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Analyst Blog

On Jun 26, we issued updated report on Genworth Financial, Inc. (GNW - Analyst Report).

Genworth’s progress on premium rate increase approvals continues. As of Mar 31, 2014, the company had approvals from 41 states and about gross incremental premiums of $325 million. The insurer estimates that annual net premium increases from the 2012 rate action will result in $250 million to $300 million of increased annual premium when fully implemented by 2017.

In addition, the U.S. Mortgage Insurance division has been showing improvement on the strength of lower new delinquency development and effective loss mitigation programs along with changes in aging of existing delinquencies. Gradual improvement in the U.S. housing market, strong loss mitigation programs and a growing private mortgage insurance market helped in increasing new insurance written and lower losses. Genworth expects the momentum to continue with substantially higher earnings in 2014.

It also successfully carried out the initial public offering (IPO) of its Australian mortgage insurance unit in May. This IPO reorganize the business portfolio, fund growth opportunities for the Australian business with greater access to the capital markets, maintain control positions of strategic mortgage insurance platforms in Australia, and free material capital for redeployment.
 
Loss ratios of long-term care insurance business have been increasing over the past several years and have ranged from 63% to 68% over the last five years. Genworth anticipates 2014 loss ratio at the low end of the 30–40% range.

Genworth has been strengthening its financial position. While cash balance improved, debt to capital ratio has also lowered, comparing favorably with the industry average. It also has addressed its debt maturities till 2016.

Genworth expects operating earnings to dragged down by continued low interest rate environment if the investment yields and asset allocation strategies, through 2015, do not change.

The Zacks Consensus Estimate for 2014 increased 1.4% to $1.45 as 4 of 7 estimates moved north over the last 60 days. However, the same for 2015 moved south by a cent. Nonetheless, the expected long-term growth rate is currently 5%.

Genworth carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked life insurers worth reckoning are China Life Insurance Co. Ltd. (LFC - Analyst Report), Lincoln National Corporation (LNC - Analyst Report) and Sun Life Financial Inc. (SLF - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).
 

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