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Genworth (GNW) Incurs Loss in Q3; Revenues Miss Estimates
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Genworth Financial, Inc. (GNW - Free Report) reported third-quarter 2016 net operating loss of 81 cents per share, which compared unfavorably with the Zacks Consensus Estimate of net operating income of 21 cents. The company had posted net operating income of 13 cents per share in the prior-year quarter.
The underperformance stemmed from previously announced charges related to the review of Long Term Care (LTC) claim reserves and taxes.
The company reported net loss per share of 76 cents, substantially wider than the net loss per share of 57 cents in the prior-year quarter.
Operational Performance
Total revenue of Genworth dipped approximately 1% year over year to $2.1 billion. Decreases of 3.2% in premiums and 2.7% in policy fees and other income, respectively, resulted in the downside. However, 2.8% improved net investment income limited the downside. Also, the top line missed the Zacks Consensus Estimate of 2.2 billion.
Total benefits and expenses declined 7.2% year over year to $2.3 billion, primarily due to fall in acquisition and operating expenses, net of deferrals, amortization of deferred acquisition costs and intangibles, and interest expenses.
Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Net operating income of $67 million soared 81.1% year over year. The loss ratio for the quarter improved 2200 basis points (bps) year over year to 21%. Continued decline and improved performance in delinquencies during the 2005–2008 book years led to the improvement.
Canada Mortgage Insurance: Net operating income was $36 million, down 5.3% year over year. The loss ratio in the quarter was deteriorated 300 bps year over year to 24%, mainly due to an increase in new delinquencies, net of cures, in oil-producing regions.
Australia Mortgage Insurance: Net operating income of $14 million plunged 33.3% year over year. Loss ratio in the quarter was 42%, up 1300 bps year over year.
U.S. Life Insurance: Net operating loss of $207 million compared unfavorably with net operating income of $40 million in the prior-year quarter. The underperformance stemmed from the net operating loss incurred by Long Term Care Insurance.
Runoff: Net operating income of $12 million compared favorably with the net operating loss of $4 million in the year-ago quarter.
Corporate And Other: Net operating loss of $327 million was significantly wider than the year-ago loss of $68 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $79 billion, up 4.3% from year-end 2015.
Long-term borrowings of Genworth totaled $4.2 billion as of Sep 30, 2016, down approximately 8.2% from year-end 2015.
Book value per share as of Sep 30, 2016 was $29.84, up 9.3% from the 2015-end level.
Business Update
During the third quarter, the company completed a review of its LTC claim reserves. Several changes were made to the assumptions and methodologies, thereby impacting claim terminations, benefit utilization and incurred but not reported reserves.
On Oct 1, 2016, Genworth Financial completed repatriation of its Bermuda subsidiary, which was part of the restructuring plan for the company’s U.S. Life Insurance business.
Among the other players from the insurance industry that have reported their third-quarter earnings so far, the bottom line at Progressive Corp.(PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) beat their respective Zacks Consensus Estimate, while earnings of RLI Corp. (RLI - Free Report) missed the same.
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Genworth (GNW) Incurs Loss in Q3; Revenues Miss Estimates
Genworth Financial, Inc. (GNW - Free Report) reported third-quarter 2016 net operating loss of 81 cents per share, which compared unfavorably with the Zacks Consensus Estimate of net operating income of 21 cents. The company had posted net operating income of 13 cents per share in the prior-year quarter.
The underperformance stemmed from previously announced charges related to the review of Long Term Care (LTC) claim reserves and taxes.
The company reported net loss per share of 76 cents, substantially wider than the net loss per share of 57 cents in the prior-year quarter.
Operational Performance
Total revenue of Genworth dipped approximately 1% year over year to $2.1 billion. Decreases of 3.2% in premiums and 2.7% in policy fees and other income, respectively, resulted in the downside. However, 2.8% improved net investment income limited the downside. Also, the top line missed the Zacks Consensus Estimate of 2.2 billion.
Total benefits and expenses declined 7.2% year over year to $2.3 billion, primarily due to fall in acquisition and operating expenses, net of deferrals, amortization of deferred acquisition costs and intangibles, and interest expenses.
Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Net operating income of $67 million soared 81.1% year over year. The loss ratio for the quarter improved 2200 basis points (bps) year over year to 21%. Continued decline and improved performance in delinquencies during the 2005–2008 book years led to the improvement.
Canada Mortgage Insurance: Net operating income was $36 million, down 5.3% year over year. The loss ratio in the quarter was deteriorated 300 bps year over year to 24%, mainly due to an increase in new delinquencies, net of cures, in oil-producing regions.
Australia Mortgage Insurance: Net operating income of $14 million plunged 33.3% year over year. Loss ratio in the quarter was 42%, up 1300 bps year over year.
U.S. Life Insurance: Net operating loss of $207 million compared unfavorably with net operating income of $40 million in the prior-year quarter. The underperformance stemmed from the net operating loss incurred by Long Term Care Insurance.
Runoff: Net operating income of $12 million compared favorably with the net operating loss of $4 million in the year-ago quarter.
Corporate And Other: Net operating loss of $327 million was significantly wider than the year-ago loss of $68 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $79 billion, up 4.3% from year-end 2015.
Long-term borrowings of Genworth totaled $4.2 billion as of Sep 30, 2016, down approximately 8.2% from year-end 2015.
Book value per share as of Sep 30, 2016 was $29.84, up 9.3% from the 2015-end level.
Business Update
During the third quarter, the company completed a review of its LTC claim reserves. Several changes were made to the assumptions and methodologies, thereby impacting claim terminations, benefit utilization and incurred but not reported reserves.
On Oct 1, 2016, Genworth Financial completed repatriation of its Bermuda subsidiary, which was part of the restructuring plan for the company’s U.S. Life Insurance business.
GENWORTH FINL Price, Consensus and EPS Surprise
GENWORTH FINL Price, Consensus and EPS Surprise | GENWORTH FINL Quote
Zacks Rank
Genworth presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Among the other players from the insurance industry that have reported their third-quarter earnings so far, the bottom line at Progressive Corp.(PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) beat their respective Zacks Consensus Estimate, while earnings of RLI Corp. (RLI - Free Report) missed the same.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>