What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-13 compared with 2023-02-10 · 368 added, 219 removed, 1675 unchanged (26% of the section changed)

41 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, 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

21 unchanged sentences

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

Allowance for Finance Receivable Losses for 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 $1,921 million as of December 31, 2022.

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 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.

Allowance for Finance Receivable Losses for Personal Loans – 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 was $2,415 million as of December 31, 2023.

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

Management also considers forecasted macroeconomic conditions within the Company’s reasonable and supportable forecast period, which includes the forecasted unemployment rate.

The principal considerations for our determination that performing procedures relating to the allowance for finance receivable losses for personal loans – 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.

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

/s/ PricewaterhouseCoopers LLP

7 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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

15 unchanged sentences

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

Management also considers forecasted macroeconomic conditions within the Company’s reasonable and supportable forecast period, which incorporated the overall unemployment rate.

Allowance for Finance Receivable Losses for Personal Loans – 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 was $2,415 million as of December 31, 2023.

Management also considers forecasted macroeconomic conditions within the Company’s reasonable and supportable forecast period, which includes the forecasted unemployment rate.

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

/s/ PricewaterhouseCoopers LLP

12 unchanged sentences

Unearned insurance premium and claim reserves ( 771 ) ( 749 )

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 1.1 billion in 2022 and $ 910 million in 2021)

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 1.4 billion in 2023 and $ 1.1 billion in 2022)

( 2,480 ) ( 2,311 )

17 unchanged sentences

Additional paid-in capital 1,715 1,689

Accumulated other comprehensive income (loss) ( 119 ) 61

Accumulated other comprehensive loss ( 87 ) ( 127 )

Retained earnings 2,285 2,119

20 unchanged sentences

Net loss on repurchases and repayments of debt

— ( 27 ) ( 78 )

Other 119 87 63

23 unchanged sentences

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

49 ( 229 ) ( 53 )

Retirement plan liability adjustments — ( 12 ) ( 1 )

Foreign currency translation adjustments 4 ( 10 ) 1

Changes in discount rate for insurance claims and policyholder liabilities 3 62 25

Other ( 5 ) 22 11

3 unchanged sentences

Foreign currency translation adjustments ( 1 ) 2 —

Changes in discount rate for insurance claims and policyholder liabilities — ( 14 ) ( 5 )

Other 1 ( 5 ) ( 3 )

Other comprehensive income (loss), net of tax, before reclassification adjustments

40 ( 131 ) ( 12 )

Reclassification adjustments included in net income, net of tax:

2 unchanged sentences

Other comprehensive income (loss), net of tax

40 ( 132 ) ( 13 )

Comprehensive income $ 681 $ 740 $ 1,301

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Balance, January 1, 2023 $ 1 $ 1,689 $ ( 127 ) $ 2,119 $ ( 667 ) $ 3,015

Net impact of adoption of ASU 2022-02 (see Note 3)

— — — 12 — 12

Balance, January 1, 2023 (post-adoption) 1 1,689 ( 127 ) 2,131 ( 667 ) 3,027

Common stock repurchased — — — — ( 65 ) ( 65 )

4 unchanged sentences

— ( 10 ) — — — ( 10 )

Other comprehensive loss — — ( 180 ) — — ( 180 )

Cash dividends (a)

Other comprehensive income

— — 40 — — 40

Cash dividends*

— — — ( 486 ) — ( 486 )

Net income — — — 641 — 641

3 unchanged sentences

— — — — ( 303 ) ( 303 )

Treasury stock issued — — — ( 2 ) 4 2

Share-based compensation expense, net of forfeitures

3 unchanged sentences

Other comprehensive loss — — ( 132 ) — — ( 132 )

Cash dividends (a)

Cash dividends*

— — — ( 478 ) — ( 478 )

1 unchanged sentence

Balance, December 31, 2022 $ 1 $ 1,689 $ ( 127 ) $ 2,119 $ ( 667 ) $ 3,015

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

Net impact of adoption of ASU 2016-13 (b)

Balance, January 1, 2021

$ 1 $ 1,655 $ 94 $ 1,691 $ — $ 3,441

Net impact of adoption of ASU 2018-12 (see Note 3)

— — ( 76 ) — — ( 76 )

Balance, January 1, 2021 (post-adoption)

Common stock repurchased (c) — ( 45 ) — — — $ ( 45 )

1 1,655 18 1,691 — 3,365

Common stock repurchased

— — — ( 368 ) $ ( 368 )

Share-based compensation expense, net of forfeitures

2 unchanged sentences

— ( 6 ) — — — ( 6 )

Other comprehensive income — — 50 — — 50

Cash dividends (a) — — — ( 807 ) — ( 807 )

Other comprehensive loss

— — ( 13 ) — — ( 13 )

Cash dividends*

— — — ( 1,278 ) — ( 1,278 )

Net income — — — 1,314 — 1,314

Balance, December 31, 2021 $ 1 $ 1,672 $ 5 $ 1,727 $ ( 368 ) $ 3,037

(a) Cash dividends declared were $ 3.80 per share, $ 9.55 per share, and $ 5.94 per share in 2022, 2021, and 2020, 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.

* Cash dividends declared were $ 4.00 per share, $ 3.80 per share, and $ 9.55 per share in 2023, 2022, and 2021, respectively.

See Notes to the Consolidated Financial Statements.

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Deferred income tax charge (benefit)

( 36 ) ( 64 ) 78

Net loss on repurchases and repayments of debt

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Withholding tax on share-based compensation ( 10 ) ( 14 ) ( 6 )

Net cash used for financing activities ( 326 ) ( 1,810 ) ( 370 )

Net cash provided by (used for) financing activities 932 ( 326 ) ( 1,810 )

Net change in cash and cash equivalents and restricted cash and restricted cash equivalents 589 ( 58 ) ( 1,706 )

26 unchanged sentences

Unearned insurance premium and claim reserves ( 771 ) ( 749 )

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 1.1 billion in 2022 and $ 910 million in 2021)

Allowance for finance receivable losses (includes allowance of consolidated VIEs of $ 1.4 billion in 2023 and $ 1.1 billion in 2022)

( 2,480 ) ( 2,311 )

19 unchanged sentences

Additional paid-in capital 1,959 1,933

Accumulated other comprehensive income (loss) ( 119 ) 61

Accumulated other comprehensive loss ( 87 ) ( 127 )

Retained earnings 1,303 1,193

16 unchanged sentences

Net loss on repurchases and repayments of debt

— ( 27 ) ( 78 )

Other 119 87 63

12 unchanged sentences

(dollars in millions) 2023 2022 2021

Years Ended December 31, 2022 2021 2020

Net income $ 641 $ 872 $ 1,314

1 unchanged sentence

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

49 ( 229 ) ( 53 )

Retirement plan liability adjustments — ( 12 ) ( 1 )

Foreign currency translation adjustments 4 ( 10 ) 1

Changes in discount rate for insurance claims and policyholder liabilities 3 62 25

Other ( 5 ) 22 11

3 unchanged sentences

Foreign currency translation adjustments ( 1 ) 2 —

Changes in discount rate for insurance claims and policyholder liabilities — ( 14 ) ( 5 )

Other 1 ( 5 ) ( 3 )

Other comprehensive income (loss), net of tax, before reclassification adjustments

40 ( 131 ) ( 12 )

Reclassification adjustments included in net income, net of tax:

2 unchanged sentences

Other comprehensive income (loss), net of tax

40 ( 132 ) ( 13 )

Comprehensive income $ 681 $ 740 $ 1,301

10 unchanged sentences

Balance, January 1, 2023 $ 5 $ 1,933 $ ( 127 ) $ 1,193 $ 3,004

Net impact of adoption of ASU 2022-02 (see Note 3)

Balance, January 1, 2023 (post-adoption) 5 1,933 ( 127 ) 1,205 3,016

Share-based compensation expense, net of forfeitures — 36 — — 36

Withholding tax on share-based compensation — ( 10 ) — — ( 10 )

Other comprehensive loss — — ( 180 ) — ( 180 )

Other comprehensive income

Cash dividends — — — ( 543 ) ( 543 )

8 unchanged sentences

Balance, December 31, 2022 $ 5 $ 1,933 $ ( 127 ) $ 1,193 $ 3,004

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

Net impact of adoption of ASU 2016-13 *

Balance, January 1, 2021 $ 5 $ 1,899 $ 94 $ 1,442 $ 3,440

Net impact of adoption of ASU 2018-12 (see Note 3)

— — ( 76 ) — ( 76 )

Balance, January 1, 2021 (post-adoption)

5 1,899 18 1,442 3,364

Share-based compensation expense, net of forfeitures — 23 — — 23

Withholding tax on share-based compensation — ( 6 ) — — ( 6 )

Other comprehensive income — — 50 — 50

Other comprehensive loss

— — ( 13 ) — ( 13 )

Cash dividends — — — ( 1,678 ) ( 1,678 )

1 unchanged sentence

Balance, December 31, 2021 $ 5 $ 1,916 $ 5 $ 1,078 $ 3,004

* 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.

9 unchanged sentences

Deferred income tax charge (benefit)

( 36 ) ( 64 ) 78

Net loss on repurchases and repayments of debt

18 unchanged sentences

Withholding tax on share-based compensation ( 10 ) ( 14 ) ( 6 )

Net cash used for financing activities ( 304 ) ( 1,845 ) ( 365 )

Net cash provided by (used for) financing activities 937 ( 304 ) ( 1,845 )

Net change in cash and cash equivalents and restricted cash and restricted cash equivalents 594 ( 35 ) ( 1,737 )

47 unchanged sentences

We include the cash flows from finance receivables held for investment in our 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.

We may finance certain optional 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 our consolidated statements of cash flows.

9 unchanged sentences

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.

We resume the accrual of interest on 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

Modified Finance Receivables to Borrowers Experiencing Financial Difficulty

We make modifications to our finance receivables to assist borrowers who are experiencing financial difficulty, participating in a counseling or settlement arrangement, or are in bankruptcy.

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.

When we modify the contractual terms for economic or other reasons related to the borrower’s financial difficulties we classify that receivable as a modified 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.

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 qualifying payments and then the accounts are 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.

reduce the interest rate, extend the term, defer or forgive past due interest, or forgive principal.

As part of the modification, we may require qualifying payments before the accounts are generally brought current for delinquency reporting.

In addition, for principal forgiveness, we may require future payment performance by the borrower under the modified terms before the balances are contractually forgiven.

We fully reserve for any potential principal forgiveness in our allowance for finance receivable losses.

Accounts that are deemed to be a modified finance receivable are measured for impairment in accordance with our policy for allowance for finance receivable losses.

Allowance for Finance Receivable Losses

2 unchanged sentences

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.

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

1 unchanged sentence

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.

Other attributes in the model include loan modification status, 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.

10 unchanged sentences

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 generally charge-off to the allowance for finance receivable losses on personal loans and credit cards that are beyond seven payments (approximately 180 days) contractually 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 contractually 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) contractually past due and may charge-off prior to the account becoming seven payments (approximately 180 days) contractually 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.

We also establish reserves for TDR finance receivables, which are included in Allowance for finance receivable losses in our consolidated balance sheets.

The allowance for finance receivable losses related to our TDR finance receivables represent loan-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 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.

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

We test goodwill for potential impairment at least annually as of October 1 of each year and more frequently if events occur or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount.

We first complete a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test.

5 unchanged sentences

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.

For intangible assets with a finite useful life, we review for impairment when 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 or changes in circumstances indicate the assets are more likely than not to be impaired.

For indefinite-lived intangible assets, we review for impairment at least annually and more frequently if events or changes in circumstances 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.

26 unchanged sentences

We recognize commissions on optional products as Other revenues - other in our consolidated statements of operations when earned.

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

We may finance certain optional 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 our consolidated balance sheets.

7 unchanged sentences

The effects of changes in such estimated reserves are classified in Insurance policy benefits and claims in our 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 in our consolidated balance sheets and include estimates of the amounts expected to be recovered from reinsurers on insurance claims and policyholder liabilities.

Policy reserves are established for our long-duration contracts.

The liability for future policy benefits is the present value of estimated future policy benefits to be paid to or on behalf of policyholders less the present value of estimated future net premiums to be collected from policyholders.

To estimate the liability, we make assumptions for mortality, morbidity, lapses, and the discount rate.

At least annually, we update our estimate of the liability with actual experience and review our cash flow assumptions.

The updated liability is discounted at the original discount rate at contract inception, and the change in the balance is recognized as a remeasurement gain or loss and included in Insurance policy benefits and claims in our consolidated statements of operations.

The discount rate assumption is the equivalent of an upper-medium grade fixed-income instrument yield.

To determine the original discount rate at contract inception, we use a weighted average rate based on a forward yield curve over the contract issue year.

At each reporting period, the liability is remeasured using the current discount rate and the change in the liability due to the discount rate is recognized in Accumulated other comprehensive income (loss) in our consolidated balance sheets.

Insurance Policy Acquisition Costs

7 unchanged sentences

We record interest receivable on investment securities in Other assets in our consolidated balance sheets.

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.

17 unchanged sentences

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

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

41 unchanged sentences

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 in our consolidated balance sheets, 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.

We recognize the net actuarial gains or losses and prior service cost or credit that arise during the period in Accumulated other comprehensive income or loss.

Many of our employees are participants in our 401(k) Plan.

33 unchanged sentences

Recent Accounting Pronouncements

ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED

ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED

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

3 unchanged sentences

and enhanced disclosures.

Upon adoption, our 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 and we will adopt using the modified retrospective transition method.

This ASU requires a transition date of January 1, 2021 and will result in recasting prior periods.

Our long-duration contracts include term and whole life, accidental death and dismemberment, and disability income protection.

The adoption of this ASU resulted in an increase to insurance claims and policyholder liabilities of $ 97 million, $ 71 million, and $ 18 million as of January 1, 2021, December 31, 2021, and December 31, 2022, respectively, and a reduction to accumulated other comprehensive income, net of tax, of $ 75 million, $ 56 million, and $ 8 million as of January 1, 2021, December 31, 2021, and December 31, 2022, respectively.

The impact to retained earnings was immaterial as of January 1, 2021, December 31, 2021, and December 31, 2022.

The ASU requires the assumptions used to measure the liability for future policy benefits to be updated at least annually.

The guidance prescribes 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 Accumulated other comprehensive income.

The amendments in this ASU became effective for the Company beginning January 1, 2023 and we adopted using the modified retrospective transition method.

This ASU required a transition date of January 1, 2021 and resulted in recasting prior periods.

The effects of the adoption of ASU 2018-12 to our consolidated balance sheets were as follows:

(dollars in millions) As Reported ASU 2018-12 Adjustment As Recast

December 31, 2022

Other assets (OMH only) $ 1,150 $ 4 $ 1,154

Other assets (OMFC only) 1,148 4 1,152

Insurance claims and policyholder liabilities 602 18 620

Accumulated other comprehensive loss ( 119 ) ( 8 ) ( 127 )

Retained earnings (OMH only) 2,125 ( 6 ) 2,119

Retained earnings (OMFC only) 1,199 ( 6 ) 1,193

December 31, 2021

Other assets (OMH only) $ 1,003 $ 16 $ 1,019

Other assets (OMFC only) 1,001 16 1,017

Insurance claims and policyholder liabilities 621 72 693

Accumulated other comprehensive income 61 ( 56 ) 5

January 1, 2021

Other assets (OMH and OMFC) $ 1,054 $ 21 $ 1,075

Insurance claims and policyholder liabilities 621 97 718

Accumulated other comprehensive income 94 ( 76 ) 18

The effects of the adoption of ASU 2018-12 to our consolidated statements of operations were as follows:

(dollars in millions, except per share amounts) As Reported ASU 2018-12 Adjustment As Recast

Year Ended December 31, 2022

Insurance policy benefits and claims $ 150 $ 8 $ 158

Income before income taxes 1,163 ( 8 ) 1,155

Income taxes 285 ( 2 ) 283

Net income 878 ( 6 ) 872

Basic EPS (OMH only) 7.07 ( 0.05 ) 7.02

Diluted EPS (OMH only) 7.06 ( 0.05 ) 7.01

Year Ended December 31, 2021

Basic EPS (OMH only) $ 9.90 $ 0.01 $ 9.91

Diluted EPS (OMH only) 9.87 0.01 9.88

The effects of the adoption of ASU 2018-12 to our consolidated statements of comprehensive income were as follows:

(dollars in millions) As Reported ASU 2018-12 Adjustment As Recast

Year Ended December 31, 2022

Comprehensive income $ 698 $ 42 $ 740

Year Ended December 31, 2021

Comprehensive income $ 1,281 $ 20 $ 1,301

The effects of the adoption of ASU 2018-12 to our consolidated statements of cash flows were as follows:

(dollars in millions) As Reported ASU 2018-12 Adjustment As Recast

Year Ended December 31, 2022

Net income $ 878 $ ( 6 ) $ 872

Deferred income tax charge ( 62 ) ( 2 ) ( 64 )

Cash flows due to changes in other assets and other liabilities (OMH only)

( 90 ) 8 ( 82 )

Cash flows due to changes in other assets and other liabilities (OMFC only) ( 89 ) 8 ( 81 )

As a result of the adoption of ASU 2018-12, our significant accounting policy related to long-duration insurance contracts for policy and claim reserves has changed to reflect the requirements of the new standard.

See Note 2 for the updated significant accounting policy as of the transition date of January 1, 2021.

Financial Instruments

2 unchanged sentences

The amendment also requires disclosure of gross charge-offs by year of origination for finance receivables.

The amendments in this ASU become effective for the Company beginning January 1, 2023 and we will adopt using the modified retrospective transition method.

The adoption of this ASU will not have a material impact on the 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.

We adopted the amendments in this ASU as of January 1, 2023 using the modified retrospective transition method.

Upon adoption, we recorded a decrease to the allowance for finance receivable losses of $ 16 million, a decrease to deferred tax assets of $ 4 million and a one-time corresponding cumulative increase to Retained earnings, net of tax, of $ 12 million in our consolidated balance sheets as of January 1, 2023.

As a result of the adoption of ASU 2022-02, several of our significant accounting policies have changed to reflect the requirements of the new standard.

See Note 2 for the updated significant accounting policies as of January 1, 2023.

Troubled Debt Restructured Finance Receivables

ASU 2022-02 superseded the accounting for troubled debt restructurings by creditors.

As a result of the adoption of this ASU, the accounting for TDR finance receivables is no longer applicable for periods beginning on or after January 1, 2023.

ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED

Segment Reporting

In November of 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires annual and interim disclosure of significant segment expenses and other segment items.

The amendments in this ASU will become effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied on a retrospective basis to all prior periods presented in the financial statements.

We are currently evaluating the impact of the standard on our segment disclosures.

In December of 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires disaggregated information in the rate reconciliation and income taxes paid disclosures.

The amendments in this ASU will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied on a prospective basis, with retrospective application allowed.

We are currently evaluating the impact of the standard on our income tax disclosures.

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

Finance Receivables

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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.

During the third quarter of 2021, we began offering credit cards.

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

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

Credit card gross finance receivables equal the principal balance and billed interest and fees.

Credit card gross finance receivables equal the unpaid principal balance, billed interest, and fees.

GEOGRAPHIC DIVERSIFICATION

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Ohio 1,006 5 963 5

New York 879 4 749 4

Georgia 843 4 792 4

Illinois 826 4 777 4

New York 749 4 681 4

Indiana 740 4 726 4

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Florida 38 11 8 8

Washington 5 5 1 5

Arizona 4 4 1 4

Pennsylvania 18 5 4 4

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WHOLE LOAN SALE TRANSACTIONS

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.

We have whole loan sale flow agreements with third parties, with remaining terms of less than one year , in which we agreed to sell a total of $ 60 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.

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The gain on the sales were $ 52 million and $ 63 million during the years ended December 31, 2023 and 2022, respectively.

Subsequent to year-end, we entered into a whole loan sale flow agreement with a third party, with a term of less than two years , in which we agreed to sell $ 600 million of gross receivables of newly originated unsecured personal loans along with any associated accrued interest.

CREDIT QUALITY INDICATOR

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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 managed by our centralized operations.

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

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

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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, at which point we reverse finance charges and fees previously accrued.

For credit cards, net accrued finance charges and fees reversed for the years ended December 31, 2022 and 2021 were immaterial.

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

For credit cards, net accrued finance charges and fees reversed totaled $ 11 million during the year ended December 31, 2023, and were immaterial during the year ended December 31, 2022.

The following tables below are a summary of our personal loans by the year of origination and number of days delinquent:

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Total $ 10,560 $ 6,260 $ 2,781 $ 862 $ 423 $ 133 $ 21,019

Gross charge-offs $ 65 $ 749 $ 630 $ 183 $ 101 $ 40 $ 1,768

(dollars in millions) 2022 2021 2020 2019 2018 Prior Total

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There were no credit cards that were converted to term loans at December 31, 2023 or December 31, 2022.

TROUBLED DEBT RESTRUCTURED FINANCE RECEIVABLES

Information regarding TDR finance receivables were as follows:

(dollars in millions)

MODIFIED FINANCE RECEIVABLES TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY

We make modifications to our finance receivables to assist borrowers who are experiencing financial difficulty and when we modify the contractual terms for economic or other reasons related to the borrower’s financial difficulties, we classify that receivable as a modified finance receivable.

The following tables below represent information regarding modified finance receivables to borrowers experiencing financial difficulty on or after January 1, 2023, the effective date of ASU 2022-02.

The period-end carrying value of finance receivables modified during the period were as follows:

(dollars in millions) Year Ended

December 31, 2023

Interest rate reduction and term extension $ 457

Interest rate reduction and principal forgiveness 331

Total modifications to borrowers experiencing financial difficulties $ 788

Modifications as a percent of net finance receivables - personal loans 3.75 %

The financial effect of modifications made during the period were as follows:

(dollars in millions) Year Ended

December 31, 2023

Weighted-average interest rate reduction 19.48 %

Weighted-average term extension (months) 25

Principal/interest forgiveness $ 44

The performance of modified finance receivables by delinquency status was as follows:

(dollars in millions) December 31, 2023

30-59 days past due

60-89 days past due 48

90+ days past due

* Excludes $ 89 million of modified finance receivables that subsequently charged off.

The period-end carrying value of modified finance receivables for which there was a default during the period to cause the modified finance receivable to be considered nonperforming ( 90 days or more contractually past due) were as follows:

(dollars in millions) Year Ended

December 31, 2023

Interest rate reduction and term extension $ 56

Interest rate reduction and principal forgiveness 20

See Notes 3 and 5 for additional information on the adoption of ASU 2022-02.

TROUBLED DEBT RESTRUCTURED FINANCE RECEIVABLES PRIOR TO ADOPTION OF ASU 2022-02

ASU 2022-02 superseded the accounting for troubled debt restructurings by creditors.

Due to the adoption of this ASU, the following disclosures related to troubled debt restructuring finance receivables are no longer applicable for reporting periods beginning in 2023.

Information regarding TDR finance receivables were as follows:

(dollars in millions) December 31, 2022

TDR gross finance receivables $ 898

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* 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 at December 31, 2022 or December 31, 2021.

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

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

(dollars in millions)

Years Ended December 31, 2022 2021 2020

December 31, 2022 2021

Pre-modification TDR net finance receivables $ 738 $ 453

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* “Other” modifications primarily consist of loans with both rate reductions and the potential of principal 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, 2022 2021 2020

December 31, 2022 2021

TDR net finance receivables * $ 136 $ 117

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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.

We estimate and record an allowance for finance receivable losses to cover the expected lifetime credit 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 accounting policies for allowance for finance receivable losses.

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

Our unemployment outlook leveraged economic 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.

Our methodology to estimate expected credit losses uses recent macroeconomic forecasts, which include forecasts for unemployment.

We leverage projections from various industry leading providers.

We also consider inflationary pressures, consumer confidence levels, and interest rate increases that may continue to impact the economic outlook.

At December 31, 2023, our economic forecast used a reasonable and supportable period of 12 months.

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Balance at beginning of period $ 2,290 $ 21 $ 2,311

Impact of adoption of ASU 2022-02 * ( 16 ) — ( 16 )

Provision for finance receivable losses 1,651 70 1,721

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Balance at end of period $ 2,290 $ 21 $ 2,311

Year Ended December 31, 2020 (a)

Year Ended December 31, 2021

Balance at beginning of period $ 2,269 $ — $ 2,269

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

Provision for finance receivable losses 588 5 593

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Balance at end of period $ 2,090 $ 5 $ 2,095

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

(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, 2022

Allowance for finance receivable losses:

Collectively evaluated for impairment

$ 1,921 $ 21 $ 1,942

TDR finance receivables 369 — 369

Total $ 2,290 $ 21 $ 2,311

Finance receivables:

Collectively evaluated for impairment

$ 18,975 $ 107 $ 19,082

TDR finance receivables 904 — 904

Total $ 19,879 $ 107 $ 19,986

Allowance for finance receivable losses as a percentage of finance receivables

11.52 % 19.12 % 11.56 %

December 31, 2021

Allowance for finance receivable losses:

Collectively evaluated for impairment $ 1,820 $ 5 $ 1,825

TDR finance receivables

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 %

* As a result of the adoption of ASU 2022-02, we recorded a one-time adjustment to the allowance for finance receivable losses.

See Notes 3 and 4 for additional information on the adoption of ASU 2022-02.

Investment Securities

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Obligations of states, municipalities, and political subdivisions

74 — ( 8 ) 66

Commercial paper 55 — — 55

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Total $ 1,897 $ 1 $ ( 169 ) $ 1,729

* The allowance for credit losses related to our investment securities as of December 31, 2022 and December 31, 2021 were immaterial.

Interest receivables reported in Other assets in our consolidated balance sheets totaled $ 14 million as of December 31, 2022 and $ 13 million as of December 31, 2021, respectively.

* The allowance for credit losses related to our investment securities as of December 31, 2023 and 2022 was immaterial.

Interest receivables reported in Other assets in our consolidated balance sheets totaled $ 14 million as of December 31, 2023 and 2022.

There were no material amounts reversed from investment revenue for available-for-sale securities for the years ended December 31, 2023 and 2022.

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Total $ 1,164 $ ( 76 ) $ 468 $ ( 93 ) $ 1,632 $ ( 169 )

* Unrealized losses on certain available-for-sale securities were less than $1 million and, therefore, were not quantified in the table above.

On a lot basis, we had 1,984 and 2,280 investment securities in an unrealized loss position at December 31, 2023 and December 31, 2022, respectively.

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The proceeds of available-for-sale securities sold or redeemed totaled $ 90 million, $ 278 million and $ 250 million during 2023, 2022, and 2021, respectively.

The net realized gains and losses were immaterial during the years ended December 31, 2022, 2021 and 2020.

The net realized gains and losses were immaterial during 2023, 2022, and 2021.

Contractual maturities of fixed-maturity available-for-sale securities at December 31, 2023 were as follows:

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Preferred stock

Common stock * 33 33

Total $ 72 $ 71

* 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 losses on other securities held were $ 9 million for the year ended December 31, 2022 and immaterial for the years ended December 31, 2021 and 2020.

Net realized gains and losses on other securities sold or redeemed were immaterial during 2022, 2021, and 2020.

Net unrealized gains on other securities held were immaterial for the year ended December 31, 2023.

Net unrealized losses on other securities held were $ 9 million and immaterial for the years ended December 31, 2022 and 2021, respectively.

Net realized gains and losses on other securities sold or redeemed were immaterial for the years ended December 31, 2023, 2022, and 2021.

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.

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

Goodwill and Other Intangible Assets

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Trade names $ 220 $ — $ 220

VOBA 105 ( 77 ) 28

Licenses 25 — 25

Customer relationships 223 ( 223 ) —

Other 13 ( 12 ) 1

VOBA 105 ( 90 ) 15

Total $ 351 $ ( 90 ) $ 261

Amortization expense totaled $ 13 million in 2022, $ 32 million in 2021, and $ 37 million in 2020.

Amortization expense was immaterial in 2023, and $ 13 million and $ 32 million in 2022 and 2021, respectively.

The estimated aggregate amortization of other intangible assets for each of the next five years is immaterial.

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Facilities Unsecured

Notes (a) (e) Junior

Debt (a) Total

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(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 $ 34 million at December 31, 2023 and are reported in Other assets in our consolidated balance sheets.

(e) During the year ended December 31, 2022, we repurchased, in the open market, portions of our Unsecured Notes in the amount of $ 269 million.

In connection with these repurchases, we recognized a net gain of $ 2 million in Net loss on repurchases and repayments of debt in our consolidated statements of operations.

2022 DEBT ISSUANCES AND REDEMPTIONS

Redemption of 8.875 % Senior Notes Due 2025

On April 26, 2022, OMFC issued a notice to fully redeem its 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.

In connection with the redemption, we recognized $ 26 million of net loss on repurchases and repayments of debt during the second quarter of 2022.

UNSECURED CORPORATE REVOLVER

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

During the fourth quarter of 2023, OMFC increased the total maximum borrowing capacity of our unsecured corporate revolver to $ 1.3 billion.

The corporate revolver has a five-year term beginning October 25, 2021, during which draws and repayments may occur.

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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.

With the exception of OMFC’s junior subordinated debenture and unsecured corporate revolver, none of our debt agreements require 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.

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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 principal, premium (if any), and interest on the Junior Subordinated Debenture.

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 5.83 % as of December 31, 2022.

ICE Benchmark Administration and the Financial Conduct Authority have announced that the publication of the most commonly used USD LIBOR settings will cease to be provided or cease to be representative after June 30, 2023.

We expect the Junior Subordinated Debenture to transition from a LIBOR-based interest rate to a SOFR-based interest rate in accordance with the statutory framework provided by the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, and the rules adopted in December 2022 by the Board of Governors of the Federal Reserve System.

Prior to June 30, 2023, the interest rate on the remaining principal balance of the Junior Subordinated Debenture consisted of a variable floating rate (determined quarterly) equal to 3-month LIBOR plus 1.75 %.

ICE Benchmark Administration and the Financial Conduct Authority announced that the publication of the most commonly used USD LIBOR settings has ceased to be provided after June 30, 2023.

Effective in July 2023 the debenture transitioned from a LIBOR-based interest rate to a SOFR-based interest rate in accordance with the statutory framework provided by the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, and the rules adopted in December 2022 by the Board of Governors of the Federal Reserve System.

The replacement rate is 3-month CME Term SOFR plus a spread adjustment of 0.26 % plus 1.75 %, or 7.41 % as of December 31, 2023.

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.

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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, private secured term funding, and revolving conduit facilities were as follows:

The carrying amounts of consolidated VIE assets and liabilities associated with our personal loan securitization trusts, private secured term funding, and revolving conduit facilities were as follows:

(dollars in millions)

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

Principal balances of outstanding loans, if any, are due and payable in full over periods ranging up to ten years as of December 31, 2022.

Principal balances of outstanding loans, if any, are due and payable in full over periods ranging up to nine years as of December 31, 2023.

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

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

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

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Total $ 1,386 $ 1,369

(a) Reported in Unearned insurance premium and clam reserves in our consolidated balance sheets.

(a) Reported in Unearned insurance premium and claim reserves in our consolidated balance sheets.

(b) Reported in Insurance claims and policyholder liabilities in our consolidated balance sheets.

The 2022 balances have been recast as a result of the modified retrospective adoption of ASU 2018-12.

See Note 3 for additional information on the adoption of ASU 2018-12.

Our insurance subsidiaries enter into reinsurance agreements with other insurers.

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(dollars in millions)

At or for the Years Ended December 31, 2022 2021 2020

At or for the Years Ended December 31, 2023 2022 (a) 2021 (a)

Balance at beginning of period $ 93 $ 102 $ 135

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Current year 173 144 165

Prior years * ( 11 ) ( 18 ) ( 11 )

Prior years (b) ( 2 ) ( 12 ) ( 19 )

Total 171 132 146

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Balance at end of period $ 108 $ 93 $ 102

* At December 31, 2022, $ 11 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of credit life, credit disability, and term life claims.

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 credit life, credit disability, and term life claims.

(a) As a result of the modified retrospective adoption of ASU 2018-12, we have recorded a $ 13 million reduction to the 2021 beginning balance, and the previously reported balances were recast to exclude reserves for unpaid claims on our long-duration contracts.

These reserves have been included in our estimate of the liability for future policy benefits as of the transition date of January 1, 2021.

See Note 3 for additional information on the adoption of ASU 2018-12.

(b) At December 31, 2023, $ 2 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of credit disability claims during the period.

At December 31, 2022, $ 12 million reflected a redundancy in the prior years’ net reserves, primarily due to favorable development of credit life and credit disability claims during the period.

At December 31, 2021, $ 19 million reflected a redundancy in the prior years’ net reserves, primarily due to favorable development of credit disability and unemployment claims during the period.

Incurred claims and allocated claim adjustment expenses, net of reinsurance, as of December 31, 2023, were as follows:

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Credit insurance* 60.6 % 26.9 % 6.2 % 3.3 % 1.5 %

LIABILITY FOR FUTURE POLICY BENEFITS

The present value of expected net premiums on long-duration insurance contracts were as follows:

At or for the

Years Ended December 31,

(dollars in millions) Term and

Whole Life Accidental Death and Disability Protection Term and

Whole Life Accidental Death and Disability Protection

Balance at beginning of period $ 252 $ 48 $ 313 $ 69

Effect of cumulative changes in discount rate assumptions (beginning of period) ( 8 ) — ( 53 ) ( 10 )

Beginning balance at original discount rate 244 48 260 59

Effect of changes in cash flow assumptions ( 2 ) ( 1 ) — —

Effect of actual variances from expected experience ( 11 ) ( 1 ) 17 ( 6 )

Adjusted balance at beginning of period 231 46 277 53

Interest accretion 13 2 14 3

Net premiums collected ( 32 ) ( 7 ) ( 47 ) ( 8 )

Ending balance at original discount rate 212 41 244 48

Effect of changes in discount rate assumptions 5 — 8 —

Balance at ending of period $ 217 $ 41 $ 252 $ 48

The present value of expected future policy benefits on long-duration insurance contracts were as follows:

At or for the

Years Ended December 31,

(dollars in millions) Term and

Whole Life Accidental Death and Disability Protection Term and

Whole Life Accidental Death and Disability Protection

Balance at beginning of period $ 483 $ 126 $ 601 $ 165

Effect of cumulative changes in discount rate assumptions (beginning of period) ( 17 ) ( 1 ) ( 109 ) ( 27 )

Beginning balance at original discount rate 466 125 492 138

Effect of changes in cash flow assumptions ( 4 ) ( 1 ) — —

Effect of actual variances from expected experience ( 14 ) — 5 ( 7 )

Adjusted balance at beginning of period 448 124 497 131

Net issuances 3 1 3 —

Interest accretion 25 6 26 7

Benefit payments ( 53 ) ( 18 ) ( 60 ) ( 13 )

Ending balance at original discount rate 423 113 466 125

Effect of changes in discount rate assumptions 12 — 17 1

Balance at ending of period $ 435 $ 113 $ 483 $ 126

The net liability for future policy benefits on long-duration insurance contracts were as follows:

At or for the

Years Ended December 31,

(dollars in millions) Term and

Whole Life Accidental Death and Disability Protection Term and

Whole Life Accidental Death and Disability Protection

Net liability for future policy benefits $ 218 $ 72 $ 231 $ 78

Deferred profit liability 14 51 16 57

Total net liability for future policy benefits $ 232 $ 123 $ 247 $ 135

The weighted-average duration of the liability for future policy benefits was 8 years at December 31, 2023 and 2022.

The following table reconciles the net liability for future policy benefits to Insurance claims and policyholder liabilities in the consolidated balance sheets:

At or for the

Years Ended December 31,

(dollars in millions) 2023 2022

Term and whole life $ 232 $ 247

Accidental death and disability protection 123 135

Other* 260 238

Total $ 615 $ 620

* Other primarily includes reserves for short-duration contracts that are payable to third-party beneficiaries.

The undiscounted and discounted expected future gross premiums and expected future benefits and expenses for our long-duration insurance contracts were as follows:

At or for the

Years Ended December 31,

(dollars in millions) Term and

Whole Life Accidental Death and Disability Protection Term and

Whole Life Accidental Death and Disability Protection

Expected future gross premiums:

Undiscounted $ 430 $ 146 $ 472 $ 164

Discounted 311 106 345 119

Expected future benefit payments:

Undiscounted 607 166 674 183

Discounted 435 113 483 126

The revenue and interest accretion related to our long-duration insurance contracts recognized in the consolidated statements of operations were as follows:

At or for the

Years Ended December 31,

2023 2022 2021

(dollars in millions) Term and

Whole Life Accidental Death and Disability Protection Term and

Accidental Death and Disability Protection

Gross premiums or assessments $ 57 $ 19 $ 62 $ 20 $ 69 $ 23

Interest accretion $ 12 $ 4 $ 12 $ 4 $ 13 $ 4

The expected and actual experience for mortality, morbidity, and lapses of the liability for future policy benefits were as follows:

At or for the

Years Ended December 31,

Whole Life Accidental Death and Disability Protection Term and

Whole Life Accidental Death and Disability Protection

Mortality/Morbidity:

Expected 0.38 % 0.01 % 0.39 % 0.01 %

Actual 0.32 % 0.01 % 0.36 % 0.01 %

Expected 2.94 % 1.94 % 2.35 % 1.93 %

Actual 2.39 % 2.12 % 2.05 % 2.92 %

The weighted-average interest rates for the liability of future policy benefits for our long-duration insurance contracts were as follows:

At or for the

Years Ended December 31,

Whole Life Accidental Death and Disability Protection Term and

Whole Life Accidental Death and Disability Protection

Interest accretion rate 5.28 % 4.87 % 5.26 % 4.86 %

Current discount rate 4.98 % 4.98 % 4.83 % 4.80 %

STATUTORY ACCOUNTING

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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:

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

(dollars in millions)

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Years Ended December 31, 2023 2022 2021

Property and casualty:

Triton $ 58 $ 50 $ —

Life and health:

AHL $ 98 $ — $ 50

No extraordinary dividends were paid during 2022, 2021, or 2020.

Extraordinary dividends paid were as follows:

(dollars in millions)

Years Ended December 31, 2023 2022 2021

Triton $ 23 $ — $ —

AHL $ 107 $ — $ —

Capital Stock and Earnings Per Share (OMH Only)

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Par value and shares authorized at December 31, 2023 were as follows:

Preferred Stock * Common Stock Special Stock Common Stock

Preferred Stock * Common Stock Special Stock *

Par value $ 0.01 $ 0.01 $ — $ 0.50

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Common shares repurchased

( 1,651,717 ) ( 7,181,023 ) ( 6,712,923 )

Treasury stock issued 81,389 80,470 —

Balance at end of period 119,757,277 121,042,125 127,809,640

* During the years ended December 31, 2022 and 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:

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Adjustments Foreign

Adjustments Other (b) Total

Adjustments Changes in discount rate for insurance claims and policyholder liabilities Other (b) Total

Comprehensive

Income (Loss)

Year Ended December 31, 2022

December 31, 2023

Balance at beginning of period $ ( 131 ) $ ( 8 ) $ ( 5 ) $ ( 8 ) $ 25 $ ( 127 )

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38 — 3 3 ( 4 ) 40

Reclassification adjustments from accumulated other comprehensive income ( 1 ) — — — ( 1 )

Balance at end of period $ ( 93 ) $ ( 8 ) $ ( 2 ) $ ( 5 ) $ 21 $ ( 87 )

Year Ended December 31, 2021

December 31, 2022

Balance at beginning of period $ 49 $ 1 $ 3 $ ( 56 ) $ 8 $ 5

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Balance at end of period $ ( 131 ) $ ( 8 ) $ ( 5 ) $ ( 8 ) $ 25 $ ( 127 )

Year Ended December 31, 2020

December 31, 2021

Balance at beginning of period $ 91 $ 1 $ 2 $ — $ — $ 94

Impact of adoption of ASU 2018-12 — — — ( 76 ) — ( 76 )

Adjusted beginning balance 91 1 2 ( 76 ) — 18

Other comprehensive income (loss) before reclassifications

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Effective income tax rate 23.60 % 24.53 % 24.56 %

The lower effective income tax rate in 2022 as compared to 2021 is primarily due to lower state tax expense.

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.

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:

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Balance at beginning of year $ 6 $ 8 $ 10

Increases in tax positions for current years 6 — 2

Lapse in statute of limitations ( 1 ) ( 3 ) ( 2 )

Increases in tax positions for prior years — 1 2

Increases in tax positions for current years — 2 2

Settlements with tax authorities — — ( 4 )

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Net operating losses and tax credits 46 35

Fair value of equity and securities investments 29 —

Capitalized research and experimental costs 34 29

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Pension/employee benefits 27 24

Fair value of equity and securities investments

Total 807 746

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Deferred loan fees 27 25

Fair value of equity and securities investments — 17

Fixed assets 14 16

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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 increase in net deferred tax assets of $ 113 million was primarily due to the tax effect of the increase in the allowance for finance receivable losses, the capitalization of research and experimental costs, and the fair value of investment securities.

At December 31, 2023, we had state net operating loss carryforwards of $ 601 million compared to $ 480 million at December 31, 2022.

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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.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA includes a 15% Corporate Alternative Minimum Tax (“Corporate AMT”) for tax years beginning after December 31, 2022.

We do not expect the Corporate AMT to have a material impact on our consolidated financial statements.

Additionally, the IRA imposes a 1% excise tax on net repurchases of stock by certain publicly traded corporations.

The excise tax is imposed on the value of the net stock repurchased or treated as repurchased.

The new law will apply to stock repurchases occurring after December 31, 2022.

Leases and Contingencies

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

Our operating right-of-use asset and liability balances were $ 165 million and $ 173 million, respectively, at December 31, 2023 and $ 152 million and $ 161 million, respectively, at December 31, 2022.

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§§ 5531, 5536.

The staff’s investigation is focused on certain refunding practices for optional insurance and membership plan products that were subsequently canceled by the consumer after purchase.

We are cooperating with the CFPB in this matter and expect ongoing interactions.

Although the Company believes it has not violated the Consumer Financial Protection Act, we are unable to estimate how long this investigation will continue, whether and in what manner the CFPB may commence legal action, or what the ultimate outcome of this matter will be.

Should the CFPB opt to commence legal proceedings, it may seek civil monetary penalties, restitution, injunctive relief, or other damages.

The Company does not currently believe that the outcome of this matter will have a material adverse effect on our business, financial condition, or results of operations.

On May 31, 2023, the Company entered into a consent order with the CFPB to resolve this previously disclosed investigation focused on certain refunding practices for optional insurance and membership plan products that were subsequently canceled by the customer after purchase.

Pursuant to the consent order, we agreed to issue $ 10 million in interest refunds to affected customers, pay a $ 10 million civil penalty and make certain other enhancements to our sales and refunding practices.

In agreeing to the consent order, we did not admit to any of the CFPB’s factual findings or legal conclusions.

Retirement Benefit Plans

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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, 2022 and December 31, 2021, and an equivalent weighted average discount rate was derived that resulted in the same liability.

The projected benefit cash flows were discounted using the spot rates derived from the unadjusted FTSE Pension Discount Curve at December 31, 2023 and 2022, and an equivalent weighted average discount rate was derived that resulted in the same liability.

Investment Strategy

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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.

At December 31, 2022, 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.

At December 31, 2023, the actual asset allocation for the primary asset classes was 95 % in fixed income securities and 5 % in equity securities.

The 2024 target asset allocation for the primary asset classes is 96 % in fixed income securities and 4 % in equity securities.

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The weighted average grant date fair value of performance-based awards issued in 2023, 2022, and 2021 was $ 44.69 , $ 50.34 , and $ 40.62 , respectively.

The total fair value of performance-based awards that vested was $ 7 million during 2022, and immaterial during 2021, and 2020.

The total fair value of performance-based awards that vested was immaterial during 2023, 2022, and 2021.

The following table summarizes the performance-based stock activity and related information for the Omnibus Plan for 2023:

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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.

No vesting conditions were satisfied during 2022 related to these awards.

No vesting conditions were satisfied during 2023 or 2022 related to these awards.

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.

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The Board and stockholders of OMH approved and authorized 1,000,000 shares for issuance under the ESP Plan and became effective January 1, 2022.

The Company issued 80,470 shares of treasury stock associated with the ESP Plan in 2022.

The Company’s expense associated with the ESP Plan in 2022 is immaterial and is recorded in Salaries and benefits on our consolidated statements of operations.

The Company issued 81,389 shares and 80,470 shares of treasury stock associated with the ESP Plan in 2023 and 2022, respectively.

The Company’s expense associated with the ESP Plan is recorded in Salaries and benefits on our consolidated statements of operations and was immaterial during 2023 and 2022.

Segment Information

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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:

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• 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;

• 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;

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• Assets - revalues assets based on their fair values at the effective date of the acquisition.

Assets were adjusted to present the impacts of deferred taxes associated with the acquisition on a net basis at December 31, 2023.

The following tables present information about C&I and Other, as well as reconciliations to the consolidated financial statement amounts.

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Provision for finance receivable losses

1,399 — 3 1,402

Net interest income after provision for finance receivable losses

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Long-term debt $ — $ 16,969 $ — $ 16,969 $ 18,281

* Other assets at December 31, 2022 and December 31, 2021 primarily consists of finance receivables held for sale.

* Other assets at December 31, 2023 and 2022 primarily consists of finance receivables held for sale.

FAIR VALUE MEASUREMENTS — RECURRING BASIS

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Cash equivalents in mutual funds $ 97 $ — $ — $ 97

Cash equivalents in securities — 17 — 17

Investment securities:

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Restricted cash equivalents in mutual funds 525 — — 525

Restricted cash equivalents in securities — 11 — 11

Total $ 676 $ 1,662 $ 3 $ 2,341

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Restricted cash equivalents in mutual funds 445 — — 445

Restricted cash equivalents in securities — 11 — 11

Total $ 573 $ 1,772 $ 5 $ 2,350

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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.

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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, 2022, we had no debt carried at fair value under the fair value option.

We estimate the fair values associated with variable rate secured term funding and revolving lines of credit to be equal to par.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data