What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-10 compared with 2022-02-11 · 150 added, 199 removed, 424 unchanged (45% of the section changed)

12 unchanged sentences

Recent Accounting Pronouncements

We are a leading provider of responsible personal loan products, primarily to nonprime customers.

In 2021, we also began offering credit cards.

Our branch network of approximately 1,400 locations in 44 states is staffed with expert personnel and is complemented by our centralized operations and our digital platform, which provides current and prospective customers the option of applying for a personal loan or credit card via our website, www.omf.com.

The information on our website is not incorporated by reference into this report.

In connection with our personal loan business, our insurance subsidiaries offer our customers optional credit and non-credit insurance, and other products.

In addition to our loan originations, and insurance and other product sales activities, we service loans owned by us and service loans owned by third parties;

pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios or other financial assets;

and may establish joint ventures or enter into other strategic alliances.

We operate in the United States and market our personal loans in 44 states.

We also offer two credit cards, BrightWay and BrightWay+, which are designed to reward customers for responsible credit activity such as consistent on-time payments.

We continue to expand BrightWay and BrightWay+ credit cards across our branch network, through direct mail, and through our digital affiliates.

In connection with our offerings, our insurance subsidiaries offer our personal loan customers optional credit and non-credit insurance, and other insurance-related products.

We strive to meet our customers at their preferred channel and to deliver a seamless customer experience through our digital platforms or working with our expert team members at our approximately 1,400 locations.

Our personal loans, credit cards, and other products help customers meet everyday needs and take steps to improve their financial well-being.

In addition to our loan originations, insurance, and other product sales activities, we also service the loans that we originate and retain on our balance sheet, as well as loans owned by third parties on their behalf in connection with our whole loan sale program and legacy businesses.

We also pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios or other financial assets, and may establish joint ventures or enter into other strategic alliances.

Our product offerings include:

• Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who generally need timely access to cash.

Our 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.

• Personal Loans — We offer personal loans through our branch network, centralized operations, and our website, www.omf.com, to customers who need timely access to cash.

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

At December 31, 2022, we had approximately 2.33 million personal loans totaling $19.9 billion of net finance receivables, of which 52% were secured by titled property, compared to approximately 2.34 million personal loans totaling $19.2 billion of net finance receivables, of which 52% were secured by titled property at December 31, 2021.

We also service personal loans for our whole loan sale partners, which we commenced during the first quarter of 2021.

• Credit Cards — In the third quarter of 2021, we began offering credit cards through a third-party bank partner from which we purchase the receivable balances.

We also service personal loans for our whole loan sale partners.

• Credit Cards — We offer credit cards through a third-party bank partner from which we purchase the receivable balances.

The credit cards are offered through our branch network, direct mail marketing, and direct-to-consumer via our affiliates.

Credit cards are open-ended, revolving, with a fixed rate, and are unsecured.

At December 31, 2021, we had approximately 66 thousand open credit card customer accounts, totaling $25 million of net finance receivables.

• Insurance Products — We offer our custom ers optional credit insurance products (life insurance, disability insurance, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our centralized operations.

At December 31, 2022, we had approximately 135 thousand open credit card customer accounts, totaling $107 million of net finance receivables, compared to approximately 66 thousand open credit card customer accounts, totaling $25 million of net finance receivables at December 31, 2021.

• Insurance Products — We offer our custom ers optional credit insurance products (life, disability, and involuntary unemployment insurance) and optional non-credit insurance products through both our branch network and our centralized operations.

Credit insurance and non-credit insurance products are provided by our affiliated insurance companies.

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We also offer optional membership plans from an unaffiliated company.

Our non-originating legacy products include:

• Other Receivables — We ceased originating real estate loans in 2012 and we continue to service or sub-service liquidating real estate loans.

Our real estate loans held for sale are reported in “Other assets” of our consolidated balance sheets.

At December 31, 2022, Consumer and Insurance (“C&I”) is our only reportable segment, which includes personal loans, credit cards, and insurance products.

At December 31, 2021, we managed a combined total of 2.45 million customer accounts and $19.6 billion of managed receivables.

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.

At December 31, 2022, we managed a combined total of 2.56 million customer accounts and $20.8 billion of managed receivables, compared to 2.45 million customer accounts and $19.6 billion of managed receivables at December 31, 2021.

See Note 17 of the Notes to the Consolidated Financial Statements included in this report for more information about our segment.

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Finance Receivables Originations and Purchase Volume

Because loan volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor originations and purchase volume and annual percentage rate.

Because loan volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor originations, purchase volume, and annual percentage rate.

Recent Developments and Outlook

RECENT DEVELOPMENTS

Credit Cards - BrightWay and BrightWay+

As part of our mission to improve the financial well-being of hardworking Americans, we continue to invest in new products and services that help our customers solve for their present needs while helping them build a stronger financial tomorrow.

In the third quarter of 2021, we began offering our two credit cards, BrightWay and BrightWay+, giving our customers access to more credit, while also enabling a better financial future.

Credit cards will help customers take concrete steps to improve their financial well-being by offering tangible rewards for credit building behaviors.

This is an important milestone for our company as we continue to deepen our existing customer relationships, attract new customers, and become the lender of choice for nonprime customers.

We continue to expand credit card offerings across our branch network and through direct-to-consumer and affiliate card marketing.

Issuance and Redemption of Unsecured Debt

Redemption of 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 of its 7.75% Senior Notes due 2021.

Social Bond Offering - Issuance of 3.50% Senior Notes Due 2027

As part of our commitment to improve the financial well-being of hardworking Americans, 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.

We intend to allocate an amount equivalent to the net proceeds of the offering to finance or re-finance, in part or in full, a portfolio of new or existing loans that meet the eligibility criteria of the OneMain Social Bond Framework.

This offering advances our goal of enabling access to responsible financial products and services for vulnerable and/or historically underserved populations.

At least 75% of the loans funded by the Social Bond will be allocated to women and/or minority borrowers as outlined in OneMain’s Social Bond Framework, which is available on OneMain’s Investor Relations website.

Issuance of 3.875% Senior Notes Due 2028

On August 11, 2021, OMFC issued a total of $600 million of aggregate principal amount of 3.875% Senior Notes due 2028.

Redemption of 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 of its 6.125% Senior Notes due 2022.

Unsecured Corporate Revolver

On October 25, 2021, OMFC entered into an unsecured corporate revolver with a total maximum borrowing capacity of $1.0 billion.

At December 31, 2021, no amounts were drawn under this facility.

For further information regarding the issuances and redemption of our unsecured debt and our corporate revolver, see Note 8 of the Notes to the Consolidated Financial Statements included in this report.

Securitization Transactions Completed:

OMFIT 2021-1 and ODART 2021-1

For information regarding the issuances of our secured debt, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Apollo-Värde Group Share Sales

We entered into two underwriting agreements, in February and April of 2021, with certain entities managed by affiliates of Apollo-Värde Group, in their capacities as selling stockholders (the “Selling Stockholders”), and several underwriters, for sale by the Selling Stockholders of up to 9,200,000 shares per agreement of OMH’s common stock.

The two secondary public offerings closed during the first half of 2021 and resulted in the sale by the Selling Stockholders of 18,400,000 shares of OMH common stock.

We did not receive any proceeds from the sales of the shares by the Selling Stockholders in these transactions.

We entered into three underwriting agreements, in July, August, and October of 2021, with an entity managed by affiliates of Apollo, in its capacity as selling stockholder (the “Selling Stockholder”), and an underwriter for sales by the Selling Stockholder of 10,925,000, 8,050,000, and 10,010,208 shares, respectively, of OMH’s common stock.

The three secondary public offerings closed during the second half of 2021 and resulted in the sale by the Selling Stockholder of a total of 28,985,208 shares of OMH common stock.

The shares sold represented all of the shares that were held by the Selling Stockholder.

We did not receive any proceeds from the sale of the shares by the Selling Stockholder in these transactions.

Prior to the secondary public offerings described above, the Apollo-Värde Group was entitled to designate six of OMH's nine directors, as provided for in the Amended and Restated Stockholders Agreement (“Stockholders Agreement”).

As a result of the share sales, Apollo is no longer a stockholder.

Värde retained a portion of their shares, and as of December 31, 2021, Värde and funds managed by Värde beneficially owned approximately 5.9% of OMH common stock.

Värde currently has the right to designate one director of the OMH Board of Directors, pursuant to the Stockholders Agreement, as a result of beneficially owning less than 10% but greater than 5% of the voting power of OMH common stock.

August and October Concurrent Share Buybacks

On August 3, 2021, pursuant to the July 2021 underwriting agreement, we concurrently purchased 1,700,000 of the shares of OMH common stock at a purchase price of $58.36 per share, which is equal to the price at which the underwriter purchased the shares from the Selling Stockholder, resulting in an aggregate purchase price of $99 million (the “August Concurrent Share Buyback”).

On October 28, 2021, pursuant to the October 2021 underwriting agreement, we concurrently purchased 1,870,000 of the shares of OMH common stock at a purchase price of $53.45 per share, which is equal to the price at which the underwriter purchased the shares from the Selling Stockholder, resulting in an aggregate purchase price of $100 million (the “October Concurrent Share Buyback”).

The terms and conditions of the August and October Concurrent Share Buybacks were reviewed and approved by a special committee of the Board, comprised of independent and disinterested directors of OMH.

The August and October Concurrent Share Buybacks were made pursuant to separate Board authorizations and did not reduce our availability of repurchases under our stock repurchase program commenced during the second quarter of 2021.

The August and October Concurrent Share Buybacks were funded from our existing cash on hand.

The underwriter did not receive any compensation for the shares of OMH common stock repurchased by OMH.

Stock Repurchase Program

During the second quarter of 2021 we commenced our stock repurchase program.

In December 2021, the Board increased the share repurchase authorization to $300 million from the previously announced $200 million.

As of December 31, 2021, we had $86 million of authorized share repurchase capacity, excluding fees and commissions, remaining under the program.

On February 2, 2022, the Board authorized a new stock repurchase program, which allows us to repurchase up to $1.0 billion of the OMH’s outstanding common stock, excluding fees, commissions, and other expenses related to the repurchases.

On February 2, 2022, the Board authorized a stock repurchase program, which allows us to repurchase up to $1.0 billion of OMH’s outstanding common stock, excluding fees, commissions, and other expenses related to the repurchases.

The authorization expires on December 31, 2024.

The new program replaces the previous share repurchase program.

As of December 31, 2022, we had $726 million of authorized share repurchase capacity, excluding fees and commissions, remaining under the program.

See “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in Part II of this report for further information on our shares repurchased.

Private Secured Term Funding

On April 25, 2022, OMFC entered into a $350 million private secured term funding collateralized by our personal loans.

No principal payments are required to be made during the first three years, followed by a subsequent one-year amortization period at the expiration of which the outstanding principal amount is due and payable.

Social Securitization Transaction - OMFIT 2022-S1

As part of our continued commitment to improve the financial well-being of hardworking Americans, on April 27, 2022, OMFC completed its first social securitization under Rule 144A.

We issued $600 million principal amount of notes backed by personal loans (“OMFIT 2022-S1”) made to the target population identified in the OneMain 2022 ABS Social Bond Framework.

OMFIT 2022-S1 has a revolving period of three years, during which no principal payments are required.

Generally, the target population is comprised of borrowers residing in rural communities (by zip code), 75% of whom are lower income borrowers in these communities.

Through the OneMain 2022 ABS Social Bond Framework we aim to promote financial inclusion to the target population by providing equitable access to fair and transparent credit.

The OneMain 2022 ABS Social Bond Framework, which is available on OneMain’s Investor Relations website, aligns to the Social Bond Principles 2021, as administered by the International Capital Market Association.

Securitization Transactions Completed - ODART 2022-1, OMFIT 2022-2, and OMFIT 2022-3

Redemption of 8.875% Senior Notes Due 2025

On June 1, 2022, OMFC paid a net aggregate amount of $637 million, inclusive of accrued interest and premiums, to complete the redemption of its 8.875% Senior Notes due 2025.

Unsecured Corporate Revolver

On June 15, 2022, OMFC increased the total maximum borrowing capacity of its unsecured corporate revolver to $1.25 billion.

At December 31, 2022, no amounts were drawn under this facility.

For further information regarding the redemption of our unsecured debt and our corporate revolver, see Note 8 of the Notes to the Consolidated Financial Statements included in this report.

Cash Dividends to OMH's Common Stockholders

For information regarding the quarterly dividends declared by OMH, see “Liquidity and Capital Resources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report.

Acquisition of Trim

On May 14, 2021, we completed our previously announced acquisition of Ask Benjamin, Inc.

(“Trim”), a customer-focused financial wellness fintech company.

The acquisition of Trim will enhance our mission to help our customers progress to a better financial future and further expand the ways in which we help our customers improve their financial well-being.

Resignations and Election of Member(s) of the OMH and OMFC Board of Directors

On March 5, 2021, Phyllis R.

Caldwell was elected to the OMH Board of Directors, effective June 1, 2021.

On July 19, 2021, Adam Rosman resigned from the OMFC Board of Directors and Jeannette Osterhout was elected to the OMFC Board of Directors.

On November 1, 2021, Matthew R.

Michelini and Lisa Green Hall resigned from and Philip L.

Bronner was elected to the OMH Board of Directors, effective November 8, 2021.

Election and Resignation of Members of the Board

On January 27, 2022, Toos N.

Daruvala was elected to the OMH Board of Directors, effective February 14, 2022.

Daruvala was elected to the Board, effective February 14, 2022.

On February 24, 2022, Peter B.

Sinensky resigned from the Board.

Appointments of OMFC’s President and Chief Executive Officer (“CEO”), and Vice President, Chief Financial Officer (“CFO”) and a new member of OMFC’s Board of Directors

On December 12, 2022, OMFC’s Board of Directors appointed Micah R.

Conrad as OMFC’s President and CEO and elected Matthew Vaughan as Vice President, CFO of OMFC and to OMFC’s Board of Directors.

Conrad succeeds Richard N.

Tambor and Mr.

Vaughan succeeds Mr.

Conrad’s former position as CFO of OMFC.

Management’s Response to the COVID-19 Pandemic

In early 2020, COVID-19 evolved into a global pandemic, resulting in widespread volatility and deterioration in economic conditions across the United States.

Governmental authorities continue to take steps to combat the spread of COVID-19, including the ongoing distribution of COVID-19 vaccines.

During the pandemic, we continue to focus on assisting and supporting our customers and employees, while remaining committed to the safety of our employees.

We continue to serve our customers by keeping our branch locations open with appropriate protective protocols in place and through our digital closing solutions.

This combination has enhanced our operating performance through the pandemic and enabled us to serve and support our customers effectively during these unprecedented times.

We believe the actions we have taken and the underlying strength of our balance sheet has positioned us to take advantage of growth opportunities as the economy continues to recover.

We are actively managing the continuing impacts of the COVID-19 pandemic and remain prepared for any additional opportunities or challenges that may impact our industry or business.

The impact on our financial condition and results of operations depends on the continued progress of the economic recovery, which is dependent on unemployment rates, inflationary pressures, supply chain concerns, and businesses’ ability to remain open.

There is also uncertainty regarding the effects of additional variants of COVID-19 and the impact of vaccination rates.

Current credit performance trends continue to be favorable, yet are trending back to pre-pandemic levels.

We will continue to incorporate updates, as necessary, to our macroeconomic assumptions which could lead to further adjustments in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.

Our experienced management team continues to remain focused on our strategic priorities of maintaining a solid balance sheet with an adequate liquidity runway and capital coverage, upholding a conservative and disciplined underwriting model, and building strong relationships with our customers.

We are well positioned to continue supporting and serving our customers, investing in our business, and driving growth while creating value for our stockholders as we effectively navigate the evolving economic, social, political, and regulatory environments in which we operate.

In early 2020, COVID-19 evolved into a global pandemic, resulting in widespread volatility and deterioration in economic conditions across the states and regions that we serve.

Throughout the pandemic, we maintained our focus on assisting and supporting our customers, while remaining committed to the safety of our employees.

We continue to serve our customers by keeping our branch locations open with appropriate protective protocols in place and through our digital platform.

This hybrid capability has sustained our operating performance through the pandemic and enabled us to serve and support our customers effectively.

We are actively monitoring the current macroeconomic developments, including geopolitical actions outside of the U.S., and remain prepared for any opportunities or challenges that may impact our business.

Our financial condition and results of operations could be affected by macroeconomic conditions, including changes in unemployment, inflation, interest rates, and consumer confidence.

We will continue to incorporate updates to our macroeconomic assumptions, as necessary, which could lead to further adjustments in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses.

Our experienced management team remains focused on maintaining a solid balance sheet with a strong liquidity runway and capital coverage, upholding a conservative and disciplined underwriting model, and building strong relationships with our customers to ensure that we are serving them well.

We believe we are well positioned to serve our customers, invest in our business, and drive long-term growth to create value for our stockholders as we navigate an ever-evolving economic, social, political, and regulatory environment.

Results of Operations

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Net charge-off ratio 6.10 % 4.20 % 5.54 %

30-89 Delinquency ratio 2.43 % 2.28 % 2.46 %

Personal loans:

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Number of accounts originated 1,365,989 1,388,123 1,099,767

30-89 Delinquency ratio 3.07 % 2.43 % 2.28 %

Credit cards (b):

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Number of open accounts 135,335 65,513 —

30-89 Delinquency ratio 5.90 % 0.08 % — %

Debt balances:

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(a) See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.

(b) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021.

(b) There were no credit cards for the year ended December 31, 2020, as the product offering began in 2021.

Comparison of Consolidated Results for 2022 and 2021

Interest income remained relatively consistent in 2021 when compared to 2020 primarily due to growth in our average net finance receivables, offset by lower yield.

Interest expense decreased $90 million or 8.8% in 2021 when compared to 2020 primarily due to a lower average cost of funds along with a decrease in average outstanding debt.

See Notes 8 and 9 of the Notes to the Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and our revolving conduit facilities.

Provision for finance receivable losses decreased $726 million or 55.0% in 2021 when compared to 2020 primarily due to an improved outlook for unemployment and macroeconomic conditions resulting in a release in our allowance reserve in 2021 as compared to a build in 2020 at the onset of the COVID-19 pandemic, as well as a decrease in our net charge-offs due to improved credit performance aligning with government stimulus measures.

Other revenues increased $5 million or 1.0% in 2021 when compared to 2020 primarily due to the gains on the sales of finance receivables associated with the whole loan sale program that commenced in 2021 and an increase in membership plans fee revenue due to loan origination growth.

The increase was partially offset by higher net losses on the repurchases and repayments of debt and a decrease in investment revenue driven by lower interest rates on cash.

Other expenses increased $53 million or 3.4% in 2021 when compared to 2020 primarily due to the expense associated with the cash-settled stock-based awards in the current year and an increase in general operating expenses due to growth in our receivables and our strategic investments in the business, compared to COVID-19 cost cutting measures in 2020.

The increase was partially offset by a decrease in insurance policy and benefits claims expense resulting from lower than expected involuntary unemployment insurance claims.

Interest income increased $71 million or 2% in 2022 when compared to 2021 primarily due to growth in our loan portfolio, partially offset by lower yield.

Interest expense decreased $45 million or 5% in 2022 when compared to 2021 primarily due to a lower average cost of funds, partially offset by an increase in average debt.

See Notes 8 and 9 of the Notes to the Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, private secured term funding, and our revolving conduit facilities.

Provision for finance receivable losses increased $809 million or 136% in 2022 when compared to 2021 primarily driven by higher net charge-offs and an increase in the allowance for finance receivable losses due to the weakened macroeconomic environment and growth in the portfolio.

Other revenues increased $98 million or 18% in 2022 when compared to 2021 primarily due to an increase in gains on the sales of finance receivables and an increase in servicing revenue associated with the whole loan sale program as a result of more loans sold in the current period and lower net losses on the repurchases and repayments of debt in the current period compared to the prior year period.

Other expenses decreased $17 million or 1% in 2022 when compared to 2021 primarily due to a decrease in insurance policy and benefits claims expense due to favorable experiences in credit life and term life products, the prior year expense associated with the cash-settled stock-based awards not present in the current year, and a decrease in amortization expense of other intangibles primarily due to the customer relationships intangible asset being fully amortized in the prior year.

The decrease was partially offset by an increase in salaries and benefits expense and an increase in software and technology expense driven by the continued investment in our business.

Income taxes totaled $285 million for 2022 compared to $427 million for 2021.

The effective tax rate for 2022 was 24.5% compared to 24.6% for 2021.

The effective tax rate for 2021 and 2020 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes and discrete tax expense.

The effective tax rate for 2022 and 2021 differed from the federal statutory rate of 21% primarily due to the effect of state income taxes.

See Note 13 of the Notes to the Consolidated Financial Statements included in this report for further information on effective tax rates.

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Management uses C&I adjusted pretax income (loss), a non-GAAP financial measure, as a key performance measure of our segment.

C&I adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes the expense associated with the cash-settled stock-based awards, direct costs associated with COVID-19, acquisition-related transaction and integration expenses, net loss resulting from repurchases and repayments of debt, and restructuring charges.

C&I adjusted pretax income (loss) represents income (loss) before income taxes on a Segment Accounting Basis and excludes the expense associated with the net loss resulting from repurchases and repayments of debt, restructuring charges, direct costs associated with COVID-19, the expense associated with the cash-settled stock-based awards, and acquisition-related transaction and integration expenses.

Management believes C&I adjusted pretax income (loss) is useful in assessing the profitability of our segment.

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Net loss on repurchases and repayments of debt

Cash-settled stock-based awards 54 — —

Restructuring charges 7 — 7

Direct costs associated with COVID-19

Cash-settled stock-based awards — 54 —

Acquisition-related transaction and integration expenses — — 11

Net gain on sale of cost method investment — — (11)

Restructuring charges — 7 5

Adjusted pretax income (non-GAAP)

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See Note 1 of the Notes to the Consolidated Financial Statements included in this report for further information.

See Note 17 of the Notes to the Consolidated Financial Statements included in this report for a description of our segment and methodologies used to allocate revenues and expenses to our C&I segment.

See Note 17 of the Notes to the Consolidated Financial Statements in this report for a description of our segment, methodologies used to allocate revenues and expenses to our C&I segment, and reconciliations of segment total to consolidated financial statement amounts.

CONSUMER AND INSURANCE

18 unchanged sentences

Net charge-off ratio 6.10 % 4.20 % 5.54 %

30-89 Delinquency ratio 2.43 % 2.28 % 2.47 %

Personal loans:

3 unchanged sentences

Number of accounts originated 1,365,989 1,388,123 1,099,767

30-89 Delinquency ratio 3.07 % 2.43 % 2.28 %

Credit cards (b):

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Number of open accounts 135,335 65,513 —

30-89 Delinquency ratio 5.90 % 0.08 % — %

(a) See “Glossary” at the beginning of this report for formulas and definitions of our key performance ratios.

(b) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021.

(b) There were no credit cards for the year ended December 31, 2020, as the product offering began in 2021.

Comparison of Adjusted Pretax Income for 2022 and 2021

Interest income remained relatively consistent in 2021 when compared to 2020 primarily due to growth in our average net finance receivables, offset by lower yield.

Interest expense decreased $77 million or 7.6% in 2021 when compared to 2020 primarily due to a lower average cost of funds along with a decrease in average outstanding debt.

Provision for finance receivable losses decreased $726 million or 55.3% in 2021 when compared to 2020 primarily due to an improved outlook for unemployment and macroeconomic conditions resulting in a release in our allowance reserve in 2021 as compared to a build in 2020 at the onset of the COVID-19 pandemic, as well as a decrease in our net charge-offs due to improved credit performance aligning with government stimulus measures.

Other revenues increased $46 million or 8.3% in 2021 when compared to 2020 primarily due to the gains on the sales of finance receivables associated with the whole loan sale program that commenced in 2021 and an increase in membership plans fee revenue due to loan origination growth.

The increase was partially offset by a decrease in investment revenue driven by lower interest rates on cash.

Other expenses increased $25 million or 1.7% in 2021 when compared to 2020 primarily due an increase in general operating expenses due to growth in our receivables and our strategic investments in the business, compared to COVID-19 cost cutting measures in 2020.

The increase was partially offset by a decrease in insurance policy and benefits claims expense resulting from lower than expected involuntary unemployment insurance claims.

Interest income increased $74 million or 2% in 2022 when compared to 2021 primarily due to growth in our loan portfolio, partially offset by lower yield.

Interest expense decreased $44 million or 5% in 2022 when compared to 2021 primarily due to a lower average cost of funds, partially offset by an increase in average debt.

Provision for finance receivable losses increased $812 million or 138% in 2022 when compared to 2021 primarily driven by higher net charge-offs and an increase in the allowance for finance receivable losses due to the weakened macroeconomic environment and growth in the portfolio.

Other revenues increased $47 million or 8% in 2022 when compared to 2021 primarily due to an increase in gains on the sales of finance receivables and an increase in servicing revenue associated with the whole loan sale program as a result of more loans sold in the current period.

Other expenses increased $57 million or 4% in 2022 when compared to 2021 primarily due to an increase in salaries and benefits expense and an increase in software and technology expense driven by the continued investment in our business.

The increase was partially offset by a decrease in insurance policy and benefits claims expense primarily due to favorable experiences in credit life and term life products.

Comparison of Adjusted Pretax Income for 2021 and 2020

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Our net finance receivables, consisting of personal loans and credit cards, were $20.0 billion at December 31, 2022 and $19.2 billion at December 31, 2021.

Our 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.

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

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We closely track and report the percentage of receivables that are contractually 30-89 days past due as a benchmark of portfolio quality, collections effectiveness, and as a strong indicator of losses in coming quarters.

When personal loans are contractually 60 days 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.

When personal loans are contractually 60 days past due, we consider these accounts to be at an increased risk for loss and collection of these accounts is managed by our centralized operations.

Use of our centralized operations teams for managing late-stage delinquency allows us to apply more advanced collection technologies and tools and drives operating efficiencies in servicing.

At 90 days contractually past due, we consider our personal loans to be nonperforming and stop accruing finance charges.

We reverse finance charges previously accrue d .

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.

The delinquency information for net finance receivables was as follows:

Consumer and Insurance Segment to

Adjustment GAAP

We consider our personal loans to be nonperforming at 90 days contractually past due, at which point we stop accruing finance charges and reverse finance charges previously accrue d .

We accrue finance charges and fees on credit cards until charge-off at approximately 180 days past due, at which point we reverse finance charges and fees previously accrued.

The delinquency information for net finance receivables on a Segment Accounting Basis was as follows:

Consumer and Insurance

(dollars in millions) Personal Loans Credit Cards

25 unchanged sentences

90+ days past due 2.00 % — %

* Not applicable

ALLOWANCE FOR FINANCE RECEIVABLE LOSSES

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

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the ongoing impacts of 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.

Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the overall unemployment rate.

Our unemployment outlook leveraged projections from various industry leading forecast providers.

We also considered inflationary pressures, consumer confidence levels, and continued interest rate increases negatively impacting the economic outlook.

At December 31, 2022, our economic forecast used a reasonable and supportable period of 12 months.

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1,376 23 3 1,402

(1,431) (7) — (1,438)

Balance at end of period

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11.54 % 19.12 % (a) 11.56 %

Year Ended December 31, 2020 (b)

Year Ended December 31, 2021

Balance at beginning of period

$ 2,283 $ — $ (14) $ 2,269

Impact of adoption of ASU 2016-13 (c) 1,119 — (1) 1,118

Provision for finance receivable losses

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(990) — 1 $ (989)

222 — — $ 222

Balance at end of period

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$ 849 $ — $ (20) $ 829

Provision for finance receivable losses

Impact of adoption of ASU 2016-13 (c)

1,119 — (1) 1,118

Provision for finance receivable losses

1,313 — 6 1,319

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(a) Not applicable.

(b) There were no credit cards for the years ended December 31, 2020 and 2019 as the product offering began in 2021.

(b) There were no credit cards for the year ended December 31, 2020 as the product offering began in 2021.

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

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We monitor the allowance ratio to ensure we have a sufficient level of allowance for finance receivable losses based on the estimated lifetime expected credit losses in our finance receivable portfolio.

The allowance for finance receivable losses as a percentage of net finance receivables for personal loans decreased from prior period primarily due to an improved outlook for unemployment and macroeconomic conditions, partially offset by growth in our loan portfolio, as compared to a build in our allowance reserve at the onset of the COVID-19 pandemic.

The allowance for finance receivable losses as a percentage of net finance receivables for personal loans increased from the prior year period primarily due to the weakened macroeconomic environment.

See Note 5 of the Notes to the Consolidated Financial Statements included in this report for more information about the changes in the allowance for finance receivable losses.

TDR FINANCE RECEIVABLES

We make modifications to our finance receivables to assist borrowers experiencing financial difficulties.

We may modify the terms of our finance receivables to assist borrowers experiencing financial difficulties.

When we modify a loan’s 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 loan as a TDR finance receivable.

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Allowance for TDR finance receivable losses 279 (9) 270

There were no credit cards classified as TDR finance receivables for the years ended December 31, 2021 and 2020.

There were no credit cards classified as TDR finance receivables at December 31, 2022 or December 31, 2021.

DISTRIBUTION OF FINANCE RECEIVABLES BY FICO SCORE

There are many different categorizations used in the consumer lending industry to describe the creditworthiness of a borrower, including prime, near-prime, and sub-prime.

While management does not utilize FICO scores to manage credit quality, we have presented the following on how we group FICO scores into said categories for comparability purposes across our industry:

While management does not utilize FICO scores to manage credit quality, we group FICO scores into the following categories for comparability purposes across our industry:

FICO score of 660 or higher

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December 31, 2022

FICO scores *

660 or higher

$ 4,255 $ 15 $ 4,270

619 or below 8,969 4 8,973

4,986 37 5,023

10,638 55 10,693

Total $ 19,879 $ 107 $ 19,986

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$ 4,897 $ 14 $ 4,911

619 or below 8,554 — 8,554

5,321 7 5,328

8,969 4 8,973

Total $ 19,187 $ 25 $ 19,212

* Due to the impact of COVID-19, FICO scores as of December 31, 2021 and December 31, 2020 may have been impacted by government stimulus measures, borrower assistance programs, and potentially inconsistent reporting to credit bureaus.

* Due to the impact of COVID-19, FICO scores as of December 31, 2021 may have been positively impacted by government stimulus measures, borrower assistance programs, and potentially inconsistent reporting to credit bureaus.

Liquidity and Capital Resources

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Future purchases may be made through the open market, privately negotiated transactions with third parties, or pursuant to one or more tender or exchange offers, all of which are subject to terms, prices, and consideration we may determine at our discretion.

During 2021, OMH generated net income of $1.3 billion.

During the year ended December 31, 2022, OMH generated net income of $878 million.

OMH’s net cash inflow from operating and investing activities totaled $268 million for the year ended December 31, 2022.

At December 31, 2021, our scheduled interest payments for 2022 totaled $594 million and there are no scheduled principal payments for 2022 on our existing debt (excluding securitizations).

As of December 31, 2021, we had $10.2 billion of unencumbered gross finance receivables.

At December 31, 2022, our scheduled principal and interest payments for 2023 on our existing debt (excluding securitizations) totaled $1.5 billion.

As of December 31, 2022, we had $9.3 billion of unencumbered loans.

Based on our estimates and considering the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due for at least the next 24 months.

OMFC’s Issuance and Notice of Redemption of Unsecured Debt

For information regarding the issuance and notice of redemption of OMFC's unsecured debt, see Note 8 of the Notes to the Consolidated Financial Statements included in this report.

OMFC’s Unsecured Corporate Revolver

On October 25, 2021, we entered into an unsecured corporate revolver.

At December 31, 2022, the borrowing capacity of our corporate revolver was $1.25 billion, and no amounts were drawn.

OMFC’s Redemption and Repurchases of Unsecured Debt

For information regarding the redemption and open market repurchases of OMFC’s unsecured debt, see Note 8 of the Notes to the Consolidated Financial Statements included in this report.

Securitizations and Borrowings from Revolving Conduit Facilities

During the year ended December 31, 2021, we completed two personal loan securitizations (OMFIT 2021-1 and ODART 2021-1, see “Securitized Borrowings” below), and redeemed three personal loan securitizations (OMFIT 2017-1, SLFT 2015-B, and SLFT 2017-A).

At December 31, 2021, we had $8.7 billion of gross finance receivables pledged as collateral for our securitization transactions.

During the year ended December 31, 2021, we entered into two new revolving conduit facilities and terminated one revolving conduit facility.

At December 31, 2021, an aggregate of $600 million was drawn under our conduit facilities, and the remaining borrowing capacity is $5.4 billion.

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

See Notes 8 and 9 of the Notes to the Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, and revolving conduit facilities.

During the year ended December 31, 2022, we completed four personal loan securitizations (OMFIT 2022-S1, ODART 2022-1, OMFIT 2022-2, and OMFIT 2022-3, see “Securitized Borrowings” below) and redeemed five personal loan securitizations (ODART 2018-1, OMFIT 2019-1, OMFIT 2015-3, OMFIT 2018-1, and OMFIT 2016-3).

During the year ended December 31, 2022, we entered into one new revolving conduit facility.

At December 31, 2022, $50 million was drawn under our revolving conduit facilities, and the remaining borrowing capacity was $6.1 billion.

At December 31, 2022, we had $10.3 billion of gross finance receivables pledged as collateral for our securitizations, revolving conduit facilities, and private secured term funding.

Private Secured Term Funding

On April 25, 2022, OMFC entered into a $350 million private secured term funding collateralized by our personal loans.

Credit Ratings

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Rating Outlook

S&P BB- Positive

S&P BB Stable

Moody’s Ba2 Stable

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Stock Repurchased

During the year ended December 31, 2021, OMH repurchased and held in treasury 3,142,923 shares of its common stock through its stock repurchase program for an aggregate total of $169 million, including commissions and fees.

To provide funding for the OMH stock repurchase, the OMFC Board of Directors authorized dividend payments in the amount of $200 million.

Additionally, on August 3, 2021 and October 28, 2021, OMH participated in two concurrent share buybacks, in which we purchased 1,700,000 shares and 1,870,000 shares, respectively, of OMH common stock for an aggregate total of $99 million and $100 million, respectively.

The August and October Concurrent Share Buybacks were made pursuant to separate Board authorizations and did not reduce our availability under the stock repurchase program.

To provide funding for the Concurrent Share Buybacks, the OMFC Board of Directors authorized dividend payments in the amount of $199 million.

During the year ended December 31, 2022, OMH repurchased 7,181,023 shares of its common stock through its stock repurchase program for an aggregate total of $303 million, including commissions and fees.

As of December 31, 2022, OMH held a total of 13,813,476 shares of treasury stock.

To provide funding for the OMH stock repurchases, the OMFC Board of Directors authorized dividend payments in the amount of $280 million.

For additional information regarding the shares repurchased, see Item 5.

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Total $ 3.80 $ 472

* Our February 8, 2021 and July 21, 2021 dividend declarations included the minimum quarterly dividends of $0.45 per share and $0.70 per share, respectively.

To provide funding for the dividend, OMFC paid dividends of $1.3 billion to OMH during the year ended December 31, 2021.

To provide funding for the dividend, OMFC paid dividends of $471 million to OMH during the year ended December 31, 2022.

On February 7, 2023, OMH declared a dividend of $1.00 per share payable on February 24, 2023 to record holders of OMH's common stock as of the close of business on February 17, 2023.

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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.

Our first sale was executed in the first quarter of 2021.

During the year ended December 31, 2021, we sold $505 million of gross finance receivables.

For further information on the whole loan sale transactions, see Note 4 of the Notes to the Consolidated Financial Statements included in this report.

As of December 31, 2022, we have whole loan sale flow agreements with third parties, with remaining terms of up to one year, 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.

During the year ended December 31, 2022, we sold $720 million of gross finance receivables, compared to $505 million during the year ended December 31, 2021.

See Note 4 of the Notes to the Consolidated Financial Statements included in this report for further information on the whole loan sale transactions.

OMH's Operating Activities

Net cash provided by operations of $2.2 billion for 2021 reflected net income of $1.3 billion, the impact of non-cash items, and an unfavorable change in working capital of $48 million.

Net cash provided by operations of $2.2 billion for 2020 reflected net income of $730 million, the impact of non-cash items, and an unfavorable change in working capital of $118 million.

Net cash provided by operations of $2.4 billion for 2019 reflected net income of $855 million, the impact of non-cash items, and a favorable change in working capital of $67 million.

Net cash provided by operations of $2.4 billion for the year ended December 31, 2022 reflected net income of $878 million, the impact of non-cash items, and an unfavorable change in working capital of $90 million.

Net cash provided by operations of $2.2 billion for the year ended December 31, 2021 reflected net income of $1.3 billion, the impact of non-cash items, and an unfavorable change in working capital of $48 million.

Net cash provided by operations of $2.2 billion for the year ended December 31, 2020 reflected net income of $730 million, the impact of non-cash items, and an unfavorable change in working capital of $118 million.

OMH's Investing Activities

Net cash used for investing activities of $2.1 billion, $751 million, and $3.4 billion for 2021, 2020, and 2019 respectively, was primarily due to net principal originations of finance receivables and purchases of available-for-sale and other securities, partially offset by calls, sales, and maturities of available-for-sale and other securities and proceeds from sales of finance receivables.

Net cash used for investing activities of $2.1 billion for both the years ended December 31, 2022 and 2021 was primarily due to net principal originations and purchases of finance receivables and purchases of available-for-sale and other securities, partially offset by the proceeds from sales of finance receivables and calls, sales, and maturities of available-for-sale and other securities.

Net cash used for investing activities of $751 million for the year ended December 31, 2020 was primarily due to net principal originations of finance receivables and purchases of available-for-sale and other securities, partially offset by calls, sales and maturities of available-for-sale and other securities.

OMH's Financing Activities

Net cash used for financing activities of $1.8 billion for 2021 was primarily due to debt repayments, cash dividends paid, and the cash paid to repurchase common stock during the period, partially offset by the issuances of the OMFIT 2021-1 and ODART 2021-1 securitizations, the Social Bond, and the 3.875% Senior Notes due 2028.

Net cash used for financing activities of $370 million for 2020 was primarily due to debt repayments, cash dividends paid, and the cash paid on the common stock repurchased, partially offset by the issuances of the 8.875% Senior Notes due 2025, and the OMFIT 2020-1 and OMFIT 2020-2 securitizations during the period.

Net cash provided by financing activities of $1.5 billion for 2019 was primarily due to net issuances of long-term debt offset primarily by the cash dividends paid in 2019.

Net cash used for financing activities of $326 million for the year ended December 31, 2022 was primarily due to repayments and repurchases of long-term debt, cash dividends paid, and the cash paid to repurchase common stock, partially offset by the issuance and borrowings of long-term debt.

Net cash used for financing activities of $1.8 billion and $370 million for the years ended December 31, 2021 and 2020, respectively, were primarily due to debt repayments, cash dividends paid, and the cash paid to repurchase common stock, partially offset by the issuance and borrowings of long-term debt.

OMH's Cash and Investments

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• the potential for disruptions in the debt and equity markets.

The principal factors that could decrease our liquidity are customer delinquencies and defaults, a decline in customer prepayments, and a prolonged inability to adequately access capital market funding.

The principal factors that could decrease our liquidity are customer delinquencies and defaults, a decline in customer prepayments, rising interest rates, and a prolonged inability to adequately access capital market funding.

We intend to support our liquidity position by utilizing some or all of the following strategies:

• maintaining disciplined underwriting standards and pricing for loans we originate or purchase and managing purchases of finance receivables;

• pursuing additional debt financings (including new securitizations and new unsecured debt issuances, debt refinancing transactions, unsecured corporate revolvers, and revolving conduit facilities), or a combination of the foregoing;

• pursuing additional debt financings (including new secured and unsecured debt issuances, debt refinancing transactions, unsecured corporate revolvers, and revolving conduit facilities), or a combination of the foregoing;

• purchasing portions of our outstanding indebtedness through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we may determine;

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

See Note 10 of the Notes to the Consolidated Financial Statements included in this report for further information on these state restrictions and the dividends paid by our insurance subsidiaries from 2019 through 2021.

See Note 10 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in this report for further information on these state restrictions and the dividends paid by our insurance subsidiaries from 2020 through 2022.

OUR DEBT AGREEMENTS

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

See Note 8 of the Notes to the Consolidated Financial Statements included in this report for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.

See Note 8 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in this report for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.

Securitized Borrowings

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OMFIT 2019-2 900 947 900 995 3.30 % 7 years

OMFIT 2018-1 632 650 298 339 3.91 % 3 years

OMFIT 2018-2 368 381 350 400 3.87 % 5 years

OMFIT 2019-A 789 892 750 892 3.78 % 7 years

OMFIT 2020-1 821 958 457 556 4.34 % 2 years

OMFIT 2020-2 1,000 1,053 1,000 1,053 2.03 % 5 years

OMFIT 2019-A 789 892 750 892 3.78 % 7 years

OMFIT 2021-1 850 904 850 904 2.46 % 5 years

OMFIT 2022-S1 600 652 600 652 4.31 % 3 years

OMFIT 2022-2 1,000 1,099 1,000 1,099 5.17 % 2 years

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ODART 2021-1 1,000 1,053 1,000 1,053 0.98 % 2 years

ODART 2021-1 (d) 1,000 1,053 1,000 1,053 0.98 % 2 years

ODART 2022-1 600 632 600 632 4.92 % 2 years

Total securitizations $ 9,644 $ 10,411 $ 9,003 $ 10,076

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(b) Inclusive of in-process replenishments of collateral for securitized borrowings in a revolving status as of December 31, 2022.

The notes mature in June of 2036.

(d) On October 15, 2021, we issued $1 billion of notes backed by personal loans.

The notes mature in November of 2030.

(c) On December 14, 2022, we issued $979 million of notes backed by personal loans and retained the Class C and Class D notes in the amount of $183 million.

The notes mature in May of 2034.

Revolving Conduit Facilities

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OneMain Financial Funding IX, LLC 600 —

Mystic River Funding, LLC 600 —

OneMain Financial Auto Funding I, LLC 550 —

Seine River Funding, LLC 550 —

Chicago River Funding, LLC 500 —

Hudson River Funding, LLC 500 —

OneMain Financial Funding VIII, LLC 400 —

River Thames Funding, LLC 400 —

OneMain Financial Funding X, LLC 400 50

Chicago River Funding, LLC 375 —

Mystic River Funding, LLC 350 —

Thayer Brook Funding, LLC 350 —

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New River Funding Trust 250 —

River Thames Funding, LLC 250 200

Lawrence River Funding, LLC 250 —

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At December 31, 2022, our material contractual obligations were as follows:

(dollars in millions) 2022 2023-2024 2025-2026 2027+ Securitizations Revolving

(dollars in millions) 2023 2024-2025 2026-2027 2028+ Securitizations Private Secured Term Funding Revolving

Facilities Total

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Securitization debt (a) $ — $ — $ — $ — $ 9,003 $ — $ — $ 9,003

Revolving conduit facilities (a) — — — — — 600 600

Medium-term notes 1,004 2,519 2,350 2,933 — — — 8,806

Junior subordinated debt — — — 350 — — — 350

Private secured term funding (a) — — — — — 350 — 350

Revolving conduit facilities (a) — — — — — — 50 50

Total principal maturities 1,004 2,519 2,350 3,283 9,003 350 50 18,559

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Total $ 1,517 $ 3,306 $ 2,785 $ 4,407 $ 9,902 $ 414 $ 59 $ 22,390

(a) On-balance sheet securitizations and borrowings under revolving conduit facilities are not included in maturities by period due to their variable monthly payments.

(b) Future interest payments on floating-rate debt are estimated based upon floating rates in effect at December 31, 2021.

(a) On-balance sheet securitizations, private secured term funding, and borrowings under revolving conduit facilities are not included in maturities by period due to their variable monthly payments.

(b) Future interest payments on floating-rate debt are estimated based upon rates in effect at December 31, 2022.

OFF-BALANCE SHEET ARRANGEMENTS

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These seasonal trends contribute to fluctuations in our operating results and cash needs throughout the year.

The seasonality impact on our delinquency trend continues to be affected by the COVID-19 pandemic and mitigating efforts from government stimulus measures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis