OneMain Holdings, Inc. Reports First Quarter 2019 Results

  • 1Q 2019 diluted EPS of $1.11
  • 1Q 2019 C&I adjusted diluted EPS of $1.37
  • 1Q 2019 C&I Ending Net Finance Receivables of $16.2 billion
  • 1Q 2019 C&I Net Charge-Off ratio of 7.1%

EVANSVILLE, Ind.–(BUSINESS WIRE)–OneMain Holdings, Inc. (NYSE: OMF) today reported pretax income of $202
million and net income of $152 million for the first quarter of 2019,
compared to $168 million and $124 million, respectively, in the prior
year quarter. Earnings per diluted share were $1.11 in the first quarter
of 2019, compared to $0.91 in the prior year quarter.

On April 29, 2019, OneMain’s Board of Directors approved a regular
quarterly dividend of $0.25 per share, payable on June 14, 2019 to
record holders of our common stock as of the close of business on May
29, 2019.

“We delivered strong financial results for the first quarter of 2019,”
said Doug Shulman, President and CEO of OneMain. “Our credit performance
and operating efficiency continued to improve, and we further reinforced
our funding and liquidity. These results demonstrate the strength of our
business and I am confident that we are well positioned for the long
term.”

The following segment results are reported on a non-GAAP basis. Refer
to the required reconciliations of non-GAAP to comparable GAAP measures
at the end of this press release.

Consumer and Insurance Segment (“C&I”)

C&I generated adjusted pretax income of $246 million and adjusted net
income of $187 million for the first quarter of 2019, compared to $211
million and $160 million, respectively, in the prior year quarter.
Adjusted earnings per diluted share were $1.37 for the first quarter of
2019, compared to $1.18 in the prior year quarter.

Originations totaled $2.6 billion in the first quarter of 2019, up 2%
from $2.5 billion in the prior year quarter. The percentage of secured
originations was 56% in the first quarter of 2019, up from 44% in the
prior year quarter.

Ending net finance receivables reached $16.2 billion at March 31, 2019,
up 9% from $14.9 billion in the prior year quarter. Secured receivables
represented $1.5 billion of the increase in ending net finance
receivables from the prior year and were 49% of ending net finance
receivables at March 31, 2019, up from 43% in the prior year quarter.

Average net finance receivables were $16.2 billion in the first quarter
of 2019, up 9% from $14.9 billion in the prior year quarter.

Yield was 23.9% in the first quarter of 2019, up from 23.8% in the prior
year quarter, primarily reflecting improvement in late stage
delinquencies.

Interest income in the first quarter of 2019 was $954 million, up from
$873 million in the prior year quarter, reflecting higher average
receivables and higher yield.

The provision for finance receivable losses was $276 million in the
first quarter of 2019, up from $258 million in the prior year quarter,
primarily as a result of higher average receivables.

The 30-89 day delinquency ratio was 1.9% at March 31, 2019, down from
2.1% at March 31, 2018.

The 90+ day delinquency ratio was 2.1% at March 31, 2019, down from 2.3%
at March 31, 2018.

The net charge-off ratio was 7.1% in the first quarter of 2019, down
from 7.2% in the prior year quarter.

Operating expense for the first quarter of 2019 was $309 million, up 4%
from $298 million in the prior year quarter, primarily reflecting
inflationary increases and investment in the business.

Acquisitions and Servicing Segment (“A&S”)

A&S broke even in the first quarter of 2019 on an adjusted pretax income
basis, compared to adjusted pretax income of $1 million prior year
quarter.

Other

During the first quarter of 2019, Other generated an adjusted pretax
loss of $2 million, compared to an adjusted pretax loss of $10 million
in the prior year quarter. Other consists of our non-originating legacy
operations, which include our liquidating real estate loan portfolio.
During the first quarter of 2019, we sold a portion of our real estate
loans held for sale. The remaining real estate loans held for sale are
carried at $79 million compared to the unpaid principal balance of $136
million.

Funding and Liquidity

As of March 31, 2019, the company had principal debt balances
outstanding of $16.5 billion, 50% of which was secured and 50% of which
was unsecured. The company had $1.7 billion of cash and cash
equivalents, which included $312 million of cash and cash equivalents
held at our regulated insurance subsidiaries or for other operating
activities that are unavailable for general corporate purposes. The
company had $6.2 billion of undrawn revolving conduit facilities and
$6.9 billion of unencumbered personal loans.

Use of Non-GAAP Financial Measures

We report the operating results of Consumer and Insurance, Acquisitions
and Servicing, and Other using the Segment Accounting Basis, which (i)
reflects our allocation methodologies for interest expense and operating
costs, to reflect the manner in which we assess our business results and
(ii) excludes the impact of applying purchase accounting (eliminates
premiums/discounts on our finance receivables and long-term debt at
acquisition, as well as the amortization/accretion in future periods).
Consumer and Insurance adjusted pretax income (loss), Consumer and
Insurance adjusted net income (loss), Consumer and Insurance adjusted
earnings (loss) per diluted share, Acquisitions and Servicing adjusted
pretax income (loss), and Other adjusted pretax income (loss) are key
performance measures used by management in evaluating the performance of
our business. Consumer and Insurance adjusted pretax income (loss),
Acquisitions and Servicing adjusted pretax income (loss), and Other
adjusted pretax income (loss) represents income (loss) before income
taxes on a Segment Accounting Basis and excludes net losses resulting
from repurchases and repayments of debt, acquisition-related transaction
and integration expenses, restructuring charges, net gain on sale of
cost method investment, and net loss on sale of real estate loans.
Management believes these non-GAAP financial measures are useful in
assessing the profitability of our segments and uses these non-GAAP
financial measures in evaluating our operating performance and as a
performance goal under the company’s executive compensation programs.
These non-GAAP financial measures should be considered supplemental to,
but not as a substitute for or superior to, income (loss) before income
taxes, net income, or other measures of financial performance prepared
in accordance with U.S. generally accepted accounting principles
(“GAAP”).

Conference Call & Webcast Information

OneMain management will host a conference call and webcast to discuss
our first quarter 2019 results and other general matters at 8:00 am
Eastern Time on Tuesday, April 30, 2019. Both the call and webcast are
open to the general public. The general public is invited to listen to
the call by dialing 877-330-3668 (U.S. domestic) or 678-304-6859
(international), and using conference ID 7889473, or via a live audio
webcast through the Investor Relations section of the website. For those
unable to listen to the live broadcast, a replay will be available on
our website, or by dialing 800-585-8367 (U.S. domestic) or 404-537-3406,
and using conference ID 7889473, beginning approximately two hours after
the event. The replay of the conference call will be available via audio
webcast through May 11, 2019. An investor presentation will be available
on the Investor Relations page of OneMain’s website at https://www.omf.com
prior to the start of the conference call.

This document contains summarized information concerning OneMain
Holdings, Inc. (the “Company”) and the Company’s business, operations,
financial performance and trends. No representation is made that the
information in this document is complete. For additional financial,
statistical and business related information see the Company’s most
recent Annual Report on Form 10-K (“Form 10-K”) and Quarterly Reports on
Form 10-Q (“Form 10-Qs”) filed with the U.S. Securities and Exchange
Commission (the “SEC”), as well as the Company’s other reports filed
with the SEC from time to time. Such reports are or will be available in
the Investor Relations section of the Company’s website (
https://www.omf.com)
and the SEC’s website (
http://www.sec.gov).

Cautionary Note Regarding Forward-Looking Statements

This document contains “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are not statements of historical fact but instead represent
only management’s current beliefs regarding future events. By their
nature, forward-looking statements are subject to risks, uncertainties,
assumptions and other important factors that may cause actual results,
performance or achievements to differ materially from those expressed in
or implied by such forward-looking statements. We caution you not to
place undue reliance on these forward-looking statements that speak only
as of the date on which they were made. We do not undertake any
obligation to update or revise these forward-looking statements to
reflect events or circumstances after the date of this document or to
reflect the occurrence of unanticipated events or the non-occurrence of
anticipated events, whether as a result of new information, future
developments or otherwise, except as required by law. Forward-looking
statements include, without limitation, statements concerning future
plans (including statements regarding the timing, declaration, amount
and payment of any future dividends), objectives, goals, projections,
strategies, events or performance, and underlying assumptions and other
statements related thereto. Statements preceded by, followed by or that
otherwise include the words “anticipates,” “appears,” “are likely,”
“believes,” “estimates,” “expects,” “foresees,” “intends,” “plans,”
“projects” and similar expressions or future or conditional verbs such
as “would,” “should,” “could,” “may,” or “will,” are intended to
identify forward-looking statements. Important factors that could cause
actual results, performance or achievements to differ materially from
those expressed in or implied by forward-looking statements include,
without limitation, the following: adverse changes in general economic
conditions, including the interest rate environment and the financial
markets; risks related to the acquisition or sale of assets or
businesses or the formation, termination or operation of joint ventures
or other strategic alliances, including increased loan delinquencies or
net charge-offs, integration or migration issues, increased costs of
servicing, incomplete records, and retention of customers; our estimates
of the allowance for finance receivable losses may not be adequate to
absorb actual losses, causing our provision for finance receivable
losses to increase, which would adversely affect our results of
operations; increased levels of unemployment and personal bankruptcies;
our strategy of increasing the proportion of secured loans may lead to
declines in or slower growth in our personal loan receivables and
portfolio yield; adverse changes in the rate at which we can collect or
potentially sell our finance receivables portfolio; our decentralized
branch loan approval process could expose us to greater than historical
delinquencies and charge-offs; natural or accidental events such as
earthquakes, hurricanes, tornadoes, fires, or floods affecting our
customers, collateral, or branches or other operating facilities; war,
acts of terrorism, riots, civil disruption, pandemics, disruptions in
the operation of our information systems, or other events disrupting
business or commerce; a failure in or breach of our operational or
security systems or infrastructure or those of third parties, including
as a result of cyber-attacks; or other cyber-related incidents involving
the loss, theft or unauthorized disclosure of personally identifiable
information, or “PII,” of our present or former customers; our credit
risk scoring models may be inadequate to properly assess the risk of
customer unwillingness or lack of capacity to repay; adverse changes in
our ability to attract and retain employees or key executives to support
our businesses; increased competition, lack of customer responsiveness
to our distribution channels, an inability to make technological
improvements, and the ability of our competitors to offer a more
attractive range of personal loan products than we offer; changes in
federal, state or local laws, regulations, or regulatory policies and
practices that adversely affect our ability to conduct business or the
manner in which we are permitted to conduct business, such as licensing
requirements, pricing limitations or restrictions on the method of
offering products, as well as changes that may result from increased
regulatory scrutiny of the sub-prime lending industry, our use of
third-party vendors and real estate loan servicing, or changes in
corporate or individual income tax laws or regulations, including
effects of the Tax Cuts and Jobs Act; risks associated with our
insurance operations, including insurance claims that exceed our
expectations or insurance losses that exceed our reserves; our ability
be unable to successfully implement our growth strategy for our consumer
lending business or successfully acquire portfolios of personal loans;
declines in collateral values or increases in actual or projected
delinquencies or net charge-offs; potential liability relating to
finance receivables which we have sold or securitized or may sell or
securitize in the future if it is determined that there was a
non-curable breach of a representation or warranty made in connection
with such transactions; the costs and effects of any actual or alleged
violations of any federal, state or local laws, rules or regulations,
including any litigation associated therewith; the costs and effects of
any fines, penalties, judgments, decrees, orders, inquiries,
investigations, subpoenas, or enforcement or other proceedings of any
governmental or quasi-governmental agency or authority and any
litigation associated therewith; our continued ability to access the
capital markets or the sufficiency of our current sources of funds to
satisfy our cash flow requirements; our ability to comply with our debt
covenants; our ability to generate sufficient cash to service all of our
indebtedness; any material impairment or write-down of the value of our
assets; the ownership of our common stock continues to be highly
concentrated, which may prevent minority stockholders from influencing
significant corporate decisions and may result in conflicts of interest;
the effects of any downgrade of our debt ratings by credit rating
agencies, which could have a negative impact on our cost of and/or
access to capital; our substantial indebtedness, which could prevent us
from meeting our obligations under our debt instruments and limit our
ability to react to changes in the economy or our industry or our
ability to incur additional borrowings; our ability to maintain
sufficient capital levels in our regulated and unregulated subsidiaries;
changes in accounting standards or tax policies and practices and the
application of such new standards, policies and practices; management
estimates and assumptions, including estimates and assumptions about
future events, may prove to be incorrect; any failure to achieve the
SpringCastle Portfolio performance requirements, which could, among
other things, cause us to lose our loan servicing rights over the
SpringCastle Portfolio; various risks relating to continued compliance
with the Settlement Agreement with the U.S. Department of Justice; and
other risks and uncertainties described in the “Risk Factors” and
“Management’s Discussion and Analysis” sections of the Company’s most
recent Form 10-K and Form 10-Qs filed with the SEC and in the Company’s
other filings with the SEC from time to time.

If one or more of these or other risks or uncertainties materialize, or
if our underlying assumptions prove to be incorrect, our actual results
may vary materially from what we may have expressed or implied by these
forward-looking statements. You should specifically consider the factors
identified in this document that could cause actual results to differ
before making an investment decision to purchase our common stock and
should not place undue reliance on any of our forward-looking
statements. Furthermore, new risks and uncertainties arise from time to
time, and it is impossible for us to predict those events or how they
may affect us.

     
OneMain Holdings, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
Three Months Ended
 
(unaudited, $ in millions, except per share amounts) 3/31/19 12/31/18 3/31/18
 
Interest Income:
Finance charges $ 953 $ 954 $ 859
Finance receivables held for sale 3   4   3  
Total interest income 956 958 862
 
Interest expense (236 ) (229 ) (200 )
Provision for finance receivable losses (286 ) (278 ) (254 )
Net interest income after provision for finance receivable losses 434   451   408  
 
Other Revenues:
Insurance 110 111 105
Investment 26 16 13
Net gain on sale of real estate loans 3 18
Net loss on repurchases and repayments of debt (21 ) (1 )
Other (1) 30   8   20  
Total other revenues 148   153   137  
 
Other Expenses
Salaries and benefits (199 ) (208 ) (199 )
Other operating expenses (136 ) (135 ) (133 )
Insurance policy benefits and claims (45 ) (47 ) (45 )
Total other expenses (380 ) (390 ) (377 )
Income before income taxes 202 214 168
Income taxes (50 ) (46 ) (44 )
Net income $ 152   $ 168   $ 124  
 
Share Data:
Weighted average number of diluted shares: 136.2 136.2 135.9
Diluted EPS $ 1.11 $ 1.24 $ 0.91
Book value per basic share $ 29.03 $ 27.97 $ 24.93
           
(1) 1Q19 and 4Q18 include the fair value impairment of the remaining
loans in held for sale after certain real estate loan sales. 1Q19
includes a gain on sale related to an investment held at cost.
 
 
OneMain Holdings, Inc.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
As of
   
(unaudited, $ in millions) 3/31/2019 12/31/2018 3/31/2018
 
Assets
Cash and cash equivalents $ 1,709 $ 679 $ 1,807
Investment securities 1,743 1,694 1,706
Net finance receivables:
Personal loans 16,136 16,164 14,858
Other receivables (1)     129  
Net finance receivables 16,136 16,164 14,987
Unearned insurance premium and claim reserves (668 ) (662 ) (585 )
Allowance for finance receivable losses (733 ) (731 ) (689 )

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

14,735 14,771 13,713
Finance receivables held for sale (1) 78 103 126
Restricted cash and restricted cash equivalents 575 499 679
Goodwill 1,422 1,422 1,422
Other intangible assets 372 388 428
Other assets 724   534   586  
Total assets $ 21,358   $ 20,090   $ 20,467  
 
Liabilities and Shareholders’ Equity
Long-term debt $ 16,117 $ 15,178 $ 15,898
Insurance claims and policyholder liabilities 642 685 728
Deferred and accrued taxes 81 45 72
Other liabilities 568   383   387  
Total liabilities 17,408   16,291   17,085  
 
Common stock 1 1 1
Additional paid-in capital 1,682 1,681 1,563
Accumulated other comprehensive loss (2 ) (34 ) (12 )
Retained earnings 2,269   2,151   1,830  
Total shareholders’ equity 3,950   3,799   3,382  
Total liabilities and shareholders’ equity $ 21,358   $ 20,090   $ 20,467  
           
(1) On September 30, 2018, the company transferred all of the real
estate loans from Other Receivables to Finance Receivables Held for
Sale.
 
 
OneMain Holdings, Inc.
CONSOLIDATED KEY FINANCIAL METRICS (UNAUDITED)
 
Three Months Ended
 
(unaudited, $ in millions) 3/31/2019 12/31/2018 3/31/2018
 
Non-TDR Net Finance Receivables $ 15,634 $ 15,711 $ 14,582
TDR Net Finance Receivables 502   453   405  
Net Finance Receivables $ 16,136   $ 16,164   $ 14,987  
 
Average Net Receivables $ 16,146 $ 15,964 $ 14,986
Average Daily Debt Balances 15,839 15,516 14,947
Origination Volume 2,582 3,268 2,540
 
 
Non-TDR Allowance $ 537 $ 561 $ 524
TDR Allowance 196   170   165  
Allowance $ 733   $ 731   $ 689  
 
Non-TDR Allowance Ratio 3.4 % 3.6 % 3.6 %
TDR Allowance Ratio 39.0 % 37.5 % 40.7 %
Allowance Ratio 4.5 % 4.5 % 4.6 %
 
Gross Charge-Off $ 311 $ 280 $ 290
Recoveries (27 ) (26 ) (28 )
Net Charge-Off $ 284   $ 254   $ 262  
 
Gross Charge-Off Ratio 7.8 % 7.0 % 7.9 %
Recoveries (0.7 )% (0.7 )% (0.8 )%
Net Charge-Off Ratio 7.1 % 6.3 % 7.1 %
 
 
30-89 Delinquency $ 312 $ 390 $ 317
30+ Delinquency 647 753 671
60+ Delinquency 468 524 490
90+ Delinquency 335 363 354
 
30-89 Delinquency Ratio 1.9 % 2.4 % 2.1 %
30+ Delinquency Ratio 4.0 % 4.7 % 4.5 %
60+ Delinquency Ratio 2.9 % 3.3 % 3.3 %
90+ Delinquency Ratio 2.1 % 2.3 % 2.4 %
           
Note: Delinquency ratios are calculated as a percentage of net
finance receivables. Charge-off ratios are calculated as a
percentage of average net finance receivables. Ratios may not sum
due to rounding.
 
 
OneMain Holdings, Inc.
BALANCE SHEET METRICS (UNAUDITED)
 
As of
   
(unaudited, $ in millions) 3/31/2019 12/31/2018 3/31/2018
 
Liquidity
Cash and cash equivalents $ 1,709 $ 679 $ 1,807
Unencumbered personal loans 6,944 7,607 4,829
Undrawn conduit facilities 6,200 5,950 4,900
 
Total Assets $ 21,358 $ 20,090 $ 20,467
Less: Goodwill (1,422 ) (1,422 ) (1,422 )
Less: Other intangible assets (372 ) (388 ) (428 )
Tangible Managed Assets $ 19,564   $ 18,280   $ 18,617  
 
Long-term debt $ 16,117 $ 15,178 $ 15,898
Less: Junior subordinated debt (172 ) (172 ) (172 )
Adjusted Debt $ 15,945   $ 15,006   $ 15,726  
 
Total Shareholders’ Equity $ 3,950 $ 3,799 $ 3,382
Less: Goodwill (1,422 ) (1,422 ) (1,422 )
Less: Other intangible assets (372 ) (388 ) (428 )
Plus: Junior subordinated debt 172   172   172  
Adjusted Tangible Common Equity $ 2,328   $ 2,161   $ 1,704  
 
Adjusted Debt to Adjusted Tangible Common Equity (Tangible
Leverage)
6.8 x 6.9 x 9.2 x
 
Adjusted Tangible Common Equity to Tangible Managed Assets 11.9 % 11.8 % 9.2 %
 
 
OneMain Holdings, Inc.
CONSOLIDATED RETURN ON RECEIVABLES (UNAUDITED)
 
Three Months Ended
   
(unaudited, $ in millions) 3/31/19 12/31/18 3/31/18
 
Revenue (1) 26.6 % 26.7 % 25.5 %
Net Charge-Off (7.1 )% (6.3 )% (7.1 )%
Risk Adjusted Margin 19.5 % 20.3 % 18.4 %
Operating Expenses (8.4 )% (8.6 )% (8.9 )%
Unlevered Return on Receivables 11.1 % 11.7 % 9.5 %
Interest Expense (5.9 )% (5.7 )% (5.3 )%
Change in Allowance (0.1 )% (0.6 )% 0.2 %
Income Tax Expense (1.3 )% (1.2 )% (1.2 )%
Return on Receivables 3.8 % 4.3 % 3.2 %
           
Note: All ratios are based on consolidated results as a percentage
of average net finance receivables held for investment. Ratios may
not sum due to rounding.
 
(1) Revenue includes interest income on finance receivables plus
other revenues less insurance policy benefits and claims.
 
     
OneMain Holdings, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
 
Three Months Ended
 
(unaudited, $ in millions) 3/31/19 12/31/18 3/31/18
 
Consumer & Insurance $ 232 $ 234 $ 174
Acquisitions & Servicing 1
Other (3 ) (9 ) (10 )
Segment to GAAP Adjustment (27 ) (11 ) 3  
Income Before Income Taxes – GAAP basis $ 202   $ 214   $ 168  
 
Pretax Income – Segment Accounting Basis $ 232 $ 234 $ 174
Net Loss on Repurchases and Repayments of Debt (1) 16 27
Acquisition-Related Transaction and Integration Expenses (1) 6 6 10
Restructuring Charges 3 8
Net Gain on Sale of Cost Method Investment (11 )    
Consumer & Insurance Adjusted Pretax Income (non-GAAP) $ 246   $ 248   $ 211  
 
Pretax Income – Segment Accounting Basis 1
Adjustments      
Acquisitions & Servicing Adjusted Pretax Income (non-GAAP) $   $   $ 1  
 
Pretax Loss – Segment Accounting Basis $ (3 ) $ (9 ) $ (10 )
Net Loss on Sale of Real Estate Loans (2) 1   6    
Other Adjusted Pretax Loss (non-GAAP) $ (2 ) $ (3 ) $ (10 )
 
Springleaf Debt Discount Accretion $ (6 ) $ (6 ) $ (6 )
OMFH LLR Provision Catch-up (10 ) (4 ) (4 )
OMFH Receivable Premium Amortization (5 ) (8 ) (19 )
OMFH Receivable Discount Accretion 3 4 10
Other (9 ) 3   22  
Total Segment to GAAP Adjustment $ (27 ) $ (11 ) $ 3  

Contacts

OneMain Holdings, Inc.
Investor Contact:
Kathryn
Miller, 475-619-8821
Kathryn.Miller@omf.com

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