Genworth Financial Inc. (GNW) reported its third quarter operating income of 21 cents per share, a penny ahead of the Zacks Consensus Estimate. Results breezed past the year ago earnings of 6 cents. Operating profit for the quarter stood at $104 million, surging from $29 million, a year ago.
Better performance at Retirement & Protection largely aided the company to deliver better numbers in the quarter.
Including net investment losses of $75 million, net loss available to common shareholders was $29 million or 6 cents per share in the reported quarter compared with net income of $29 million or 17 cents per share available to common shareholders in the comparable period last year. The prior year quarter included net investment gains of $54 million.
Operational Performance
Genworth’s total revenue declined 5.5% in the quarter to $2.52 billion from $2.67 billion in the prior-year quarter. Top line missed the Zacks Consensus estimate of $2.68 billion.
Premium revenue at Genworth increased 1% year over year to $1.46 billion in the quarter. But, net investment income increased 3.3% year over year to $842 million.
Segment Update
Retirement and Protection: Net operating income increased 8.1% year over year to $120 million in the quarter from $111 million in third quarter 2010, largely led by higher income from the life insurance and Wealth Management businesses.
International: Net operating income decreased 19% year over year to $98 million in the quarter from $121 million in the third quarter of 2010. Soft performance at Mortgage and Lifestyle Protection business led to the decline.
U.S. Mortgage Insurance: Operating loss narrowed to $79 million from $152 million in the prior-year quarter. The decline in loss was primarily due to better loss mitigation results, stability in the aging of loan delinquencies and higher levels of profitable new business.
Corporate and Other: Net operating loss was $35 million in comparison with an operating loss of $51 million in the prior-year period.
Financial Update
At third quarter-end, cash, cash equivalents and invested assets of Genworth stood at $76.8 billion, higher than $72.3 billion at 2010-end.
Genworth’s long-term borrowings decreased to $4.71 billion at the end of the quarter from $4.95 million at 2010 end.
Initial Public Offering of Australian Mortgage Insurance Business
Genworth Financial plans an initial public offering (IPO) of its Australian mortgage insurance business in the second quarter of 2012. The company intends to sell 40% of its stake. Additionally, the company expects to record a tax charge of up to $80 million in the fourth quarter of 2011 related to the potential repatriation of earnings from this planned transaction.
The IPO is an effort to reorganize the business portfolio, support future growth opportunities for the Australian business with greater access to the capital markets, maintain control positions of strategic mortgage insurance platforms in Australia and Canada, and free material capital for redeployment.
Peer Take
MetLife Inc. (MET), which competes with Genworth, reported third quarter operating earnings per share of $1.11, three cents ahead of both the Zacks Consensus Estimate and the year-ago quarter.
The upside was primarily due to a robust growth in the International business segment, improved underwriting results as well as higher demand for variable annuities, net investment income and higher-than-expected derivative gains. This was partially offset by underperformance at its Banking and the U.S. business segments along with higher expenses.
Prudential Financial Inc. (PRU), which also competes with Genworth, reported core operating earnings of $1.07 per share, substantially lower than the Zacks Consensus Estimate of $1.56. This also compared unfavorably with earnings of $2.12 in the year-ago quarter.
Zacks Rank
We retain our Neutral recommendation on Genworth. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
GENWORTH FINL (GNW): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment