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Section 1: 10-Q (10-Q)

Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-36129
ONEMAIN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
27-3379612
(State of Incorporation)
(I.R.S. Employer Identification No.)
 
 
601 N.W. Second Street, Evansville, IN
47708
(Address of principal executive offices)
(Zip Code)
(812) 424-8031
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
OMF
 
New York Stock Exchange LLC
At April 30, 2019, there were 136,093,799 shares of the registrant’s common stock, $0.01 par value, outstanding.
 



TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Table of Contents

GLOSSARY
Terms and abbreviations used in this report are defined below.
Term or Abbreviation
 
Definition
 
 
 
2018 Annual Report on Form
10-K
 
Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 15, 2019
30-89 Delinquency ratio
 
net finance receivables 30-89 days past due as a percentage of net finance receivables
5.25% SFC Notes
 
$700 million of 5.25% Senior Notes due 2019 issued by SFC on December 3, 2014 and guaranteed by OMH
6.125% SFC Notes due 2024
 
$1.0 billion of 6.125% Senior Notes due 2024 issued by SFC on February 22, 2019 and guaranteed by OMH
ABS
 
asset-backed securities
Accretable yield
 
the excess of the cash flows expected to be collected on the purchased credit impaired finance receivables over the discounted cash flows
Adjusted pretax income (loss)
 
a non-GAAP financial measure used by management as a key performance measure of our segments
AHL
 
American Health and Life Insurance Company, an insurance subsidiary of OMFH
AIG
 
AIG Capital Corporation, a subsidiary of American International Group, Inc.
AIG Share Sale Transaction
 
sale by SFH of 4,179,678 shares of OMH common stock pursuant to an Underwriting Agreement entered into February 21, 2018 among OMH, SFH and Morgan Stanley & Co. LLC
AOCI
 
Accumulated other comprehensive income (loss)
Apollo
 
Apollo Global Management, LLC and its consolidated subsidiaries
Apollo-Värde Group
 
an investor group led by funds managed by Apollo and Värde
Apollo-Värde Transaction
 
the purchase by the Apollo-Värde Group of 54,937,500 shares of OMH common stock from SFH pursuant to the Share Purchase Agreement for an aggregate purchase price of approximately $1.4 billion in cash on June 25, 2018
ASC
 
Accounting Standards Codification
ASU
 
Accounting Standards Update
Average daily debt balance
 
average of debt for each day in the period
Average net receivables
 
average of monthly average net finance receivables (net finance receivables at the beginning and end of each month divided by two) in the period
Blackstone
 
collectively, BTO Willow Holdings II, L.P. and Blackstone Family Tactical Opportunities Investment Partnership—NQ—ESC L.P.
BPS
 
basis points
CDO
 
collateralized debt obligations
Citigroup
 
CitiFinancial Credit Company
CMBS
 
commercial mortgage-backed securities
Contribution
 
On June 22, 2018, SFC entered into a Contribution Agreement with SFI, a wholly-owned subsidiary of OMH. Pursuant to the Contribution Agreement, Independence was contributed by SFI to SFC.
Exchange Act
 
Securities Exchange Act of 1934, as amended
FASB
 
Financial Accounting Standards Board
February 2019 Real Estate Loan Sale
 
SFC and certain of its subsidiaries sold a portfolio of real estate loans with a carrying value of $16 million, classified in finance receivables held for sale, for aggregate cash proceeds of $19 million on February 5, 2019.
FICO score
 
a credit score created by Fair Isaac Corporation
Fortress
 
Fortress Investment Group LLC
Fortress Acquisition
 
transaction by which FCFI Acquisition LLC, an affiliate of Fortress, acquired an 80% economic interest of the sole stockholder of SFC for a cash purchase price of $119 million, effective November 30, 2010
GAAP
 
generally accepted accounting principles in the United States of America
Gross charge-off ratio
 
annualized gross charge-offs as a percentage of average net receivables
Indenture
 
the SFC Base Indenture, together with all subsequent Supplemental Indentures
Independence
 
Independence Holdings, LLC
Indiana DOI
 
Indiana Department of Insurance
Investment Company Act
 
Investment Company Act of 1940

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Term or Abbreviation
 
Definition
 
 
 
IRS
 
Internal Revenue Service
Junior Subordinated Debenture
 
$350 million aggregate principal amount of 60-year junior subordinated debt issued by SFC under an indenture dated January 22, 2007, by and between SFC and Deutsche Bank Trust Company, as trustee, and guaranteed by OMH
LIBOR
 
London Interbank Offered Rate
Merit
 
Merit Life Insurance Co., an insurance subsidiary of SFC
Net charge-off ratio
 
annualized net charge-offs as a percentage of average net receivables
Net interest income
 
interest income less interest expense
ODART
 
OneMain Direct Auto Receivables Trust
OMFIT
 
OneMain Financial Issuance Trust
OMH
 
OneMain Holdings, Inc.
OneMain
 
OneMain Financial Holdings, LLC, collectively with its subsidiaries
OneMain Acquisition
 
Acquisition of OneMain from CitiFinancial Credit Company, effective November 1, 2015
Other securities
 
securities for which the fair value option was elected and equity securities. Other Securities recognize unrealized gains and losses in investment revenues
Other SFC Notes
 
collectively, SFC’s 8.25% Senior Notes due 2023, 7.75% Senior Notes due 2021, and 6.00% Senior Notes due 2020, on a senior unsecured basis, and the Junior Subordinated Debenture, on a junior subordinated basis, issued by SFC and guaranteed by OMH
PRSUs
 
performance-based RSUs
Recovery ratio
 
annualized recoveries on net charge-offs as a percentage of average net receivables
Retail sales finance portfolio
 
collectively, retail sales finance contracts and revolving retail accounts
RMBS
 
residential mortgage-backed securities
RSAs
 
restricted stock awards
RSUs
 
restricted stock units
SEC
 
U.S. Securities and Exchange Commission
Securities Act
 
Securities Act of 1933, as amended
Segment Accounting Basis
 
a basis used to report the operating results of our segments, which reflects our allocation methodologies for certain costs and excludes the impact of applying purchase accounting
Settlement Agreement
 
a Settlement Agreement with the U.S. Department of Justice entered into by OMH and certain of its subsidiaries on November 13, 2015, in connection with the OneMain Acquisition
SFC
 
Springleaf Finance Corporation
SFC Base Indenture
 
Indenture, dated as of December 3, 2014
SFC Guaranty Agreements
 
agreements entered into on December 30, 2013 by OMH whereby it agreed to fully and unconditionally guarantee the payments of principal, premium (if any) and interest on the Other SFC Notes
SFC Senior Notes Indentures

 
the SFC Base Indenture as supplemented by the SFC First Supplemental Indenture, the SFC Second Supplemental Indenture, the SFC Third Supplemental Indenture, the SFC Fourth Supplemental Indenture, the SFC Fifth Supplemental Indenture and the SFC Sixth Supplemental Indenture
SFC Seventh Supplemental Indenture
 
Seventh Supplemental Indenture, dated as of February 22, 2019, to the SFC Base Indenture
SFH
 
Springleaf Financial Holdings, LLC, an entity owned primarily by a private equity fund managed by an affiliate of Fortress that sold 54,937,500 shares of OMH’s common stock to the Apollo-Värde Group in the Apollo-Värde Transaction
SFI
 
Springleaf Finance, Inc.
Share Purchase Agreement
 
a share purchase agreement entered into on January 3, 2018, among the Apollo-Värde Group, SFH and the Company to acquire from SFH 54,937,500 shares of our common stock that was issued and outstanding as of such date, representing the entire holdings of our stock beneficially owned by Fortress
SLFT
 
Springleaf Funding Trust
SpringCastle Joint Venture
 
joint venture among SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC, and SpringCastle Acquisition LLC in which SpringCastle Holdings, LLC previously owned a 47% equity interest in each of SpringCastle America, LLC, SpringCastle Credit, LLC and SpringCastle Finance, LLC and Springleaf Acquisition Corporation previously owned a 47% equity interest in SpringCastle Acquisition LLC
SpringCastle Portfolio
 
loans acquired through the SpringCastle Joint Venture
Tax Act
 
Public Law 115-97 amending the Internal Revenue Code of 1986

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Term or Abbreviation
 
Definition
 
 
 
TDR finance receivables
 
troubled debt restructured finance receivables. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower’s financial difficulties.
Triton
 
Triton Insurance Company, an insurance subsidiary of OMFH
UPB
 
unpaid principal balance for interest bearing accounts and the gross remaining contractual payments less the unaccreted balance of unearned finance charges for precompute accounts
Värde
 
Värde Partners, Inc.
VIEs
 
variable interest entities
Weighted average interest rate
 
annualized interest expense as a percentage of average debt
Yield
 
annualized finance charges as a percentage of average net receivables

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
 
 
 
 
 
(dollars in millions, except par value amount)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Assets
 
 

 
 

Cash and cash equivalents
 
$
1,709

 
$
679

Investment securities
 
1,743

 
1,694

Net finance receivables (includes loans of consolidated VIEs of $9.1 billion in 2019 and $8.5 billion in 2018)
 
16,136

 
16,164

Unearned insurance premium and claim reserves
 
(668
)
 
(662
)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $430 million in 2019 and $444 million in 2018)
 
(733
)
 
(731
)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses
 
14,735

 
14,771

Finance receivables held for sale
 
78

 
103

Restricted cash and restricted cash equivalents (include restricted cash and restricted cash equivalents of consolidated VIEs of $558 million in 2019 and $479 million in 2018)
 
575

 
499

Goodwill
 
1,422

 
1,422

Other intangible assets
 
372

 
388

Other assets
 
724

 
534

Total assets
 
$
21,358

 
$
20,090

Liabilities and Shareholders’ Equity
 
 

 
 

Long-term debt (includes debt of consolidated VIEs of $8.1 billion in 2019 and $7.5 billion in 2018)
 
$
16,117

 
$
15,178

Insurance claims and policyholder liabilities
 
642

 
685

Deferred and accrued taxes
 
81

 
45

Other liabilities (includes other liabilities of consolidated VIEs of $16 million in 2019 and $14 million in 2018)
 
568

 
383

Total liabilities
 
17,408

 
16,291

Commitments and contingent liabilities (Note 13)
 


 

 
 
 
 
 
Shareholders’ equity:
 
 

 
 

Common stock, par value $.01 per share; 2,000,000,000 shares authorized, 136,082,463 and 135,832,278 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
 
1

 
1

Additional paid-in capital
 
1,682

 
1,681

Accumulated other comprehensive loss
 
(2
)
 
(34
)
Retained earnings
 
2,269

 
2,151

Total shareholders’ equity
 
3,950

 
3,799

Total liabilities and shareholders’ equity
 
$
21,358

 
$
20,090


See Notes to the Condensed Consolidated Financial Statements.

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)

 
Three Months Ended March 31,
(dollars in millions, except per share amounts)
 
2019
 
2018
 
 
 
 

Interest income:
 
 
 
 
Finance charges
 
$
953

 
$
859

Finance receivables held for sale
 
3

 
3

Total interest income
 
956

 
862

 
 
 
 
 
Interest expense
 
236

 
200

 
 
 
 
 
Net interest income
 
720

 
662

 
 
 
 
 
Provision for finance receivable losses
 
286

 
254

 
 
 
 
 
Net interest income after provision for finance receivable losses
 
434

 
408

 
 
 
 
 
Other revenues:
 
 

 
 

Insurance
 
110

 
105

Investment
 
26

 
13

Net loss on repurchases and repayments of debt
 
(21
)
 
(1
)
Net gain on sale of real estate loans
 
3

 

Other
 
30

 
20

Total other revenues
 
148

 
137

 
 
 
 
 
Other expenses:
 
 

 
 

Salaries and benefits
 
199

 
199

Other operating expenses
 
136

 
133

Insurance policy benefits and claims
 
45

 
45

Total other expenses
 
380

 
377

 
 
 
 
 
Income before income taxes
 
202

 
168

 
 
 
 
 
Income taxes
 
50

 
44

 
 
 
 
 
Net income
 
$
152

 
$
124

 
 
 
 
 
Share Data:
 
 

 
 

Weighted average number of shares outstanding:
 
 

 
 

Basic
 
136,001,996

 
135,596,279

Diluted
 
136,191,283

 
135,897,296

Earnings per share:
 
 

 
 

Basic
 
$
1.12

 
$
0.91

Diluted
 
$
1.11

 
$
0.91


See Notes to the Condensed Consolidated Financial Statements.

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 
 
Three Months Ended March 31,
(dollars in millions)
 
2019
 
2018
 
 
 
 
 
Net income
 
$
152

 
$
124

 
 
 
 
 
Other comprehensive income (loss):
 
 

 
 

Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities
 
39

 
(24
)
Foreign currency translation adjustments
 
2

 
(3
)
Income tax effect:
 
 

 
 

Net unrealized gains (losses) on non-credit impaired available-for-sale securities
 
(9
)
 
4

Other comprehensive income (loss), net of tax
 
32

 
(23
)
 
 
 
 
 
Comprehensive income
 
$
184

 
$
101


See Notes to the Condensed Consolidated Financial Statements.


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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
(dollars in millions)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Income (Loss)
 
Retained
Earnings
 
Total Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2019
 
$
1

 
$
1,681

 
$
(34
)
 
$
2,151

 
$
3,799

Share-based compensation expense, net of forfeitures
 

 
6

 

 

 
6

Withholding tax on share-based compensation
 

 
(5
)
 

 

 
(5
)
Other comprehensive income
 

 

 
32

 

 
32

Cash Dividends *
 

 

 

 
(34
)
 
(34
)
Net income
 

 

 

 
152

 
152

Balance, March 31, 2019
 
$
1

 
$
1,682

 
$
(2
)
 
$
2,269

 
$
3,950

 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2018
 
$
1

 
$
1,560

 
$
11

 
$
1,706

 
$
3,278

Non-cash incentive compensation from SFH
 

 
4

 

 

 
4

Share-based compensation expense, net of forfeitures
 

 
5

 

 

 
5

Withholding tax on share-based compensation
 

 
(6
)
 

 

 
(6
)
Other comprehensive loss
 

 

 
(23
)
 

 
(23
)
Net income
 

 

 

 
124

 
124

Balance, March 31, 2018
 
$
1

 
$
1,563

 
$
(12
)
 
$
1,830

 
$
3,382

                                      
* Cash dividends declared and paid were $0.25 per share in the first quarter of 2019 and no dividends were declared in 2018.


See Notes to the Condensed Consolidated Financial Statements.


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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollars in millions)
 
Three Months Ended March 31,
 
2019
 
2018
 
 
 
 
 
Cash flows from operating activities
 
 

 
 

Net income
 
$
152

 
$
124

Reconciling adjustments:
 
 

 
 

Provision for finance receivable losses
 
286

 
254

Depreciation and amortization
 
68

 
67

Deferred income tax charge (benefit)
 
9

 
11

Net loss on repurchases and repayments of debt
 
21

 
1

Non-cash incentive compensation from SFH
 

 
4

Share-based compensation expense, net of forfeitures
 
6

 
5

Other
 
(11
)
 
6

Cash flows due to changes in other assets and other liabilities
 
17

 
83

Net cash provided by operating activities
 
548

 
555

 
 
 
 
 
Cash flows from investing activities
 
 

 
 

Net principal originations of finance receivables held for investment and held for sale
 
(290
)
 
(333
)
Proceeds on sales of finance receivables held for sale originated as held for investment
 
19

 

Available-for-sale securities purchased
 
(154
)
 
(197
)
Available-for-sale securities called, sold, and matured
 
103

 
156

Trading and other securities called, sold, and matured
 
5

 
8

Other, net
 
12

 
(15
)
Net cash used for investing activities
 
(305
)
 
(381
)
 
 
 
 
 
Cash flows from financing activities
 
 

 
 

Proceeds from issuance of long-term debt, net of commissions
 
2,327

 
2,805

Repayment of long-term debt
 
(1,425
)
 
(1,972
)
Dividends
 
(34
)
 

Withholding tax on share-based compensation
 
(5
)
 
(6
)
Net cash provided by financing activities
 
863

 
827

 
 
 
 
 
Net change in cash and cash equivalents and restricted cash and restricted cash equivalents
 
1,106

 
1,001

Cash and cash equivalents and restricted cash and restricted cash equivalents at beginning of period
 
1,178

 
1,485

Cash and cash equivalents and restricted cash and restricted cash equivalents at end of period
 
$
2,284

 
$
2,486

 
 
 
 
 
Supplemental cash flow information
 
 
 
 
Cash and cash equivalents
 
$
1,709

 
$
1,807

Restricted cash and restricted cash equivalents
 
575

 
679

Total cash and cash equivalents and restricted cash and restricted cash equivalents
 
$
2,284

 
$
2,486

 
 
 
 
 
Cash paid for amounts included in the measurement of operating lease liabilities
 
$
15

 
$

Supplemental non-cash activities
 
 
 
 
Right-of-use assets obtained in exchange for operating lease obligations
 
$
173

 
$

Net unsettled investment security purchases
 
(2
)
 
(5
)
 

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

See Notes to the Condensed Consolidated Financial Statements.

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
1. Business and Basis of Presentation

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

OMH is a financial services holding company whose principal subsidiary is Springleaf Finance, Inc. (“SFI”). SFI’s principal subsidiary is Springleaf Finance Corporation (“SFC”). On June 22, 2018, SFI entered into a contribution agreement with OMH, whereby OMH contributed all of the common interests of Independence Holdings, LLC (“Independence”) to SFI. Immediately thereafter, SFI entered into a separate contribution agreement with SFC, pursuant to which SFI contributed all of the common interests of Independence to SFC. As a result of the contribution from SFI to SFC, Independence became a wholly owned direct subsidiary of SFC on June 22, 2018. Independence, through its wholly owned subsidiary OneMain Financial Holdings, LLC (“OMFH”) and OMFH’s subsidiaries, and SFC engage in the consumer finance and insurance businesses.

Apollo-Värde Transaction

On January 3, 2018, an investor group led by funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) and Värde Partners, Inc. (“Värde” and together with Apollo, collectively, the “Apollo-Värde Group”) entered into a Share Purchase Agreement with SFH and the Company to acquire from SFH 54,937,500 shares of OMH’s common stock, par value $0.01 per share, at a purchase price per share of $26.00, representing the entire holdings of our stock beneficially owned by a private equity fund managed by an affiliate of Fortress Investment Group LLC (“Fortress”). This transaction closed on June 25, 2018 for an aggregate purchase price of approximately $1.4 billion in cash (the “Apollo-Värde Transaction”). In connection with the Apollo-Värde Transaction, certain executive officers who are holders of SFH incentive units received a distribution of approximately $106 million in the aggregate from SFH in the second quarter of 2018 as a result of their ownership interests in SFH. Although the distribution was not made by the Company or its subsidiaries, in accordance with ASC Topic 710, Compensation-General, we recorded non-cash incentive compensation expense of approximately $106 million, with an equal and offsetting increase to additional paid-in-capital. The impact to the Company was non-cash, equity neutral and not tax deductible.

AIG Share Sale Transaction

On February 21, 2018, the Company, SFH and Morgan Stanley & Co. LLC as underwriter entered into an underwriting agreement in connection with the sale by SFH of 4,179,678 shares of our common stock. These shares were beneficially owned by AIG Capital Corporation (“AIG”), a subsidiary of American International Group, Inc., and represented the entire holdings of our stock beneficially owned by AIG. In connection with this sale of our common stock by SFH, certain executive officers who held SFH incentive units, as described above, received a distribution of approximately $4 million in the first quarter of 2018. Consistent with the accounting for the distribution from the Apollo-Värde Transaction described above, the Company recognized non-cash incentive compensation expense of approximately $4 million, with an equal and offsetting increase to additional paid-in-capital. Again, the impact to the Company was non-cash, equity neutral and not tax deductible.

At March 31, 2019, the Apollo-Värde Group owned approximately 40.4% of OMH’s common stock.

BASIS OF PRESENTATION

We prepared our condensed consolidated financial statements using GAAP. These statements are unaudited. The year-end condensed balance sheet data was derived from our audited financial statements but does not include all disclosures required by GAAP. The statements include the accounts of OMH, its subsidiaries (all of which are wholly owned), and VIEs in which we hold a controlling financial interest and for which we are considered to be the primary beneficiary as of the financial statement date.

We eliminated all material intercompany accounts and transactions. We made judgments, estimates, and assumptions that affect amounts reported in our condensed consolidated financial statements and disclosures of contingent assets and liabilities. In management’s opinion, the condensed consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of results. Actual results could differ from our estimates. We evaluated the effects of and the need to disclose events that occurred subsequent to the balance sheet date. To conform to the 2019 presentation, we have reclassified certain items in prior periods of our condensed consolidated financial statements.

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The condensed consolidated financial statements in this report should be read in conjunction with the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K. We follow the same significant accounting policies for our interim reporting, except for the new accounting pronouncements subsequently adopted and disclosed in Note 2 below.
2. Recent Accounting Pronouncements

ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED

Leases

In February of 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use asset and a liability for the obligation to make payments on leases with terms greater than 12 months and to disclose information related to the amount, timing and uncertainty of cash flows arising from leases, including various qualitative and quantitative requirements. Management has reviewed this update and other ASUs that were subsequently issued to further clarify the implementation guidance outlined in ASU 2016-02. We adopted the amendments of these ASUs as of January 1, 2019. See Note 13 for additional information on the adoption of ASU 2016-02.

ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED

Financial Instruments - Credit Losses

In June of 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which significantly changes the way that entities will be required to measure credit losses. The new standard requires that the estimated credit loss be based upon an “expected credit loss” approach rather than the “incurred loss” approach currently required. The new approach will require entities to measure all expected credit losses for financial assets over their expected lives based on historical experience, current conditions, and reasonable forecasts of collectability. It is anticipated that the expected credit loss model will require earlier recognition of credit losses than the incurred loss approach. Therefore, we would expect ongoing changes in the allowance for finance receivable losses will be driven primarily by the nature and growth of the Company’s loan portfolio and the economic environment at that time.

The ASU requires that credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination and that are measured at amortized cost basis be determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price of the financial asset rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses are recorded in earnings. Interest income should be recognized based on the effective rate, excluding the discount embedded in the purchase price attributable to expected credit losses at acquisition.

The ASU also requires companies to record allowances for held-to-maturity and available-for-sale debt securities rather than write-downs of such assets.

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

The ASU will become effective for the Company for fiscal years beginning January 1, 2020. Early adoption is permitted for fiscal years beginning January 1, 2019. The Company’s cross-functional implementation team continues to make progress in line with the established project plan to ensure we comply with all updates from this ASU at the time of adoption. We continue to refine the development of an acceptable model to estimate the expected credit losses in accordance with our model governance policies. The Company has started the parallel testing phase in 2019. The Company will provide further disclosure regarding the estimated impact on our allowance for finance receivable losses as the parallel testing phase is enhanced with additional levels of governance and review. In addition to the development of the model, we are assessing the additional disclosure requirements from this update and the impact the adoption may have on any available-for-sale securities held by the Company. We believe the adoption of this ASU will have a material effect on our consolidated financial statements through an increase to the allowance for finance receivable losses, an increase to deferred tax assets and a corresponding one-time cumulative reduction to retained earnings, net of tax, in the consolidated balance sheet as of the beginning of the year of adoption.


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Table of Contents

Insurance

In August of 2018, the FASB issued ASU 2018-12, Financial Services - Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which provides targeted improvements to Topic 944 for the assumptions used to measure the liability for future policy benefits for nonparticipating traditional and limited-payment contracts; measurement of market risk benefits; amortization of deferred acquisition costs; and enhanced disclosures. The amendments in this ASU become effective for fiscal years beginning January 1, 2021. We have established a cross-functional implementation team and a project plan to ensure we comply with all the amendments in this ASU at the time of adoption. We are currently evaluating the potential impact of the adoption of the ASU on our consolidated financial statements.

We do not believe that any other accounting pronouncements issued during the three months ended March 31, 2019, but not yet effective, would have a material impact on our consolidated financial statements or disclosures, if adopted.
3. Finance Receivables

Our finance receivables consist of personal loans, which are non-revolving, with a fixed-rate, a fixed term of three to six years, and are secured by automobiles, other titled collateral or are unsecured. Prior to September 30, 2018, our finance receivables also included other receivables, which consist of our liquidating loan portfolios: real estate loans, retail sales finance contracts and revolving retail accounts. We continue to service or sub-service liquidating real estate loans and retail sales finance contracts. Effective September 30, 2018, our real estate loans were transferred from held for investment to held for sale. See Notes 5, 6 and 7 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual Report on Form 10-K for more information about Other Receivables.
 
Net finance receivables consist of our total portfolio of personal loans. Components of our personal loans were as follows:
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Gross receivables *
 
$
15,968

 
$
15,978

Unearned points and fees
 
(202
)
 
(201
)
Accrued finance charges
 
240

 
253

Deferred origination costs
 
130

 
134

Total
 
$
16,136

 
$
16,164

                                      
*
Gross receivables equal the UPB except for the following:
Finance receivables purchased as a performing receivable — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase to reflect the finance receivable balance at its initial fair value; and
Purchased credit impaired finance receivables — gross receivables equal the remaining estimated cash flows less the current balance of accretable yield on the purchased credit impaired accounts.

At March 31, 2019 and December 31, 2018, unused lines of credit extended to customers by the Company were immaterial.

CREDIT QUALITY INDICATOR

We consider the value of the collateral, the concentration of secured loans, and the delinquency status of our finance receivables as our primary credit quality indicators. At March 31, 2019 and December 31, 2018, 49% and 48% of our personal loans were secured by titled collateral, respectively. We monitor delinquency trends to manage our exposure to credit risk. When finance receivables are 60 days contractually past due, we consider these accounts to be at an increased risk for loss and we transfer collection of these accounts to our centralized operations. At 90 days or more contractually past due, we consider our finance receivables to be nonperforming.


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Table of Contents

The following is a summary of our personal loans held for investment by number of days delinquent:
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Performing
 
 
 
 
Current
 
$
15,489

 
$
15,411

30-59 days past due
 
179

 
229

60-89 days past due
 
133

 
161

Total performing
 
15,801

 
15,801

Nonperforming
 
 
 
 
90-179 days past due
 
327

 
355

180 days or more past due
 
8

 
8

Total nonperforming
 
335

 
363

Total
 
$
16,136

 
$
16,164


PURCHASED CREDIT IMPAIRED FINANCE RECEIVABLES

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

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

At March 31, 2019 and December 31, 2018, finance receivables held for sale totaled $78 million and $103 million, respectively, which include purchased credit impaired real estate loans, as well as TDR real estate loans. See Note 5 for further information on our finance receivables held for sale.

Information regarding our purchased credit impaired finance receivables were as follows:
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Personal Loans
 
 
 
 
Carrying amount, net of allowance
 
$
73

 
$
89

Outstanding balance (a)
 
116

 
135

Allowance for purchased credit impaired finance receivable losses (b)
 

 

 
 
 
 
 
Real Estate Loans - Held for Sale
 
 
 
 
Carrying amount
 
$
22

 
$
28

Outstanding balance (a)
 
39

 
48

                                      
(a)
Outstanding balance is defined as UPB of the loans with a net carrying amount.
(b)
The allowance for purchased credit impaired finance receivable losses reflects the carrying value of the purchased credit impaired loans held for investment exceeding the present value of the expected cash flows. As indicated above, no allowance was required as of March 31, 2019 or December 31, 2018.


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Table of Contents

Changes in accretable yield for purchased credit impaired finance receivables were as follows:
 
 
Three Months Ended March 31,
(dollars in millions)
 
2019
 
2018
 
 
 
 
 
Personal Loans
 
 
 
 
Balance at beginning of period
 
$
39

 
$
47

Accretion
 
(5
)
 
(6
)
Reclassifications from nonaccretable difference (a)
 

 
8

Balance at end of period
 
$
34

 
$
49

 
 
 
 
 
Real Estate Loans - Held for Sale
 
 
 
 
Balance at beginning of period
 
$
27

 
$
53

Accretion
 
(1
)
 
(1
)
Transfer due to finance receivables sold
 
(3
)
 

Balance at end of period
 
$
23

 
$
52

                               
(a)
Reclassifications from nonaccretable difference represents the increases in accretable yield resulting from higher estimated undiscounted cash flows.

TDR FINANCE RECEIVABLES

Information regarding TDR finance receivables were as follows:
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 

Personal Loans
 
 
 
 

TDR gross receivables (a)
 
$
499

 
$
450

TDR net receivables (b)
 
502

 
453

Allowance for TDR finance receivable losses
 
196

 
170

 
 
 
 
 
Real Estate Loans - Held for Sale
 
 
 
 
TDR gross receivables (a)
 
$
58

 
$
89

TDR net receivables (b)
 
58

 
75

                                      
(a)
TDR gross receivables — gross receivables are equal to UPB and, if applicable, any remaining unearned premium or discount established at the time of purchase if previously purchased as a performing receivable.
(b)
TDR net receivables — TDR gross receivables net of unearned points and fees, accrued finance charges, deferred origination costs and any impairment for real estate loans held for sale.

As of March 31, 2019, we had no commitments to lend additional funds on our TDR finance receivables.


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Table of Contents

TDR average net receivables held for investment and held for sale and finance charges recognized on TDR finance receivables held for investment and held for sale were as follows:
(dollars in millions)
 
Personal
Loans
 
Other Receivables *
 
Total
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
TDR average net receivables
 
$
477

 
$
64

 
$
541

TDR finance charges recognized
 
12

 
1

 
13

 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
TDR average net receivables
 
$
337

 
$
139

 
$
476

TDR finance charges recognized
 
11

 
2

 
13

                                          
* Other Receivables held for sale included in the table above consist of real estate loans and were as follows:
 
 
Three Months Ended March 31,
(dollars in millions)
 
2019
 
2018
 
 
 
 
 
TDR average net receivables
 
$
64

 
$
90

TDR finance charges recognized
 
1

 
1


Information regarding the new volume of the TDR finance receivables held for investment, consisting of personal loans, are reflected in the following table. New volume of TDR other receivables are not included in the table below as they were immaterial for the three months ended March 31, 2019 and 2018.
 
 
Three Months Ended March 31,
(dollars in millions)
 
2019
 
2018
 
 
 
 
 
Personal Loans
 
 
 
 
Pre-modification TDR net finance receivables
 
$
120

 
$
94

Post-modification TDR net finance receivables:
 
 
 
 
Rate reduction
 
$
85

 
$
70

Other *
 
35

 
24

Total post-modification TDR net finance receivables
 
$
120

 
$
94

Number of TDR accounts
 
18,506

 
14,730

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

Personal loans held for investment that were modified as TDR finance receivables within the previous 12 months and for which there was a default during the period to cause the TDR finance receivables to be considered nonperforming (90 days or more past due) were as follows:
 
 
Three Months Ended March 31,
(dollars in millions)
 
2019
 
2018
 
 
 
 
 
Personal Loans
 
 
 
 
TDR net finance receivables *
 
$
19

 
$
18

Number of TDR accounts
 
2,925

 
2,719

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

TDR other receivables for the three months ended March 31, 2019 and 2018 that defaulted during the previous 12-month
period were immaterial.

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Table of Contents

4. Allowance for Finance Receivable Losses

Changes in the allowance for finance receivable losses by finance receivable type were as follows:
(dollars in millions)
 
Personal
Loans
 
Other
Receivables
 
Total
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 

 
 

 
 

Balance at beginning of period
 
$
731

 
$

 
$
731

Provision for finance receivable losses
 
286

 

 
286

Charge-offs
 
(311
)
 

 
(311
)
Recoveries
 
27

 

 
27

Balance at end of period
 
$
733

 
$

 
$
733

 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 

 
 

 
 

Balance at beginning of period
 
$
673

 
$
24

 
$
697

Provision for finance receivable losses
 
254

 

 
254

Charge-offs
 
(289
)
 
(1
)
 
(290
)
Recoveries
 
27

 
1

 
28

Balance at end of period
 
$
665

 
$
24

 
$
689


The allowance for finance receivable losses and net finance receivables by impairment method were as follows:
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Allowance for finance receivable losses:
 
 
 
 
Collectively evaluated for impairment
 
$
537

 
$
561

Purchased credit impaired finance receivables
 

 

TDR finance receivables
 
196

 
170

Total
 
$
733

 
$
731

 
 
 
 
 
Finance receivables:
 
 
 
 
Collectively evaluated for impairment
 
$
15,561

 
$
15,622

Purchased credit impaired finance receivables
 
73

 
89

TDR finance receivables
 
502

 
453

Total
 
$
16,136

 
$
16,164

 
 
 
 
 
Allowance for finance receivable losses as a percentage of finance receivables
 
4.54
%
 
4.52
%

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Table of Contents

5. Finance Receivables Held for Sale

We reported finance receivables held for sale of $78 million at March 31, 2019 and $103 million at December 31, 2018, which consist entirely of real estate loans and are carried at the lower of cost or fair value, applied on an aggregate basis. In February 2019, we sold a portfolio of real estate loans with a carrying value of $16 million for aggregate cash proceeds of $19 million and recorded a net gain in other revenues of $3 million (“February 2019 Real Estate Loan Sale”). After the recognition of the February 2019 Real Estate Loan Sale, the carrying value of the remaining loans classified in finance receivables held for sale exceeded their fair value and, accordingly, we marked the remaining loans to fair value and recorded an impairment in other revenue of $3 million. At March 31, 2019, the carrying value of our finance receivables held for sale was not impaired.

We did not have any material transfers to or from finance receivables held for sale during the three months ended March 31, 2019 and 2018.

6. Investment Securities

AVAILABLE-FOR-SALE SECURITIES

Cost/amortized cost, unrealized gains and losses, and fair value of fixed maturity available-for-sale securities by type were as follows:
(dollars in millions)
 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 
 
 
 
 
 
 
 
 
March 31, 2019
 
 

 
 

 
 

 
 

Fixed maturity available-for-sale securities:
 
 

 
 

 
 

 
 

U.S. government and government sponsored entities
 
$
17

 
$

 
$

 
$
17

Obligations of states, municipalities, and political subdivisions
 
87

 

 

 
87

Certificates of deposit and commercial paper
 
59

 

 

 
59

Non-U.S. government and government sponsored entities
 
143

 
2

 

 
145

Corporate debt
 
1,056

 
13

 
(10
)
 
1,059

Mortgage-backed, asset-backed, and collateralized:
 
 

 
 

 
 

 
 
RMBS
 
141

 
1

 
(1
)
 
141

CMBS
 
67

 

 
(1
)
 
66

CDO/ABS
 
82

 
1

 

 
83

Total
 
$
1,652

 
$
17

 
$
(12
)
 
$
1,657

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 

 
 

 
 

 
 

Fixed maturity available-for-sale securities:
 
 

 
 

 
 

 
 

U.S. government and government sponsored entities
 
$
21

 
$

 
$

 
$
21

Obligations of states, municipalities, and political subdivisions
 
91

 

 
(1
)
 
90

Certificates of deposit and commercial paper
 
63

 

 

 
63

Non-U.S. government and government sponsored entities
 
145

 

 
(2
)
 
143

Corporate debt
 
1,027

 
2

 
(32
)
 
997

Mortgage-backed, asset-backed, and collateralized:
 
 

 
 

 
 

 
 
RMBS
 
130

 

 
(2
)
 
128

CMBS
 
72

 

 
(1
)
 
71

CDO/ABS
 
94

 
1

 
(1
)
 
94

Total
 
$
1,643

 
$
3

 
$
(39
)
 
$
1,607



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Table of Contents

Fair value and unrealized losses on available-for-sale securities by type and length of time in a continuous unrealized loss position were as follows:
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in millions)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
 

 
 

 
 

 
 

 
 

 
 

U.S. government and government sponsored entities
 
$

 
$

 
$
17

 
$

 
$
17

 
$

Obligations of states, municipalities, and political subdivisions
 
5

 

 
38

 

 
43

 

Non-U.S. government and government sponsored entities
 
1

 

 
45

 

 
46

 

Corporate debt
 
63

 
(1
)
 
416

 
(9
)
 
479

 
(10
)
Mortgage-backed, asset-backed, and collateralized:
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
10

 

 
63

 
(1
)
 
73

 
(1
)
CMBS
 
3

 

 
42

 
(1
)
 
45

 
(1
)
CDO/ABS
 
3

 

 
30

 

 
33

 

Total
 
$
85

 
$
(1
)
 
$
651

 
$
(11
)
 
$
736

 
$
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

U.S. government and government sponsored entities
 
$
3

 
$

 
$
16

 
$

 
$
19

 
$

Obligations of states, municipalities, and political subdivisions
 
10

 

 
57

 
(1
)
 
67

 
(1
)
Non-U.S. government and government sponsored entities
 
19

 
(1
)
 
97

 
(1
)
 
116

 
(2
)
Corporate debt
 
377

 
(14
)
 
448

 
(18
)
 
825

 
(32
)
Mortgage-backed, asset-backed, and collateralized:
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
 
23

 

 
78

 
(2
)
 
101

 
(2
)
CMBS
 
10

 

 
54

 
(1
)
 
64

 
(1
)
CDO/ABS
 
18

 

 
33

 
(1
)
 
51

 
(1
)
Total
 
$
460

 
$
(15
)
 
$
783

 
$
(24
)
 
$
1,243

 
$
(39
)

On a lot basis, we had 1,031 and 1,767 investment securities in an unrealized loss position at March 31, 2019 and December 31, 2018, respectively. We do not consider the unrealized losses to be credit-related, as these unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase. Additionally, at March 31, 2019, other-than-temporary impairments on investment securities that we intend to sell were immaterial. We do not have plans to sell any of the remaining investment securities with unrealized losses as of March 31, 2019, and we believe it is more likely than not that we would not be required to sell such investment securities before recovery of their amortized cost.

We continue to monitor unrealized loss positions for potential impairments. During the three months ended March 31, 2019 and 2018, other-than-temporary impairment credit losses, primarily on corporate debt, in investment revenues were immaterial.

There were no material additions or reductions in the cumulative amount of credit losses (recognized in earnings) on other-than-temporarily impaired available-for-sale securities during the three months ended March 31, 2019 and 2018.

The proceeds of available-for-sale securities sold or redeemed during the three months ended March 31, 2019 and March 31, 2018 were $29 million and $71 million, respectively. The realized gains and losses were immaterial during the three months ended March 31, 2019 and 2018.


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Table of Contents

Contractual maturities of fixed-maturity available-for-sale securities at March 31, 2019 were as follows:
(dollars in millions)
 
Fair
Value
 
Amortized
Cost
 
 
 
 
 
Fixed maturities, excluding mortgage-backed, asset-backed, and collateralized securities:
 
 

 
 

Due in 1 year or less
 
$
207

 
$
208

Due after 1 year through 5 years
 
552

 
549

Due after 5 years through 10 years
 
421

 
417

Due after 10 years
 
187

 
188

Mortgage-backed, asset-backed, and collateralized securities
 
290

 
290

Total
 
$
1,657

 
$
1,652


Actual maturities may differ from contractual maturities since issuers and borrowers may have the right to call or prepay obligations. We may sell investment securities before maturity for general corporate and working capital purposes and to achieve certain investment strategies.

The fair value of securities on deposit with third parties totaled $509 million and $515 million at March 31, 2019 and December 31, 2018, respectively.

OTHER SECURITIES

The fair value of other securities by type was as follows:
 
 
 
 
 
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Fixed maturity other securities:
 
 

 
 

Bonds
 
 

 
 

Non-U.S. government and government sponsored entities
 
$
1

 
$
1

Corporate debt
 
38

 
43

Mortgage-backed, asset-backed, and collateralized bonds
 
2

 
2

Total bonds
 
41

 
46

Preferred stock (a)
 
20

 
19

Common stock (a)
 
24

 
21

Other long-term investments
 
1

 
1

Total
 
$
86

 
$
87

                                     
(a)
The Company employs an income equity strategy targeting investments in stocks with strong current dividend yields. Stocks included have a history of stable or increasing dividend payments.

We recognized $4 million in unrealized gains and $2 million in unrealized losses on other securities for the three months ended March 31, 2019 and 2018, respectively. We report these unrealized gains and losses in investment revenues.

Net realized gains and losses on other securities sold or redeemed were immaterial for the three months ended March 31, 2019 and 2018. We report these gains and losses in investment revenues.

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


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Table of Contents

7. Long-term Debt

Principal maturities of long-term debt (excluding projected repayments on securitizations and revolving conduit facilities by period) by type of debt at March 31, 2019 were as follows:
 
 
Senior Debt
 
 
 
 
(dollars in millions)
 
Securitizations
 
Unsecured
Notes (a)
 
Junior
Subordinated
Debt (a)
 
Total
 
 
 
 
 
 
 
 
 
Interest rates (b)
 
2.16% - 6.94%

 
5.63% - 8.25%

 
4.54
%
 
 
 
 
 
 
 
 
 
 
 
Remainder of 2019
 

 
299

 

 
299

2020
 

 
1,000

 

 
1,000

2021
 

 
646

 

 
646

2022
 

 
1,000

 

 
1,000

2023
 

 
1,175

 

 
1,175

2024-2067
 

 
3,849

 
350

 
4,199

Securitizations (c)
 
8,155

 

 

 
8,155

Total principal maturities
 
$
8,155

 
$
7,969

 
$
350

 
$
16,474

 
 
 
 
 
 
 
 
 
Total carrying amount
 
$
8,125

 
$
7,820

 
$
172

 
$
16,117

Debt issuance costs (d)
 
$
(28
)
 
$
(69
)
 
$

 
$
(97
)
                                      
(a)
Pursuant to the SFC Base Indenture, the SFC supplemental indentures and the SFC Guaranty Agreements, OMH agreed to fully and unconditionally guarantee, on a senior unsecured basis, payments of principal, premium and interest on the SFC Unsecured Senior Notes and Junior Subordinated Debenture. The OMH guarantees of SFC’s long-term debt are subject to customary release provisions.

(b)
The interest rates shown are the range of contractual rates in effect at March 31, 2019. 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 4.54% as of March 31, 2019.

(c)
Securitizations have a stated maturity date but are not included in the above maturities by period due to their variable monthly repayments, which may result in pay-off prior to the stated maturity date. At March 31, 2019, there were no amounts drawn under our revolving conduit facilities. See Note 8 for further information on our long-term debt associated with securitizations and revolving conduit facilities.

(d)
Debt issuance costs are reported as a direct deduction from long-term debt, with the exception of debt issuance costs associated with our revolving conduit facilities, which totaled $25 million at March 31, 2019 and are reported in “Other assets”.

SFC’S 6.125% SENIOR NOTES DUE 2024 OFFERING

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

REDEMPTION OF 5.25% SENIOR NOTES DUE 2019

As a result of the offering described above, SFC issued a notice of redemption to redeem all of the outstanding principal amount of its 5.25% Senior Notes due 2019. On March 25, 2019, SFC paid an aggregate amount of $706 million, inclusive of accrued interest and premiums, to complete the redemption. We recognized approximately $21 million of net loss on the repurchases and repayments of debt for the three months ended March 31, 2019.


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Table of Contents

REDEMPTION OF 6.00% SENIOR NOTES DUE 2020

On March 15, 2019, SFC issued a Notice of Full Redemption of its 6.00% Senior Notes due 2020. On April 15, 2019, SFC paid an aggregate amount of $317 million, inclusive of accrued interest and premiums, to complete the redemption. In connection with the redemption we will recognize approximately $11 million of net loss on repurchases and repayments of debt for the three and six months ended June 30, 2019.

8. Variable Interest Entities

CONSOLIDATED VIES

We have transferred finance receivables to VIEs for asset-backed financing transactions and include the assets and liabilities in our consolidated financial statements because we are the primary beneficiary of each VIE. We account for these asset-backed debt obligations as secured borrowings.

See Note 3 and Note 13 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our 2018 Annual
Report on Form 10-K for more detail regarding VIEs.

We parenthetically disclose on our consolidated balance sheets the VIE’s assets that can only be used to settle the VIE’s obligations and liabilities if its creditors have no recourse against the primary beneficiary’s general credit. The carrying amounts of consolidated VIE assets and liabilities associated with our securitization trusts and revolving conduit facilities were as follows:
(dollars in millions)
 
March 31,
2019
 
December 31,
2018
 
 
 
 
 
Assets
 
 

 
 

Cash and cash equivalents
 
$
3

 
$
2

Finance receivables - Personal loans
 
9,128

 
8,480

Allowance for finance receivable losses
 
430

 
444

Restricted cash and restricted cash equivalents
 
558

 
479

Other assets
 
26

 
26

 
 
 
 
 
Liabilities
 
 

 
 

Long-term debt
 
$
8,125

 
$
7,510

Other liabilities
 
16

 
14


Other than the retained subordinate and residual interests in our consolidated VIEs, we are under no further obligation than is otherwise noted herein, either contractually or implicitly, to provide financial support to these entities. Consolidated interest expense related to our VIEs totaled $82 million for the three months ended March 31, 2019, compared to $87 million for the three months ended March 31, 2018.

SECURITIZED BORROWINGS

Each of our securitizations contains a revolving period ranging from one to five years during which no principal payments are required to be made on the related asset-backed notes. The indentures governing our securitization borrowings contain early amortization events and events of default, that, if triggered, may result in the acceleration of the obligation to pay principal and interest on the related asset-backed notes. Our total securitized borrowings at March 31, 2019 were $8.1 billion.

REVOLVING CONDUIT FACILITIES

We had access to 12 conduit facilities with a total borrowing capacity of $6.2 billion as of March 31, 2019. Our conduit facilities’ revolving period end ranges from one to three years. Principal balances of outstanding loans, if any, are due and payable in full ranging from three to eight years as of March 31, 2019. Amounts drawn on these facilities are collateralized by our personal loans.

At March 31, 2019, no amounts were drawn under these facilities.

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9. Insurance

Changes in the reserve for unpaid claims and loss adjustment expenses (not considering reinsurance recoverable):
 
 
At or for the Three Months Ended March 31,
(dollars in millions)
 
2019
 
2018
 
 
 
 
 
Balance at beginning of period
 
$
117

 
$
154

Less reinsurance recoverables
 
(4
)
 
(23
)
Net balance at beginning of period
 
113

 
131

Additions for losses and loss adjustment expenses incurred to:
 
 
 
 
Current year
 
54

 
50

Prior years *
 
(7
)
 
(4
)
Total
 
47

 
46

Reductions for losses and loss adjustment expenses paid related to:
 
 
 
 
Current year
 
(17
)
 
(15
)
Prior years
 
(33
)
 
(35
)
Total
 
(50
)
 
(50
)
Net balance at end of period
 
110

 
127

Plus reinsurance recoverables
 
4

 
23

Balance at end of period
 
$
114

 
$
150

                                      
*
Reflects (i) a redundancy in the prior years’ net reserves of $7 million at March 31, 2019 primarily due to a favorable development of credit life, disability, and unemployment claims during the year and (ii) a redundancy in the prior years’ net reserves of $4 million at March 31, 2018, primarily due to a favorable development of credit disability and unemployment claims during the year.


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10. Earnings Per Share

The computation of earnings per share was as follows:
 
 
Three Months Ended March 31,
(dollars in millions, except per share data)
 
2019
 
2018
 
 
 
 
 
Numerator (basic and diluted):
 
 

 
 

Net income attributable to OneMain Holdings, Inc.
 
$
152

 
$
124

Denominator:
 
 

 
 

Weighted average number of shares outstanding (basic)
 
136,001,996


135,596,279

Effect of dilutive securities *
 
189,287


301,017

Weighted average number of shares outstanding (diluted)
 
136,191,283


135,897,296

Earnings per share:
 
 

 
 

Basic
 
$
1.12

 
$
0.91

Diluted
 
$
1.11

 
$
0.91

                                      
*    We have excluded the following shares in the diluted earnings per share calculation for three months ended March 31, 2019 and 2018 because these shares would be anti-dilutive, which could impact the earnings per share calculation in the future:
 
 
Three Months Ended March 31,
 
 
2019
 
2018
 
 
 
 
 
Performance-based shares
 
127,183

 
97,161

Service-based shares
 
331,411

 
321,237


Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during each period. Diluted earnings per share is computed based on the weighted-average number of shares outstanding plus the effect of potentially dilutive shares outstanding during the period using the treasury stock method. The potentially dilutive shares represent outstanding unvested RSUs and RSAs.

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11. Accumulated Other Comprehensive Income (Loss)

Changes, net of tax, in accumulated other comprehensive income (loss) were as follows:
(dollars in millions)
 
Unrealized
Gains (Losses)
Available-for-Sale Securities
 
Retirement
Plan Liabilities
Adjustments
 
Foreign
Currency
Translation
Adjustments
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 

 
 

 
 

 
 

Balance at beginning of period
 
$
(28
)
 
$
(3
)
 
$
(3
)
 
$
(34
)
Other comprehensive income before reclassifications
 
30

 

 
2