In an effort to enhance its operational performance, Genworth Financial, Inc. (GNW - Free Report) decided to sever 400 positions. The decision is also based on the company’s intentions to reduce expenses.
Genworth will have to bear severance, outplacement and other associated costs of $15 to $20 million during the second quarter of 2013. The Zacks Consensus Estimate for the second quarter of 2013 is currently pegged at 29 cents, translating to a year-over-year improvement of approximately 80.6%.
Nevertheless, Genworth will have $80 to $90 million in annual pre-tax expense savings when the plan will be fully implemented.
Out of the total number of eliminated positions, 150 will never be filled. The plan also involves cutting down on information technology and program expenditure. The company has approximately 6,300 employees.
Genworth expects the restructuring initiatives to have significant impact on its performance after 2013.
In order to emphasize on generating capital as well as increasing the financial strength and flexibility of the company and its business model, Genworth decided to divest the wealth management business for about $412.5 million. This includes divesting Genworth Financial Wealth Management, and alternative solutions provider, the Altegris companies.
The company, in relation with the sale, incurred $27 million in goodwill impairment and other loss and expects to incur about $10 million more losses upon closing of the transaction.
Earlier in Jan 2013, Genworth announced the U.S. Mortgage Insurance Capital Plan to reduce the risk-to-capital ratio of the U.S. mortgage insurance subsidiary and separate the mortgage insurance business from the company. The plan has already gained approval.
Genworth’s first-quarter 2013 net operating income of 30 cents per share surpassed the Zacks Consensus Estimate of 27 cents and was much above the year-ago level of 3 cents. Results benefited from better performances at Global Mortgage Insurance and U.S. Life Insurance.
Genworth carries a Zacks Rank #3 (Hold). Life insurers Protective Life Corporation and StanCorp Financial Group Inc. with a Zacks Rank #1(Strong Buy), and China Life Insurance Co. Ltd. (LFC - Free Report) with a Zacks Rank #2 (Buy) are worth noting.