Genworth Sells Non-Core Unit

Last week, Genworth Financial Inc. (GNW - Analyst Report) announced that it completed the sale of Genworth Seguros Mexico S.A. de C.V. to HDI-Gerling International Holding AG. Genworth now intends to focus more on its core Lifestyle Protection Insurance and Mortgage Insurance businesses in Mexico.
 
The transaction, which was valued at approximately $45 million, included the sale of automobile, property and casualty, life, and personal accident insurance business lines that Genworth Seguros distributes through independent professional insurance agents.

Lifestyle protection insurance products help customers pay their mortgages, loans and credit card bills in case they are unable to make such payments due to unemployment or sickness.

The challenging market conditions combined with slowing global economies have influenced investment and spending decisions in the past few quarters as both consumers and businesses modulate their risk profiles in response. This has resulted in a slowdown of mortgage originations and consumer lending. Genworth also experienced an elevated incidence of claims in its U.S. and international mortgage and lifestyle protection insurance businesses.

Genworth’s second quarter earnings of 2 cents per share was considerably lower than the Zacks Consensus Estimate as it suffered significant losses in its U.S. mortgage insurance division and its investment portfolio. However, Genworth’s recent capital infusion, implementation of several cost curtailment measures and focus on its core business growth augur well.

We believe that the recent recovery of the economy along with the positive trends in home sales will bring some respite for Genworth. Though we expect improvement in new business from better pricing and strict underwriting standards, mortgage insurance delinquencies will continue to rise across most geographical regions.

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