278 Junior subordinated debt 172 207 172 148 Total $ 17,750 $ 18,781 $ 17,800 $ 19,426 Weighted average effective interest rates on long-term debt by type were as follows: Years Ended December 31, At December 31, 2021 2020 2019 2021 2020 Senior debt 5.38 % 5.68 % 5.90 % 5.05 % 5.70 % Junior subordinated debt 4.02 5.64 8.68 3.86 4.09 Total 5.37 5.68 5.93 5.03 5.68 Principal maturities of long-term debt (excluding projected repayments on securitizations and revolving conduit facilities by period) by type of debt at December 31, 2021 were as follows: Senior Debt (dollars in millions) Securitizations Revolving Conduit Facilities Unsecured Notes (a) Junior Subordinated Debt (a) Total Interest rates (b) 0.81 %- 6.94 % 0.86 %- 1.02 % 3.50 %- 8.88 % 1.87 % 2022 $ — $ — $ — $ — $ — 2023 — — 1,175 — 1,175 2024 — — 1,300 — 1,300 2025 — — 1,835 — 1,835 2026 — — 1,600 — 1,600 2027-2067 — — 3,750 350 4,100 Securitizations (c) 7,432 — — — 7,432 Revolving conduit facilities (c) — 600 — — 600 Total principal maturities $ 7,432 $ 600 $ 9,660 $ 350 $ 18,042 Total carrying amount $ 7,399 $ 600 $ 9,579 $ 172 $ 17,750 Debt issuance costs (d) ( 31 ) — ( 83 ) — ( 114 ) (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, 2021. (c) Securitizations and borrowings under the revolving conduit facilities 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. See Note 9 for further information on our long-term debt associated with securitizations and revolving conduit facilities. (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 and unsecured corporate revolver, which totaled $ 29 million at December 31, 2021 and are reported in “Other assets.” 95 Table of Contents 2021 DEBT ISSUANCES AND REDEMPTIONS 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 recognized $ 47 million of net loss on repurchases and repayments of debt during the year ended December 31, 2021. Social Bond Offering - Issuance of 3.50 % Senior Notes Due 2027 OMFC issued its inaugural social bond offering on June 22, 2021 for a total of $ 750 million aggregate principal amount of 3.50 % Senior Notes due 2027 (the “Social Bond”) under the Base Indenture, as supplemented by the Twelfth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis. Issuance of 3.875 % Senior Notes Due 2028 On August 11, 2021, OMFC issued a total of $ 600 million aggregate principal amount of 3.875 % Senior Notes due 2028 (the “ 3.875 % Senior Notes due 2028”) under the Base Indenture, as supplemented by the Thirteenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis. Redemption of 6.125 % Senior Notes Due 2022 On November 10, 2021, OMFC issued a notice of full redemption of its 6.125 % Senior Notes due 2022. On December 10, 2021, OMFC paid a net aggregate amount of $ 1.0 billion, inclusive of accrued interest and premiums, to complete the redemption. In connection with the redemption, we recognized $ 23 million of net loss on repurchases and repayments of debt during the year ended December 31, 2021. UNSECURED CORPORATE REVOLVER On October 25, 2021, OMFC entered into an unsecured corporate revolver with a total maximum borrowing capacity of $ 1.0 billion. The corporate revolver has a five-year term during which draws and repayments may occur. Any outstanding principal balance is due and payable on October 25, 2026. At December 31, 2021, no amounts were drawn under this facility. DEBT COVENANTS 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 and unsecured corporate revolver, 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, 2021, OMFC was in compliance with all of the covenants under its debt agreements. 96 Table of Contents Junior Subordinated Debenture 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. 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 1.87 % as of December 31, 2021. 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, 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, 2021, a mandatory trigger event did not occur with respect to the interest payment due in January of 2022, as OMFC was in compliance with both required ratios discussed above. 9. 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 revolving conduit transactions. We have determined that OMFC or OneMain Financial Holdings, LLC (“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. The asset-backed debt obligations and conduits issued by the VIEs are supported by the expected cash flows from the underlying finance receivables securing such debt obligations. Cash inflows from these finance receivables are distributed to repay the debt obligations and related service providers in accordance with each transaction’s contractual priority of payments, referred to as the “waterfall.” The holders of the asset-backed debt obligations have no recourse to the Company if the cash flows from the underlying finance receivables securing such debt obligations are not sufficient to pay all principal and interest on the asset-backed debt obligations. With respect to any asset-backed financing transaction that has multiple classes of debt obligations, substantially all cash inflows will be directed to the senior debt obligations until fully repaid and, thereafter, to the subordinate debt obligations on a sequential basis. 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. 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. We have no obligation to repurchase or replace qualified finance receivables that subsequently become delinquent or are otherwise in default. 97 Table of Contents We parenthetically disclose on our consolidated balance sheets the VIE’s assets that can only be used to settle the VIE’s obligations and liabilities if its creditors have no recourse against the primary beneficiary’s general credit. The carrying amounts of consolidated VIE assets and liabilities associated with our securitization trusts and revolving conduit facilities were as follows: (dollars in millions) December 31, 2021 2020 Assets Cash and cash equivalents $ 2 $ 2 Net finance receivables 8,821 8,772 Allowance for finance receivable losses 910 1,085 Restricted cash and restricted cash equivalents 466 441 Other assets 26 33 Liabilities Long-term debt $ 7,999 $ 7,789 Other liabilities 13 15 Other than the retained subordinate and residual interests in our consolidated VIEs, we are under no further obligation than is otherwise noted herein, either contractually or implicitly, to provide financial support to these entities. Consolidated interest expense related to our VIEs totaled $ 293 million in 2021, $ 338 million in 2020, and $ 326 million in 2019. SECURITIZED BORROWINGS 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 revolving conduit facilities with a total maximum borrowing capacity of $ 6.0 billion as of December 31, 2021. 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 nine years as of December 31, 2021. Amounts drawn on these facilities are collateralized by our personal loans. At December 31, 2021, an aggregate amount of $ 600 million was drawn under these facilities and the remaining borrowing capacity was $ 5.4 billion. 98 Table of Contents 10. Insurance 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 subsidiary, Merit Life Insurance Co. (“Merit”) during the 2019 period. INSURANCE RESERVES Components of our insurance reserves were as follows: (dollars in millions) December 31, 2021 2020 Finance receivable related: Payable to OMH: Unearned premium reserves $ 677 $ 662 Claim reserves 84 109 Subtotal (a) 761 771 Payable to third-party beneficiaries (b) 256 236 Non-finance receivable related (b) 365 385 Total $ 1,382 $ 1,392 (a) Reported as a contra-asset to net finance receivables. (b) Reported in insurance claims and policyholder liabilities. Our insurance subsidiaries enter into reinsurance agreements with other insurers. Reserves related to unearned premiums, claims and benefits assumed from non-affiliated insurance companies totaled $ 322 million and $ 338 million at December 31, 2021 and 2020, respectively. Reserves related to unearned premiums, claims and benefits ceded to non-affiliated insurance companies totaled $ 62 million and $ 66 million at December 31, 2021 and 2020, respectively. 99 Table of Contents Changes in the reserve for unpaid claims and loss adjustment expenses (net of reinsurance recoverables): (dollars in millions) At or for the Years Ended December 31, 2021 2020 2019 Balance at beginning of period $ 148 $ 117 $ 117 Less reinsurance recoverables ( 3 ) ( 4 ) ( 4 ) Net balance at beginning of period 145 113 113 Additions for losses and loss adjustment expenses incurred to: Current year 212 272 200 Prior years * ( 18 ) ( 11 ) ( 15 ) Total 194 261 185 Reductions for losses and loss adjustment expenses paid related to: Current year ( 135 ) ( 161 ) ( 121 ) Prior years ( 89 ) ( 67 ) ( 64 ) Total ( 224 ) ( 228 ) ( 185 ) Foreign currency translation adjustment — ( 1 ) — Net balance at end of period 115 145 113 Plus reinsurance recoverables 3 3 4 Balance at end of period $ 118 $ 148 $ 117 * At December 31, 2021, $ 18 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of credit disability and unemployment claims. At December 31, 2020, $ 11 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of term life, credit life, and credit disability. At December 31, 2019, $ 15 million reflected a redundancy in the prior years’ net reserves, primarily due to favorable developments of credit life, disability, and unemployment claims. Incurred claims and allocated claim adjustment expenses, net of reinsurance, as of December 31, 2021, were as follows: Years Ended December 31, At December 31, 2021 (dollars in millions) 2017 (a) 2018 (a) 2019 (a) 2020 (a) 2021 Incurred-but- not-reported Liabilities (b) Cumulative Number of Reported Claims Cumulative Frequency (c) Credit Insurance Accident Year 2017 $ 136 $ 129 $ 125 $ 125 $ 124 $ — 43,960 2.4 % 2018 — 146 135 134 133 3 42,883 2.2 % 2019 — — 155 150 150 10 45,444 2.0 % 2020 — — — 226 209 21 68,365 3.1 % 2021 — — — — 162 63 30,853 1.4 % Total $ 778 (a) Unaudited. (b) Includes expected development on reported claims. (c) Frequency for each accident year is calculated as the ratio of all reported claims incurred to the total exposures in force. 100 Table of Contents Cumulative paid claims and allocated claim adjustment expenses, net of reinsurance, as of December 31, 2021, were as follows: Years Ended December 31, (dollars in millions) 2017 * 2018 * 2019* 2020* 2021 Credit Insurance Accident Year 2017 $ 75 $ 108 $ 118 $ 122 $ 124 2018 — 82 116 125 130 2019 — — 88 129 140 2020 — — — 129 188 2021 — — — — 99 Total $ 681 All outstanding liabilities before 2017, net of reinsurance — Liabilities for claims and claim adjustment expenses, net of reinsurance $ 97 * Unaudited. The reconciliations of the net incurred and paid claims development to the liability for claims and claim adjustment expenses were as follows: (dollars in millions) December 31, 2021 Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance: Credit insurance $ 97 Other short-duration insurance lines 2 Total 99 Insurance lines other than short-duration 19 Total gross liability for unpaid claims and claim adjustment expense $ 118 We use completion factors to estimate the unpaid claim liability for credit insurance and most other short-duration products. For some products, the unpaid claim liability is estimated as a percent of exposure. There have been no significant changes in methodologies or assumptions during 2021. Our average annual percentage payout of incurred claims by age, net of reinsurance, as of December 31, 2021, were as follows: Years 1 2 3 4 5 Credit insurance* 60.9 % 26.9 % 7.4 % 3.6 % 1.1 % * Unaudited. 101 Table of Contents STATUTORY ACCOUNTING Our insurance subsidiaries file financial statements prepared using statutory accounting practices prescribed or permitted by the Department of Insurance (“DOI”) which is a comprehensive basis of accounting other than GAAP. The primary differences between statutory accounting practices and GAAP are that under statutory accounting, policy acquisition costs are expensed as incurred, policyholder liabilities are generally valued using prescribed actuarial assumptions, and certain investment securities are reported at amortized cost. We are not required and did not apply purchase accounting to the insurance subsidiaries on a statutory basis. Statutory net income (loss) for our insurance companies by type of insurance was as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 Property and casualty: Triton $ 66 $ ( 7 ) $ 16 Life and health: AHL $ 79 $ 114 $ 56 Statutory capital and surplus for our insurance companies by type of insurance were as follows: (dollars in millions) December 31, 2021 2020 Property and casualty: Triton $ 210 $ 137 Life and health: AHL $ 292 $ 261 Our insurance companies are also subject to risk-based capital requirements adopted by the Texas DOI. Minimum statutory capital and surplus is the risk-based capital level that would trigger regulatory action. At December 31, 2021 and 2020, our insurance subsidiaries’ statutory capital and surplus exceeded the risk-based capital minimum required levels. DIVIDEND RESTRICTIONS Our insurance subsidiaries are subject to domiciliary state regulations that limit their ability to pay dividends. Our previously owned life insurance subsidiary, Merit, was domiciled in Indiana and redomesticated to Texas on January 28, 2019. AHL and Triton are domiciled in Texas. State law restricts the amounts that our insurance subsidiaries may pay as dividends without prior notice to the state of domicile DOI. The maximum amount of dividends, referred to as “ordinary dividends,” for an Indiana or Texas domiciled life insurance company that can be paid without prior approval in a 12 month period (measured retrospectively from the date of payment) is the greater of: (i) 10 % of policyholders’ surplus as of the prior year-end or (ii) the statutory net gain from operations as of the prior year-end. Any amount greater must be approved by the state of domicile DOI. The maximum ordinary dividends for a Texas domiciled property and casualty insurance company that can be paid without prior approval in a 12 month period (measured retrospectively from the date of payment) is the greater of: (i) 10 % of policyholders’ surplus as of the prior year-end or (ii) the statutory net income. Any amount greater must be approved by the state of domicile DOI. These approved dividends are called “extraordinary dividends.” 102 Table of Contents Ordinary dividends paid were as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 AHL $ 50 $ 48 $ — Extraordinary dividends paid were as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 Merit $ — $ — $ 140 11. Capital Stock and Earnings Per Share (OMH Only) CAPITAL STOCK OMH has two classes of authorized capital stock: preferred stock and common stock. OMFC has two classes of authorized capital stock: special stock and common stock. 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. Par value and shares authorized at December 31, 2021 were as follows: OMH OMFC Preferred Stock * Common Stock Special Stock Common Stock Par value $ 0.01 $ 0.01 $ — $ 0.50 Shares authorized 300,000,000 2,000,000,000 25,000,000 25,000,000 * No shares of OMH preferred stock or OMFC special stock were issued and outstanding at December 31, 2021 or 2020. Changes in OMH shares of common stock issued and outstanding were as follows: At or for the Years Ended December 31, 2021 2020 2019 Balance at beginning of period 134,341,724 136,101,156 135,832,278 Common shares issued 180,839 272,266 268,878 Common shares repurchased * ( 6,712,923 ) ( 2,031,698 ) — Balance at end of period 127,809,640 134,341,724 136,101,156 * During the year ended December 31, 2021, the common stock repurchased was held in treasury. During the year ended December 31, 2020, the common stock repurchased was retired. OMFC shares issued and outstanding were as follows: Special Stock Common Stock 2021 2020 2021 2020 Shares issued and outstanding — — 10,160,021 10,160,021 103 Table of Contents EARNINGS PER SHARE (OMH ONLY) The computation of earnings per share was as follows: (dollars in millions, except per share data) Years Ended December 31, 2021 2020 2019 Numerator (basic and diluted): Net income $ 1,314 $ 730 $ 855 Denominator: Weighted average number of shares outstanding (basic) 132,653,889 134,716,012 136,070,837 Effect of dilutive securities * 400,605 203,246 256,074 Weighted average number of shares outstanding (diluted) 133,054,494 134,919,258 136,326,911 Earnings per share: Basic $ 9.90 $ 5.42 $ 6.28 Diluted $ 9.87 $ 5.41 $ 6.27 * We have excluded weighted-average unvested restricted stock units totaling 421,511 , 231,125 , and 270,955 for 2021, 2020, and 2019, 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. Diluted earnings per share is computed based on the weighted-average number of shares outstanding plus the effect of potentially dilutive shares outstanding during the period using the treasury stock method. The potentially dilutive shares represent outstanding unvested restricted stock units (“RSUs”) and restricted stock awards (“RSAs”). 104 Table of Contents 12. Accumulated Other Comprehensive Income (Loss) Changes, net of tax, in accumulated other comprehensive income (loss) were as follows: (dollars in millions) Unrealized Gains (Losses) Available-for-Sale Securities (a) Retirement Plan Liabilities Adjustments Foreign Currency Translation Adjustments Other (b) Total Accumulated Other Comprehensive Income (Loss) Year Ended December 31, 2021 Balance at beginning of period $ 91 $ 1 $ 2 $ — $ 94 Other comprehensive income (loss) before reclassifications ( 41 ) — 1 8 ( 32 ) Reclassification adjustments from accumulated other comprehensive income ( 1 ) — — — ( 1 ) Balance at end of period $ 49 $ 1 $ 3 $ 8 $ 61 Year Ended December 31, 2020 Balance at beginning of period $ 41 $ 3 $ — $ — $ 44 Other comprehensive income (loss) before reclassifications 51 ( 2 ) 2 — 51 Reclassification adjustments from accumulated other comprehensive income ( 1 ) — — ( 1 ) Balance at end of period $ 91 $ 1 $ 2 $ — $ 94 Year Ended December 31, 2019 Balance at beginning of period $ ( 28 ) $ ( 3 ) $ ( 3 ) $ — $ ( 34 ) Other comprehensive income before reclassifications 68 6 3 — 77 Reclassification adjustments from accumulated other comprehensive income 1 — — — 1 Balance at end of period $ 41 $ 3 $ — $ — $ 44 (a) There were no material amounts related to available-for-sale debt securities for which an allowance for credit losses was recorded during the year ended December 31, 2021. There were no amounts related to available-for-sale debt securities for which an allowance for credit losses was recorded during the years ended December 31, 2020 and 2019. (b) Other primarily includes changes in the fair value of our mark-to-market derivative instruments that have been designated as cash flow hedges. 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, 2021, 2020, and 2019. 105 Table of Contents 13. Income Taxes OMH and all of its eligible domestic U.S. subsidiaries file a consolidated life/non-life federal tax return with the IRS. Income taxes from the consolidated federal and state tax returns are allocated to our eligible subsidiaries under a tax sharing agreement with OMH. The Company’s foreign subsidiaries/branches file tax returns in Canada, Puerto Rico, and the U.S. Virgin Islands. The Company recognizes a deferred tax liability for the undistributed earnings of its foreign operations, if any, as we do not consider the amounts to be permanently reinvested. As of December 31, 2021, the Company had no undistributed foreign earnings. Components of income before income tax expense were as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 Income before income tax expense - U.S. operations $ 1,722 $ 973 $ 1,082 Income before income tax expense - foreign operations 19 4 16 Total $ 1,741 $ 977 $ 1,098 Components of income tax expense (benefit) were as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 Current: Federal $ 298 $ 235 $ 205 Foreign 1 9 3 State 50 45 34 Total current 349 289 242 Deferred: Federal 55 ( 43 ) 15 State 23 1 ( 14 ) Total deferred 78 ( 42 ) 1 Total $ 427 $ 247 $ 243 Expense from foreign income taxes includes foreign subsidiaries/branches that operate in Canada, Puerto Rico, and the U.S. Virgin Islands. OMH's reconciliations of the statutory federal income tax rate to the effective income tax rate were as follows: Years Ended December 31, 2021 2020 2019 Statutory federal income tax rate 21.00 % 21.00 % 21.00 % State income taxes, net of federal 3.27 3.52 3.49 Change in valuation allowance 0.24 0.08 ( 2.07 ) Nondeductible compensation 0.50 0.25 0.13 Other, net ( 0.45 ) 0.48 ( 0.39 ) Effective income tax rate 24.56 % 25.33 % 22.16 % 106 Table of Contents OMFC's reconciliations of the statutory federal income tax rate to the effective income tax rate were as follows: Years Ended December 31, 2021 2020 2019 Statutory federal income tax rate 21.00 % 21.00 % 21.00 % State income taxes, net of federal 3.27 3.52 3.49 Change in valuation allowance 0.24 0.08 ( 2.06 ) Nondeductible compensation 0.50 0.25 0.13 Other, net ( 0.45 ) 0.48 ( 0.29 ) Effective income tax rate 24.56 % 25.33 % 22.27 % The lower effective income tax rate in 2021 as compared to 2020 is primarily due to recording the benefit of tax credits and lower state tax expense. 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: (dollars in millions) Years Ended December 31, 2021 2020 2019 Balance at beginning of year $ 10 $ 12 $ 17 Increases in tax positions for current years 2 2 2 Increases in tax positions for prior years 2 — 2 Lapse in statute of limitations ( 2 ) ( 4 ) ( 3 ) Settlements with tax authorities ( 4 ) — ( 6 ) Balance at end of year $ 8 $ 10 $ 12 Our gross unrecognized tax benefits include related interest and penalties. We accrue interest and penalties related to uncertain tax positions in income tax expense. 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 under examination by various states for the years 2017 to 2018. Management believes it has adequately provided for taxes for such years. 107 Table of Contents Components of deferred tax assets and liabilities were as follows: (dollars in millions) December 31, 2021 2020 Deferred tax assets: Allowance for loan losses $ 523 $ 568 Net operating losses and tax credits 32 30 Insurance reserves 34 19 Pension/employee benefits 22 15 Other 32 33 Total $ 643 $ 665 Deferred tax liabilities: Goodwill $ 144 $ 120 Debt fair value adjustment 43 46 Deferred loan fees 33 21 Fair value of equity and securities investments 17 27 Fixed assets 13 15 Other 26 9 Total $ 276 $ 238 Net deferred tax assets before valuation allowance $ 367 $ 427 Valuation allowance ( 28 ) ( 22 ) Net deferred tax assets $ 339 $ 405 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 assets of $ 66 million was primarily due to the tax effect of the decrease in the allowance for finance receivable losses and the tax amortization of goodwill. At December 31, 2021, we had state net operating loss carryforwards of $ 375 million compared to $ 451 million at December 31, 2020. The state net operating loss carryforwards mostly expire between 2026 and 2041, except for some states which conform to the federal rules for indefinite carryforward. We had a valuation allowance on our gross state deferred tax assets, net of deferred federal tax benefit, of $ 23 million and $ 19 million at December 31, 2021 and 2020, respectively. 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 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. During 2021, the American Rescue Plan Act of 2021 (the “ARPA”) was 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. Based on our review, we have determined the CARES Act, the CAA, and the ARPA will not have a material impact on our consolidated financial statements. We will continue to monitor legislative developments related to the COVID-19 pandemic, along with other tax legislative and regulatory developments. 108 Table of Contents 14. Leases and Contingencies LEASES Our operating leases primarily consist of leased office space, automobiles, and information technology equipment and have remaining lease terms of one to ten years . Our operating right-of-use asset and liability balances were $ 140 million and $ 151 million, respectively, at December 31, 2021 and $ 153 million and $ 165 million, respectively, at December 31, 2020. At December 31, 2021, maturities of lease liabilities, excluding leases on a month-to-month basis, were as follows: (dollars in millions) Operating Leases 2022 $ 57 2023 42 2024 28 2025 19 2026 12 2027 5 Thereafter 1 Total lease payments 164 Imputed interest ( 13 ) Total $ 151 Weighted Average Remaining Lease Term 3.71 years Weighted Average Discount Rate 3.34 % Operating lease cost and variable lease cost, which are recorded in other operating expenses, were as follows: (dollars in millions) Years Ended December 31, 2021 2020 2019 Operating lease cost $ 60 $ 63 $ 61 Variable lease cost 15 15 16 Total $ 75 $ 78 $ 77 Our sublease income was immaterial for the years ended December 31, 2021, 2020, and 2019. LEGAL CONTINGENCIES In the normal course of business, we have been named, from time to time, as defendants in various legal actions, including arbitrations, class actions, and other litigation arising in connection with our activities. Some of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. While we will continue to evaluate legal actions to determine whether a loss is reasonably possible or probable and is reasonably estimable, there can be no assurance that material losses will not be incurred from pending, threatened or future litigation, investigations, examinations, or other claims. 109 Table of Contents We contest liability and/or the amount of damages, as appropriate, in each pending matter. Where available information indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many actions, however, it is inherently difficult to determine whether any loss is probable or even reasonably possible, or to estimate the amount of any loss. In addition, even where loss is reasonably possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss. 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 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. 15. Retirement Benefit Plans DEFINED CONTRIBUTION PLAN The Company sponsors a voluntary defined contribution plan to eligible employees of the Company. OneMain 401(k) Plan The OneMain 401(k) Plan (the “401(k) Plan”) provided for a 100 % Company matching on the first 4 % of the salary reduction contributions of the employees for 2021, 2020, and 2019. The salaries and benefits expense associated with this plan was $ 17 million in 2021, $ 18 million in 2020, and $ 17 million in 2019. In addition, the Company may make a discretionary profit sharing contribution to the 401(k) Plan. The Company has full discretion to determine whether to make such a contribution, and the amount of such contribution. In no event, however, will the discretionary profit sharing contribution exceed 4 % of annual pay. The Company did not make any discretionary profit sharing contributions to the 401(k) Plan in 2021, 2020, or 2019. DEFINED BENEFIT PLANS 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 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. U.S. 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. Employees generally vested after 5 years of service. Prior to January 1, 2013, unreduced benefits were paid to retirees at normal retirement (age 65 ) and were based upon a percentage of final average compensation multiplied by years of credited service, up to 44 years. Our current and former employees will not lose any vested benefits in the Springleaf Retirement Plan that accrued prior to January 1, 2013. CommoLoCo Retirement Plan The CommoLoCo Retirement Plan is a qualified non-contributory defined benefit plan, which is subject to the provisions of ERISA and the Puerto Rico tax code. Effective December 31, 2012, the CommoLoCo Retirement Plan was frozen. Puerto Rican residents employed by CommoLoCo, Inc., our Puerto Rican subsidiary, who had attained age 21 and completed one year of service, were eligible to participate in the plan. Our former employees in Puerto Rico will not lose any vested benefits in the CommoLoCo Retirement Plan that accrued prior to January 1, 2013. 110 Table of Contents Unfunded Defined Benefit Plans We sponsor unfunded defined benefit plans for certain employees, including key executives, designed to supplement pension benefits provided by our other retirement plans. These include: (i) the Springleaf Financial Services Excess Retirement Income Plan (the “Excess Retirement Income Plan”), which provides a benefit equal to the reduction in benefits payable to certain employees under our qualified retirement plan as a result of federal tax limitations on compensation and benefits payable; and (ii) the Supplemental Executive Retirement Plan (“SERP”), which provides additional retirement benefits to designated executives. Benefits under the Excess Retirement Income Plan were frozen as of December 31, 2012, and benefits under the SERP were frozen at the end of August 2004. OBLIGATIONS AND FUNDED STATUS The following table presents the funded status of the defined benefit pension plans. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation. (dollars in millions) Pension At or for the Years Ended December 31, 2021 2020 2019 Projected benefit obligation, beginning of period $ 401 $ 364 $ 320 Interest cost 7 10 12 Actuarial loss (gain) (a) ( 18 ) 42 47 Benefits paid: Plan assets ( 16 ) ( 15 ) ( 15 ) Projected benefit obligation, end of period (b) 374 401 364 Fair value of plan assets, beginning of period 405 363 308 Actual return on plan assets, net of expenses ( 7 ) 56 69 Company contributions 1 1 1 Benefits paid: Plan assets ( 16 ) ( 15 ) ( 15 ) Fair value of plan assets, end of period (b) 383 405 363 Funded status, end of period $ 9 $ 4 $ ( 1 ) Other assets (other liabilities) recognized in the consolidated balance sheet $ 9 $ 4 $ ( 1 ) Pretax net gain recognized in accumulated other comprehensive income (loss) $ 2 $ 3 $ 4 (a) For the years ended December 31, 2021, 2020, and 2019, 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 $ 13 million, $ 14 million, and $ 13 million at December 31, 2021, 2020, and 2019, respectively. 111 Table of Contents 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: (dollars in millions) Pension Years Ended December 31, 2021 2020 2019 Components of net periodic benefit cost: Interest cost $ 7 $ 10 $ 12 Expected return on assets ( 12 ) ( 15 ) ( 15 ) Net periodic benefit cost ( 5 ) ( 5 ) ( 3 ) Other changes in plan assets and projected benefit obligation recognized in other comprehensive income or loss: Net actuarial loss (gain) 1 2 ( 7 ) Total recognized in other comprehensive income or loss 1 2 ( 7 ) Total recognized in net periodic benefit cost and other comprehensive income $ ( 4 ) $ ( 3 ) $ ( 10 ) Assumptions The following table summarizes the weighted average assumptions used to determine the projected benefit obligations and the net periodic benefit costs: Pension December 31, 2021 2020 Projected benefit obligation: Discount rate 2.67 % 2.30 % Net periodic benefit costs: Discount rate 2.30 % 3.08 % Expected long-term rate of return on plan assets 3.04 % 4.28 % Discount Rate Methodology The projected benefit cash flows were discounted using the spot rates derived from the unadjusted FTSE Pension Discount Curve at December 31, 2021 and December 31, 2020 , and an equivalent weighted average discount rate was derived that resulted in the same liability. Investment Strategy The investment strategy with respect to assets relating to our pension plans is designed to achieve investment returns that will (i) provide for the benefit obligations of the plans over the long term; (ii) limit the risk of short-term funding shortfalls; and (iii) maintain liquidity sufficient to address cash needs. Accordingly, the asset allocation strategy is designed to maximize the investment rate of return while managing various risk factors, including but not limited to, volatility relative to the benefit obligations, diversification and concentration, and the risk and rewards profile indigenous to each asset class. Allocation of Plan Assets The long-term strategic asset allocation is reviewed and revised annually. The plans’ assets are monitored by our Retirement Plans Committee and the investment managers, which can entail allocating the plans’ assets among approved asset classes within pre-approved ranges permitted by the strategic allocation. 112 Table of Contents At December 31, 2021, the actual asset allocation for the primary asset classes was 95 % in fixed income securities, 4 % in equity securities, and 1 % in cash and cash equivalents. The 2022 target asset allocation for the primary asset classes is 96 % in fixed income securities and 4 % in equity securities. The actual allocation may differ from the target allocation at any particular point in time. The expected long-term rate of return for the plans was 3.0 % for the Springleaf Retirement Plan and 4.3 % for the CommoLoCo Retirement Plan for 2021. The expected rate of return is an aggregation of expected returns within each asset class category. The expected asset return and any contributions made by the Company together are expected to maintain the plans’ ability to meet all required benefit obligations. The expected asset return with respect to each asset class was developed based on a building block approach that considers historical returns, current market conditions, asset volatility and the expectations for future market returns. While the assessment of the expected rate of return is long-term, and thus, not expected to change annually, significant changes in investment strategy or economic conditions may warrant such a change. Expected Cash Flows Funding for the U.S. pension plan ranges from the minimum amount required by ERISA to the maximum amount that would be deductible for U.S. tax purposes. This range is generally not determined until the fourth quarter. Contributed amounts in excess of the minimum amounts are deemed voluntary. Amounts in excess of the maximum amount would be subject to an excise tax and may not be deductible under the Internal Revenue Code. Supplemental and excess plans’ payments and postretirement plan payments are deductible when paid. The expected future benefit payments, net of participants’ contributions, of our defined benefit pension plans at December 31, 2021 are as follows: (dollars in millions) Pension 2022 $ 17 2023 17 2024 17 2025 17 2026 18 2027-2031 90 113 Table of Contents FAIR VALUE MEASUREMENTS — PLAN ASSETS The inputs and methodology used in determining the fair value of the plan assets are consistent with those used to measure our assets. See Note 2 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. The following table presents information about our plan assets measured at fair value and indicates the fair value hierarchy based on the levels of inputs we utilized to determine such fair value: (dollars in millions) Level 1 Level 2 Level 3 Total December 31, 2021 Assets: Cash and cash equivalents $ 4 $ — $ — $ 4 Equity securities: U.S. (a) 1 1 — 2 International (b) 1 — — 1 Fixed income securities: U.S. investment grade (c) 28 276 — 304 U.S. high yield (d) — 4 — 4 Total $ 34 $ 281 $ — $ 315 Investments measured at NAV (e) 68 Total investments at fair value $ 383 December 31, 2020 Assets: Cash and cash equivalents $ 4 $ — $ — $ 4 Equity securities: U.S. (a) 2 — — 2 International (b) 1 — — 1 Fixed income securities: U.S. investment grade (c) 45 307 — 352 U.S. high yield (d) — 4 — 4 Total $ 52 $ 311 $ — $ 363 Investments measured at NAV (e) 42 Total investments at fair value $ 405 (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. (c) Includes investment mutual funds in U.S. and non-U.S. government issued bonds, U.S. government agency or sponsored agency bonds, and investment grade corporate bonds. (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. Based on our investment strategy, we have no significant concentrations of risks. 114 Table of Contents 16. Share-Based Compensation ONEMAIN HOLDINGS, INC. AMENDED 2013 OMNIBUS INCENTIVE PLAN In 2013, OMH adopted the OneMain Holdings, Inc. Amended 2013 Omnibus Incentive Plan (the “Omnibus Plan”). As of December 31, 2021, 12,339,199 shares of common stock were reserved for issuance under the Omnibus Plan. The amount of shares reserved is adjusted annually at the beginning of the year by a number of shares equal to the excess of 10 % of the number of outstanding shares on the last day of the previous fiscal year over the number of shares reserved and available for issuance as of the last day of the previous fiscal year. The Omnibus Plan allows for issuance of stock options, RSUs, RSAs, stock appreciation rights, and other stock-based awards and cash awards. Total share-based compensation expense, net of forfeitures, for all equity-based awards totaled $ 22 million, $ 15 million, and $ 13 million during 2021, 2020, and 2019, respectively. The total income tax benefit recognized for stock-based compensation was $ 6 million, $ 4 million, and $ 3 million in 2021, 2020, and 2019, respectively. As of December 31, 2021, there was total unrecognized compensation expense of $ 53 million related to unvested stock-based awards that are expected to be recognized over a weighted average period of approximately two years . Service-based Awards 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. The weighted-average grant date fair value of service-based awards issued in 2021, 2020, and 2019, was $ 55.39 , $ 39.86 , and $ 30.10 , respectively. The total fair value of service-based awards that vested during 2021, 2020, and 2019 was $ 12 million, $ 15 million, and $ 12 million, respectively. The following table summarizes the service-based stock activity and related information for the Omnibus Plan for 2021: Number of Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Term (in Years) Unvested as of January 1, 2021 423,468 $ 37.09 Granted 649,593 55.39 Vested ( 296,425 ) 40.62 Forfeited ( 40,351 ) 48.00 Unvested at December 31, 2021 736,285 51.25 1.47 Performance-based Awards During 2021, 2020 and 2019, OMH awarded certain executives performance-based awards that may be earned based on the financial performance of OMH or the market performance of OMH’s common stock. These awards are subject to the achievement of performance goals during either a cumulative three-year period or up to a seven-year period. The awards are considered earned after the attainment of the performance goal, which can occur during or 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 performance-based awards is typically based on the closing market price of OMH's stock on the date of the award. For performance-based awards with market conditions, the fair value is measured on the grant date using an option-pricing model. 115 Table of Contents Expense for performance-based awards is typically recognized over the requisite service period when it is probable that the performance goals will be achieved and is based on the total number of units expected to vest. Expense for awards with graded vesting is recognized under the accelerated method, whereby each vesting is treated as a separate award with expense for each vesting recognized ratably over the requisite service period. 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. Expense for performance-based awards with market conditions is recognized over the requisite service period, which represents the period over which the market condition is expected to be satisfied. The weighted average grant date fair value of performance-based awards issued in 2021, 2020, and 2019 was $ 40.62 , $ 42.86 , and $ 31.86 , respectively. The total fair value of performance-based awards that vested was immaterial during 2021, 2020, and 2019. The following table summarizes the performance-based stock activity and related information for the Omnibus Plan for 2021: Number of Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Term (in Years) Unvested as of January 1, 2021 290,725 $ 36.23 Granted 724,031 40.62 Vested — — Forfeited ( 40,065 ) 45.31 Unvested at December 31, 2021 974,691 39.12 1.93 Cash-settled Stock-based Awards 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. The awards provide for the right to accrue cash dividend equivalents. The grant date fair value of the cash-settled stock-based awards was zero because the satisfaction of the required event-based performance conditions was not considered probable as of the grant dates. During 2021, the vesting conditions related to a portion of the cash-settled stock-based awards were satisfied and we recognized $ 54 million in salaries and benefits expense. For the remaining unvested awards, the fair value was estimated using an option-pricing model on the date the required event-based performance condition was satisfied. The unvested cash-settled stock-based awards are liability-classified and expense is recognized over the requisite service period, which is the period of time the remaining vesting conditions are expected to be satisfied. As a result, we recognized additional salaries and benefits expense during 2021, which was immaterial. 116 Table of Contents 17. Segment Information At December 31, 2021, 2020, and 2019, Consumer and Insurance (“C&I”) was our only reportable segment. 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. The accounting policies of the C&I segment are the same as those disclosed in Note 2, except as described below. 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: Interest income Directly correlated to C&I segment and Other. Interest expense C&I and Other - The Company has secured and unsecured debt. The Company first allocates interest expense to its C&I segment based on actual expense for secured debt. Interest expense for unsecured debt is recorded to the C&I segment using a weighted average interest rate applied to allocated average unsecured debt. Total average unsecured debt is allocated as follows: l Other - at 100% of asset base. (Asset base represents the average net finance receivables including finance receivables held for sale); and l C&I - receives remainder of unallocated average debt. Provision for finance receivable losses Directly correlated to the C&I segment. Other revenues Directly correlated to the C&I segment and Other. Other expenses Salaries and benefits - Directly correlated to C&I segment and Other. Other salaries and benefits not directly correlated with the C&I segment and Other are allocated based on services provided. Other operating expenses - Directly correlated to the C&I segment and Other. Other operating expenses not directly correlated to the C&I segment and Other are allocated based on services provided. Insurance policy benefits and claims - Directly correlated to the C&I segment. Acquisition-related transaction and integration expenses - Consist of: (i) acquisition-related transaction and integration costs related to the OneMain Acquisition, including legal and other professional fees, which we primarily report in Other, as these are costs related to acquiring the business as opposed to operating the business; (ii) software termination costs, which are allocated to Consumer and Insurance; and (iii) incentive compensation incurred above and beyond expected cost from acquiring and retaining talent in relation to the OneMain Acquisition, which are allocated to C&I segment and Other based on services provided. The "Segment to GAAP Adjustment” column in the following tables primarily consists of: • Interest income - reverses the impact of premiums/discounts on certain 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 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; 117 Table of Contents • 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; • Other expenses - reestablishes expenses on a historical cost basis by reversing the impact of amortization from acquired intangible assets, including amortization of other historical deferred costs and the amortization of purchased software assets on a historical cost basis; and • Assets - revalues assets based on their fair values at the effective date of the acquisition. The following tables present information about C&I and Other, as well as reconciliations to the consolidated financial statement amounts. (dollars in millions) Consumer and Insurance Other Segment to GAAP Adjustment Consolidated Total At or for the Year Ended December 31, 2021 Interest income $ 4,355 $ 5 $ 4 $ 4,364 Interest expense 930 3 4 937 Provision for finance receivable losses 587 — 6 593 Net interest income after provision for finance receivable losses 2,838 2 ( 6 ) 2,834 Other revenues 527 12 ( 8 ) 531 Other expenses 1,577 21 26 1,624 Income (loss) before income tax expense (benefit) $ 1,788 $ ( 7 ) $ ( 40 ) $ 1,741 Assets $ 20,019 $ 40 $ 2,020 $ 22,079 At or for the Year Ended December 31, 2020 Interest income $ 4,353 $ 6 $ 9 $ 4,368 Interest expense 1,007 4 16 1,027 Provision for finance receivable losses 1,313 — 6 1,319 Net interest income after provision for finance receivable losses 2,033 2 ( 13 ) 2,022 Other revenues 515 13 ( 2 ) 526 Other expenses 1,527 24 20 1,571 Income (loss) before income tax expense (benefit) $ 1,021 $ ( 9 ) $ ( 35 ) $ 977 Assets $ 20,376 $ 57 $ 2,038 $ 22,471 At or for the Year Ended December 31, 2019 Interest income $ 4,114 $ 9 $ 4 $ 4,127 Interest expense 947 5 18 970 Provision for finance receivables losses 1,105 — 24 1,129 Net interest income after provision for finance receivable losses 2,062 4 ( 38 ) 2,028 Other revenues * 600 32 ( 10 ) 622 Other expenses 1,494 39 19 1,552 Income (loss) before income tax expense (benefit) $ 1,168 $ ( 3 ) $ ( 67 ) $ 1,098 Assets $ 20,705 $ 77 $ 2,035 $ 22,817 * Other revenues in Other include the gain on the February 2019 Real Estate Loan Sale, as well as the impairment adjustments on the remaining loans in held for sale in 2019. 118 Table of Contents 18. Fair Value Measurements The fair value of a financial instrument is the expected amount that would be received if an asset were to be sold or the expected amount that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of pricing observability. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments traded in other-than-active markets or that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. 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, 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 2 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. The following table presents the carrying amounts and estimated fair values of our financial instruments and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used: Fair Value Measurements Using Total Fair Value Total Carrying Value (dollars in millions) Level 1 Level 2 Level 3 December 31, 2021 Assets Cash and cash equivalents $ 535 $ 6 $ — $ 541 $ 541 Investment securities 59 1,927 6 1,992 1,992 Net finance receivables, less allowance for finance receivable losses — — 20,083 20,083 17,117 Restricted cash and restricted cash equivalents 476 — — 476 476 Other assets * — — 52 52 46 Liabilities Long-term debt $ — $ 18,781 $ — $ 18,781 $ 17,750 December 31, 2020 Assets Cash and cash equivalents $ 2,255 $ 17 $ — $ 2,272 $ 2,272 Investment securities 44 1,870 8 1,922 1,922 Net finance receivables, less allowance for finance receivable losses — — 18,629 18,629 15,815 Restricted cash and restricted cash equivalents 451 — — 451 451 Other assets * — 2 60 62 62 Liabilities Long-term debt $ — $ 19,426 $ — $ 19,426 $ 17,800 * Other assets at December 31, 2021 and December 31, 2020 primarily consists of finance receivables held for sale. 119 Table of Contents FAIR VALUE MEASUREMENTS — RECURRING BASIS The following tables present information about our assets measured at fair value on a recurring basis and indicates the fair value hierarchy based on the levels of inputs we utilized to determine such fair value: Fair Value Measurements Using Total Carried At Fair Value (dollars in millions) Level 1 Level 2 Level 3 December 31, 2021 Assets Cash equivalents in mutual funds $ 41 $ — $ — $ 41 Cash equivalents in securities — 6 — 6 Investment securities: Available-for-sale securities U.S. government and government sponsored entities — 16 — 16 Obligations of states, municipalities, and political subdivisions — 79 — 79 Commercial paper — 50 — 50 Non-U.S. government and government sponsored entities — 155 — 155 Corporate debt 5 1,292 5 1,302 RMBS — 170 — 170 CMBS — 45 — 45 CDO/ABS — 90 — 90 Total available-for-sale securities 5 1,897 5 1,907 Other securities Bonds: Corporate debt — 9 — 9 RMBS — 1 — 1 CDO/ABS — 20 — 20 Total bonds — 30 — 30 Preferred stock 22 — — 22 Common stock 32 — 1 33 Total other securities 54 30 1 85 Total investment securities 59 1,927 6 1,992 Restricted cash equivalents in mutual funds 468 — — 468 Total $ 568 $ 1,933 $ 6 $ 2,507 120 Table of Contents Fair Value Measurements Using Total Carried At Fair Value (dollars in millions) Level 1 Level 2 Level 3 December 31, 2020 Assets Cash equivalents in mutual funds $ 2,018 $ — $ — $ 2,018 Cash equivalents in securities — 17 — 17 Investment securities: Available-for-sale securities U.S. government and government sponsored entities — 12 — 12 Obligations of states, municipalities, and political subdivisions — 92 — 92 Certificates of deposit and commercial paper — 28 — 28 Non-U.S. government and government sponsored entities — 146 — 146 Corporate debt 5 1,207 6 1,218 RMBS — 215 — 215 CMBS — 58 — 58 CDO/ABS — 78 — 78 Total available-for-sale securities 5 1,836 6 1,847 Other securities Bonds: Non-U.S. government and government sponsored entities — 1 — 1 Corporate debt — 16 1 17 CDO/ABS — 17 — 17 Total bonds — 34 1 35 Preferred stock 13 — — 13 Common stock 26 — 1 27 Total other securities 39 34 2 75 Total investment securities 44 1,870 8 1,922 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 the years ended December 31, 2021 and 2020, 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. Net impairment charges recorded on assets measured at fair value on a non-recurring basis were immaterial during the years ended December 31, 2021 and 2020. FAIR VALUE MEASUREMENTS — VALUATION METHODOLOGIES AND ASSUMPTIONS We use the following methods and assumptions to estimate fair value. Cash and Cash Equivalents Cash equivalents in mutual funds include positions in money market funds with weighted average maturity of less than 90 days. Money market funds are reported at their current carrying value, which approximates fair value due to the short-term nature of these instruments and are categorized as Level 1 within the fair value table. 121 Table of Contents Cash equivalents in securities includes highly liquid investments with a maturity of less than 90 days at purchase. The carrying amount of these cash equivalents approximates fair value due to the short time between the purchase and expected maturity of these securities. 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 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. We generally obtain market price data from exchange or dealer markets. We estimate the fair value of fixed maturity investment securities not traded in active markets by referring to traded securities with similar attributes, using dealer quotations and a matrix pricing methodology, or discounted cash flow analyses. This methodology considers such factors as the issuer’s industry, the security’s rating and tenor, its coupon rate, its position in the capital structure of the issuer, yield curves, credit curves, composite ratings, bid-ask spreads, prepayment rates and other relevant factors. For fixed maturity investment securities that are not traded in active markets or that are subject to transfer restrictions, we adjust the valuations to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. We elect the fair value option for investment securities that are deemed to incorporate an embedded derivative and for which it is impracticable for us to isolate and/or value the derivative. The fair value of certain investment securities is based on the amortized cost, which is assumed to approximate fair value. Finance Receivables The fair value of net finance receivables, less allowance for finance receivable losses, is primarily 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. The most significant judgments and estimates relate to prepayment speeds, default rates, loss severity, and discount rates. The degree of judgment and estimation applied is significant in light of the current capital markets and, more broadly, economic environments. Therefore, the fair value of our finance receivables could not be determined with precision and may not be realized in an actual sale. 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. Long-term Debt We either receive fair value measurements of our long-term debt from market participants and pricing services or we estimate the fair values of long-term debt using projected cash flows discounted at each balance sheet date’s market-observable implicit-credit spread rates for our long-term debt. We record at fair value long-term debt issuances that are deemed to incorporate an embedded derivative and for which it is impracticable for us to isolate and/or value the derivative. At December 31, 2021, we had no debt carried at fair value under the fair value option. We estimate the fair values associated with variable rate revolving lines of credit to be equal to par. 122 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.