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Genworth Financial Inc. (GNW - Analyst Report) reported third quarter 2012 operating income of 25 cents per share, surpassing the Zacks Consensus Estimate by 31.6%. Results also compared favorably with the year-ago earnings of 13 cents. Operating profit for the quarter stood at $121 million, soaring 95% year over year.
The third quarter results benefited from better performances at Global Mortgage Insurance and at Insurance and Wealth Management division.
Including net investment gain of $1 million and goodwill impairment charge of $86 million, the company reported net income of $34 million or 7 cents compared with the loss of $16 million or 3 cents per share in the year-ago quarter.
Genworth’s total revenue crawled up 0.6% year over year to $2.54 billion in the quarter. Top line fared better largely due to net investment gains, reversing the year-ago quarter’s loss, coupled with higher Insurance and investment product fees and other. It also surpassed the Zacks Consensus Estimate by 0.7%.
Premium revenue at Genworth declined 10.3% year over year to $1.3 billion in the quarter.
Net investment income waned 2% year over year to $825 million.
Insurance and Wealth Management: Net operating income dipped 23.5% year over year to $104 million. The dip in operating income was due to lower income from U.S. Life Insurance (down 15.7% year over year), International Protection (plummeting 63.6% year over year) and Wealth Management (down 16.7% year over year).
Genworth expects to close its second life block transaction in the fourth quarter of 2012. The transaction is estimated to generate in excess of $100 million in initial after-tax capital benefits for the U.S. life insurance.
Global Mortgage Insurance: Segment net operating income of $56 million in the quarter rebounded from a loss of $11 million in the year-ago quarter. A substantial lower loss at U.S. Mortgage Insurance and higher income from International Mortgage Insurance aided the improvement.
Corporate and Run-Off: The net operating loss narrowed to $39 million in the quarter under review from an operating loss of $63 million in the prior-year period.
Genworth exited the quarter with cash, cash equivalents and invested assets of $79.4 billion, exhibiting an augmentation of nearly 3% from the end-level of 2011.
Genworth’s long-term borrowings stood at $4.9 billion at quarter end, up 3.5% from 2011 end level.
We retain our long-term 'Neutral' recommendation on Genworth Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
MetLife Inc. (MET - Analyst Report), competing closely with Genworth, is scheduled to release its third quarter earnings results on October 31, after the bell while Prudential Financial Inc. (PRU - Analyst Report), is scheduled to release its third quarter earnings results on November 7, after the closing bell.
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