Higher losses at the U.S. Mortgage Insurance segment and elevated unemployment rate continue to pressure the mortgage insurance business. We therefore, retain the Underperform rating on Genworth Financial Inc. (GNW).
Genworth reported an operating loss during the fourth-quarter, lagging the Zacks Consensus Estimate as well as the year-ago results led by a substantially higher year-over-year loss at the U.S. Mortgage Insurance segment, which was partially offset by better results at Retirement & Protection and at International.
Genworth’s mortgage insurance business is experiencing losses as a result of the stressed economic conditions combined with elevated unemployment rates. Though the overall economy is showing signs of improvement, the unemployment rate is expected to remain elevated, which will further weigh on the company’s mortgage insurance business.
Genworth has experienced significant declines in the sale of life and wealth management insurance products. Additionally, earnings were lower in the lifestyle protection business associated primarily with higher unemployment related claims.
The company has experienced significant outflows in its wealth management business, which has severely impacted its assets under management. However, life and long-term care insurance had strong sales during the quarter. With an 18% rate increase, management expects an addition of $ 40 million to $ 50 million in annual premium starting 2012.
On the flip side, Genworth remains focused on fueling growth in its Wealth Management business through acquisitions. It is acquiring Altegris, a specialist in alternative investments, to expand its offerings to financial advisers. Also, it is launching new services to continue to deliver solid growth.
It recently launched its Cash Advantage service to provide custody services for the clients of independent financial advisors. In 2010, the company recorded solid growth by adding over 400 new advisors and growing assets under management by over 30%. Genworth aims a revenue growth of 6%-8% for its leadership lines.
Over the last 7 days, none of the analysts covering the stock revised their estimate for the first quarter of 2011. However, over the last 30 days, 2 out of 13 analysts covering the stock nudged the estimate downward for the same period while none raised the same.
Over the last 7 as well as 30 days none of the analysts covering the stock raised the estimates for 2011 and 2012. However, for 2011, only 1 out of 17 analysts lowered the estimate for 2011 over the last 7 days while 3 lowered it over the last 30 days. For 2012, 1 out of 15 analysts lowered the estimate over the last 7 days while 3 lowered it over the last 30 days.
The Zacks Consensus Estimate for fourth-quarter 2010 is 22 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $ 1.09 per share and $ 1.69 per share.
The quantitative Zacks #5 Rank (short-term Strong Sell rating) for the company indicates downward pressure on the shares over the near term.
Based in Richmond, Virginia, Genworth Financial offers a variety of products to customers in areas such as life insurance and lifestyle protection, long-term care insurance, annuities, asset management and mortgage insurance through financial intermediaries, advisors, independent distributors and sales specialists. The company competes with MetLife, Inc. (MET) and Prudential Financial, Inc. (PRU).
GENWORTH FINL (GNW): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
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