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Genworth Financial (GNW) Q2 Earnings Beat, Revenues Miss

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Genworth Financial, Inc. (GNW - Free Report) reported second-quarter 2017 net operating income of 30 cents per share, beating the Zacks Consensus Estimate of 22 cents per share by 36.4%. Earnings improved 20% year over year.

The company reported net income per share of 40 cents, climbing 17.6% from 34 cents earned in the prior-year quarter.

Genworth Financial Inc Price, Consensus and EPS Surprise


Genworth Financial Inc Price, Consensus and EPS Surprise | Genworth Financial Inc Quote

Operational Performance
Total revenue of Genworth Financial declined 3.8% year over year to $2.12 billion. Decrease of 1.4% in premiums alongside lower policy fees and other income led to this downside. However, increase in net investment income limited the deterioration further. Also, the top line missed the Zacks Consensus Estimate of $2.14 billion.

Total benefits and expenses decreased 3.3% year over year to $1.8 billion, primarily owing to a decrease in interest credited, along with lower acquisition and operating expenses, net of deferrals and interest expense.

Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Adjusted operating income of $91 million surged 49.2% year over year. Loss ratio for the quarter improved 2200 basis points (bps) year over year to 2%.
Canada Mortgage Insurance: Adjusted operating income was $41 million, up 7.9% year over year. Loss ratio in the quarter improved 1600 bps year over year to 4%, mainly owing to a decrease in new delinquencies and a strong cure activity, representing the ongoing housing market strength and underlying economic conditions.

Australia Mortgage Insurance: Net operating income of $12 million declined 20% year over year. Loss ratio in the quarter was 34%, down 200 bps year over year, primarily driven by non-reinsurance recoveries on paid claims in the reported quarter.
U.S. Life Insurance: Adjusted operating income of $39 million plunged 29.1% year over year. This outperformance stemmed from adjusted net operating income at Fixed Annuities compared with a loss in the year-ago quarter.
Runoff: Adjusted operating income of $11 million compared favorably with the net operating income of $6 million in the year-ago quarter.
Corporate And Other: Net operating loss of $43 million was substantially narrower than the year-ago loss of $52 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $76.7 billion, up about 2.2% from year-end 2016.
Long-term borrowings of Genworth Financial totaled $4.2 billion as of Jun 30, 2017, up approximately 0.6% from year-end 2016.

Book value per share was $26.08 as of Jun 30, 2017, down 14.1% from the level at 2016-end.
Business Update
In Oct 2016, Genworth Financial inked a definitive agreement with China Oceanwide Holdings Group Co., Ltd. to be acquired by the latter for $2.7 billion or $5.43 per share in cash. This transaction will be executed via Asia Pacific Global Capital Co. Ltd., one of China Oceanwide’s investment platforms. The deal is expected to culminate by Nov 30, 2017, upon fulfillment of the closing conditions.

Since the end of the first quarter of 2017, Genworth Financial and China Oceanwide reported on the following progress:

On Jul 13, 2017, both the companies withdrew and refiled their joint voluntary notice to the Committee on Foreign Investment in the United States (CFIUS) for the second time, to offer CFIUS sufficient time to review and discuss the proposed transaction.

Effective from July 1, 2017, Genworth Financial completed the remaining internal reinsurance and recapture transactions required under the Oceanwide merger agreement. The life insurer expects these transactions to create a 15-20 point decline in consolidated risk-based capital (RBC) ratio from a reduction in covariance benefit.

Zacks Rank

Currently, Genworth Financial carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported their second-quarter earnings so far, The Progressive Corporation (PGR - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) missed their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) beat the same.

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