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Genworth Earnings Lag; Up Y/Y on Lower Mortgage Losses

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Genworth Financial Inc. (GNW - Free Report) reported third-quarter 2013 net operating income of 24 cents per share. The results fell short of the Zacks Consensus Estimate by 4 cents but were a couple of cents above the year-ago level of 22 cents.

Adjusting for net investment losses of $13 million and income from discontinued operations of $2 million, net income came in at 22 cents per share, skyrocketing from 7 cents per share earned in the year-ago quarter.

Genworth witnessed robust performance at Global Mortgage Insurance and long-term care insurance, benefitting from progress on rate actions. The divesture of its wealth management business positioned it well to focus on capital generation, increasing the financial strength and flexibility of the company as well as simplifying the business model. Moreover, a new credit line and redemption of 2015 notes along with increase in cash balance enhanced Genworth’s financial position. Following a robust quarterly performance, shares of Genworth moved up 1.3% to close at $14.57 yesterday.
Quarterly Operational Performance

Genworth’s total revenue decreased 5.6% to $2.32 billion in the quarter from $2.46 billion in the year-ago quarter. Top line declined primarily due to lower net investment income, lower premiums as well as lower insurance, investment product fees, and other. It missed the Zacks Consensus Estimate of $2.41 billion.

Premium revenues at Genworth decreased 1.7% year over year to $1.3 billion in the quarter.

Net investment income declined 2.9% year over year to $801 million.

Total benefits and expenses declined 13% year over year to $2.07 billion.

Quarterly Review by Segment

U.S. Life Insurance: Net operating income improved 29.1% year over year to $111 million. Favorable results from long-term care insurance and fixed annuity product lines aided the improvement.

Global Mortgage Insurance: The segment’s net operating income of $87 million in the quarter surged 53% year over year. A substantially lower loss at U.S. Mortgage Insurance and higher income from International Mortgage Insurance aided the improvement.

Corporate and Run-Off: Net operating loss was $79 million in the reported quarter, wider than $32 million loss incurred in the year-ago quarter.

Financial Update

Genworth exited the quarter with cash, cash equivalents and invested assets of $73.6 billion, down from $78.7 billion at 2012-end level.

Genworth’s long-term borrowings stood at $4.78 billion at quarter end, almost in line with 2012-end.


In August, Genworth Financial closed the divestiture of wealth management business to AqGen Liberty Acquisition, Inc., for $412.5 million. This included the sale of Genworth Financial Wealth Management, and alternative solutions provider, the Altegris companies.

Net proceeds of approximately $360 million together with available cash will be deployed to redeem the company's remaining 2014 debts.

Performance of other life insurers

StanCorp Financial Group Inc. reported third-quarter 2013 operating net earnings of $1.45 per share, exceeding the Zacks Consensus Estimate by 39% and year-ago earnings by 38%.

Zacks Rank

Genworth carries a Zacks Rank #3 (Hold). Life insurers Lincoln National Corporation (LNC - Free Report) and Sun Life Financial Inc. (SLF - Free Report) , with Zacks Rank #2 (Buy), will report their results on Oct 30 and Nov 7 respectively.

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