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Genworth Financial (GNW) Down 17.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Genworth Financial (GNW - Free Report) . Shares have lost about 17.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Genworth Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Genworth Financial Misses on Q1 Earnings and Revenues

Genworth Financial posted first-quarter 2019 adjusted operating earnings of 24 cents per share, missing the Zacks Consensus Estimate of 26 cents by 7.7%. The bottom line declined 4% year over year.

Total revenues of Genworth Financial were $2.130 billion, down 0.7% year over year. The top line marginally missed the Zacks Consensus Estimate of $2.131 billion.

Net investment income grew 1.7% year over year to $829 million attributable to higher purchase yields on new investments and higher income from limited partnerships.  

Total benefits and expenses decreased 1.3% year over year to $1.9 billion, primarily owing to lower benefits and other changes in policy reserves, interest credited and acquisition and interest expense.

Segmental Results

U.S. Mortgage Insurance: Adjusted operating income of $124 million was up 11.1% year over year. Loss ratio improved 100 basis points (bps) year over year to 8% as favorable loss performance continues along with premium growth.

Canada Mortgage Insurance: Adjusted operating income was $41 million, down 16.2% year over year. Loss ratio deteriorated 200 bps year over year to 15% attributable to higher new delinquencies, net of cures.

Australia Mortgage Insurance: Adjusted operating income of $14 million was down 26.3% year over year. Loss ratio deteriorated 400 bps.

U.S. Life Insurance: Adjusted operating loss was $5 million, flat year over year as lower loss at Long Term Care Insurance was offset by higher loss at Life Insurance and lower income at Fixed Annuities.
Runoff: Adjusted operating income of $20 million doubled year over year.  

Corporate and Other: Adjusted operating loss of $73 million was wider than $59 million loss incurred in the year-ago quarter

Financial Update

Genworth Financial exited the quarter with cash, cash equivalents and invested assets of $75.1 billion, down nearly 3% from the level at year-end 2018.
Long-term borrowings of Genworth Financial totaled $4 billion as of Mar 31, 2019 up 2% from 2018 end.

Book value per share (excluding accumulated other comprehensive income) was $21.03 as of Mar 31, 2019, up 1.5% from 2018 end level.

About $150 million incremental annual Long Term Care Insurance (LTC) in force rate actions was approved in the first quarter of 2019, with net present value (NPV) benefit of nearly $500 million.
Business Update
The deadline for the Genworth Financial and China Oceanwide Holdings Group merger has been extended to Jun 30, 2019 as Genworth Financial agreed to a 10th waiver and agreement of each party's right to terminate the previously announced merger agreement.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Genworth Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Genworth Financial has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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