Overview

OneMain Holdings, Inc. (OMH) is a leading consumer finance company that provides personal loans, auto financing, credit cards, and optional insurance products to help customers meet their financial needs. The company operates in 47 states and serves customers through its branch network, digital platforms, and distribution partnerships.

OMH’s primary reportable segment is Consumer and Insurance (C&I), which includes consumer loans, credit cards, and optional insurance products. The company also has a small legacy segment that includes liquidating real estate loans and servicing activities.

Financial Performance

In 2024, OMH generated $4.99 billion in interest income, up 9% from 2023, driven by growth in its average net receivables. However, interest expense also increased 16% to $1.18 billion due to higher debt levels and costs to support the receivables growth.

The provision for finance receivable losses, which covers expected credit losses, rose 19% to $2.04 billion in 2024. This increase was due to portfolio growth, higher net charge-offs, and additional reserves from the Foursight Capital acquisition, partially offset by improved credit performance.

Other revenues decreased 5% to $695 million, primarily due to lower gains on loan sales and a net loss on debt repurchases, partially offset by higher credit card and servicing revenues. Other expenses increased 5% to $1.80 billion, driven by higher general operating costs from strategic investments and restructuring charges.

Overall, OMH’s net income declined 20% to $509 million in 2024 compared to $641 million in 2023, mainly due to the higher provision for losses and expenses.

Segment Performance

The C&I segment, which accounts for substantially all of OMH’s business, generated $782 million in adjusted pretax income in 2024, down from $874 million in 2023. The decrease was primarily due to the higher provision for losses and expenses, partially offset by growth in interest income.

C&I’s net finance receivables grew 11% to $23.6 billion at the end of 2024, driven by increases in personal loans, auto finance, and credit cards. Origination volume was relatively flat year-over-year.

The net charge-off ratio for the consumer loan portfolio increased to 7.94% in 2024 from 7.42% in 2023, while the 30-89 day delinquency ratio improved slightly to 3.24% from 3.28%. The allowance ratio for the consumer loan portfolio decreased to 11.20% from 11.49% due to improved credit performance.

Strengths and Weaknesses

Key strengths of OMH include its diversified product offerings, extensive branch network and digital capabilities, and experienced management team. The company has also demonstrated the ability to navigate challenging economic environments through disciplined underwriting and a focus on credit quality.

However, OMH faces risks related to its non-investment grade credit ratings, which impact its cost and access to capital. The company is also exposed to macroeconomic factors, such as changes in unemployment, inflation, and interest rates, that could affect its customers and financial performance.

Outlook

Looking ahead, OMH’s management team remains focused on maintaining a strong balance sheet, expanding product offerings, driving strategic growth initiatives, and maximizing returns while minimizing credit risk. The company believes it is well-positioned to serve its customers and increase shareholder value, even in a potentially volatile economic environment.

Key priorities include:

• Striving to be the lender of choice for non-prime consumers and improving their financial well-being
• Continuing to expand product offerings and grow the receivables portfolio
• Maintaining disciplined underwriting and a focus on maximizing returns
• Leveraging scale and cost discipline to drive improved operating leverage
• Maintaining a robust liquidity position with diversified funding sources

Overall, OMH appears to be navigating the current environment effectively, but will need to closely monitor macroeconomic conditions and continue executing on its strategic initiatives to drive long-term success.