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Genworth Financial, Inc. (GNW - Free Report) reported second-quarter 2016 net operating income of 25 cents per share, which surpassed the Zacks Consensus Estimate of 21 cents per share by 19%. Also, earnings increased 4.2% year over year. The outperformance resulted from strong results of the U.S. Mortgage Insurance business.
The company reported net income per share of 34 cents rebounding from net loss per share of 39 cents in the prior-year quarter.
Operational Performance
Total revenue of Genworth inched up 2.7% year over year to $2.2 billion. A 35.1% surge in policy fees and other income drove the upside.
Total benefits and expenses dipped 1.4% year over year to $1.88 billion due to fall in benefits and other changes in policy reserves, interest credited and interest expenses.
Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Net operating income of $61 million jumped 24.5% year over year. The loss ratio for the quarter improved 900 basis points (bps) year over year to 24%. Continued decline and improved performance in delinquencies from the 2005 to 2008 book years led to the improvement.
Canada Mortgage Insurance: Net operating income was $38 million, up 2.7% year over year. The loss ratio in the quarter was 20%, up 300 bps year over year, mainly due to unfavorable conditions in oil-producing regions.
Australia Mortgage Insurance: Net operating income of $15 million plunged 48.3% year over year. The loss ratio in the quarter was 36%, up 800 bps year over year.
U.S. Life Insurance: Net operating income of $55 million declined 3.5% year over year, mainly due to the net operating loss incurred by Fixed Annuities.
Runoff: Net operating income of $6 million plunged 33.3% year over year.
Corporate And Other: Net operating loss of $52 million was substantially narrower than the year-ago loss of $62 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $78.2 billion, up 3.2% from year-end 2015.
Long-term borrowings of Genworth totaled $4.2 billion as of Jun 30, 2016, down about 8.3% from year-end 2015.
Book value per share as of Jun 30, 2016 was $30.37, up 10.4% from the 2015-end level.
Business Update
On Feb 4, 2016, a restructuring plan for the company’s U.S. life insurance businesses was announced, which has progressed since the end of the first quarter. The progress included reduction of cash expenditure by approximately $150 million pre-tax, on an annualized basis. Thus, the company managed to achieve the targeted level of cash expense reduction by the end of the reported quarter.
Further, the company recaptured two blocks of life insurance business from Brookfield Life and Annuity Insurance Company Limited (“BLAIC”) – Genworth’s primary Bermuda domiciled reinsurance subsidiary – to the U.S. life insurance companies, effective since Apr 1, 2016 and Jul 1, 2016.
Also, the company filed for the regulatory approvals to merge BLAIC into Genworth Life Insurance Company.
During the second quarter, the company completed the sale of its European Mortgage Insurance (MI) business to AmTrust Financial Services, Inc. The transaction generated about $50 million in net proceeds for the U.S. MI business.
Genworth presently carries a Zacks Rank #3 (Hold). Among the other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line at RLI Corp. (RLI - Free Report) and Progressive Corp. (PGR - Free Report) missed their respective Zacks Consensus Estimates, while Reinsurance Group of America Inc. (RGA - Free Report) earnings beat the same.
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Genworth (GNW) Q2 Earnings Beat Estimates, Increase Y/Y
Genworth Financial, Inc. (GNW - Free Report) reported second-quarter 2016 net operating income of 25 cents per share, which surpassed the Zacks Consensus Estimate of 21 cents per share by 19%. Also, earnings increased 4.2% year over year. The outperformance resulted from strong results of the U.S. Mortgage Insurance business.
The company reported net income per share of 34 cents rebounding from net loss per share of 39 cents in the prior-year quarter.
Operational Performance
Total revenue of Genworth inched up 2.7% year over year to $2.2 billion. A 35.1% surge in policy fees and other income drove the upside.
Total benefits and expenses dipped 1.4% year over year to $1.88 billion due to fall in benefits and other changes in policy reserves, interest credited and interest expenses.
Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Net operating income of $61 million jumped 24.5% year over year. The loss ratio for the quarter improved 900 basis points (bps) year over year to 24%. Continued decline and improved performance in delinquencies from the 2005 to 2008 book years led to the improvement.
Canada Mortgage Insurance: Net operating income was $38 million, up 2.7% year over year. The loss ratio in the quarter was 20%, up 300 bps year over year, mainly due to unfavorable conditions in oil-producing regions.
Australia Mortgage Insurance: Net operating income of $15 million plunged 48.3% year over year. The loss ratio in the quarter was 36%, up 800 bps year over year.
U.S. Life Insurance: Net operating income of $55 million declined 3.5% year over year, mainly due to the net operating loss incurred by Fixed Annuities.
Runoff: Net operating income of $6 million plunged 33.3% year over year.
Corporate And Other: Net operating loss of $52 million was substantially narrower than the year-ago loss of $62 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $78.2 billion, up 3.2% from year-end 2015.
Long-term borrowings of Genworth totaled $4.2 billion as of Jun 30, 2016, down about 8.3% from year-end 2015.
Book value per share as of Jun 30, 2016 was $30.37, up 10.4% from the 2015-end level.
Business Update
On Feb 4, 2016, a restructuring plan for the company’s U.S. life insurance businesses was announced, which has progressed since the end of the first quarter. The progress included reduction of cash expenditure by approximately $150 million pre-tax, on an annualized basis. Thus, the company managed to achieve the targeted level of cash expense reduction by the end of the reported quarter.
Further, the company recaptured two blocks of life insurance business from Brookfield Life and Annuity Insurance Company Limited (“BLAIC”) – Genworth’s primary Bermuda domiciled reinsurance subsidiary – to the U.S. life insurance companies, effective since Apr 1, 2016 and Jul 1, 2016.
Also, the company filed for the regulatory approvals to merge BLAIC into Genworth Life Insurance Company.
During the second quarter, the company completed the sale of its European Mortgage Insurance (MI) business to AmTrust Financial Services, Inc. The transaction generated about $50 million in net proceeds for the U.S. MI business.
GENWORTH FINL Price, Consensus and EPS Surprise
GENWORTH FINL Price, Consensus and EPS Surprise | GENWORTH FINL Quote
Zacks Rank and Performance of Other Insurers
Genworth presently carries a Zacks Rank #3 (Hold). Among the other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line at RLI Corp. (RLI - Free Report) and Progressive Corp. (PGR - Free Report) missed their respective Zacks Consensus Estimates, while Reinsurance Group of America Inc. (RGA - Free Report) earnings beat the same.
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