Genworth Financial Inc. (GNW) reported first-quarter 2013 net operating income of 30 cents per share. The result surpassed the Zacks Consensus Estimate of 27 cents and was much above year ago level of 3 cents.
Adjusting for net investment losses of $28 million and loss from discontinued operations of $20 million, net income came in at 21 cents, up from 9 cents earned in the year ago quarter.
The first-quarter results benefited from better performances at Global Mortgage Insurance and U.S. Life Insurance.
Quarterly Operational Performance
Genworth’s total revenues decreased to $2.30 billion in the quarter from $2.32 billion in the year ago quarter. Top line declined primarily due to lower net investment income, lower insurance and investment product fees and other as well as net investment losses. It missed the Zacks Consensus Estimate of $2.51 billion.
Premium revenue at Genworth increased 14% year over year to $1.2 billion in the quarter.
Net investment income declined 2.2% year over year to $814 million.
Quarterly Review by Segment
U.S. Life Insurance: Net operating income improved 32.8% year over year to $85 million. Favorable mortality experience across the life insurance, long-term care insurance and fixed annuity product lines aided the improvement.
Global Mortgage Insurance: The segment’s net operating income of $102 million in the quarter recovered from a loss of $37 million in the year-ago quarter. 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 $36 million in the reported quarter, was wider than the year ago loss of $36 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $77.3 billion, down from $78.7 billion at 2012 end level.
Genworth’s long-term borrowings stood at $4.7 billion at quarter end, flat with 2012-end level.
Divestiture
In Mar 2013, Genworth inked a deal to divest the wealth management business for $412.5 million. It recognized $27 million from a goodwill impairment and other loss related to the sale of the wealth management business, partially mitigated by $7 million of income from discontinued operations.
Genworth expects the transaction to close in the second half of 2013, subject to closing conditions. The company also expects to record an additional after-tax loss of up to $10 million.
Business Update
Genworth announced that it has gained approval for implementation of its U.S. Mortgage Insurance Capital Plan. The plan was previously announced in Jan 2013 to reduce the risk-to-capital ratio of the U.S. mortgage insurance subsidiary and the risk of a default under the indenture governing Genworth's senior notes,
As per the plan, the European mortgage insurance subsidiaries’ ownership is transferred to that of Genworth Mortgage Insurance Corporation effective Jan 31, 2013.
Performance of a Few Other Life Insurers
StanCorp Financial Group Inc. (SFG) reported first quarter 2013 operating earnings of $1.07 per share, which exceeded the Zacks Consensus Estimate by 33.8%. Results were also 35.4% higher than 79 cents earned in the prior year quarter.
Reinsurance Group of America Inc. (RGA) reported first quarter 2013 operating earnings of $1.65 per share, exceeding the Zacks Consensus Estimate of $1.61 per share. Results were also ahead of the year-ago earnings by 8.6%.
Zacks Rank
Genworth currently carries a Zacks Rank #5 (Strong Sell). Protective Life (PL), another life insurer with a favorable Zacks Rank #1 (Strong Buy), is scheduled to release its first-quarter results on May 6.
GENWORTH FINL (GNW): Free Stock Analysis Report
PROTECTIVE LIFE (PL): Free Stock Analysis Report
REINSURANCE GRP (RGA): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
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