Genworth Financial Inc. GNW posted second-quarter earnings of 24 cents per share, missing the Zacks Consensus Estimate by a couple of cents. Earrings were also down 22.6% year over year.
Soft performance at International Mortgage Insurance as well as Life Insurance division accounted for the shortfall.
Including the impact of 61 cents loss per share related to the planned sale of the lifestyle protection insurance business, the insurer incurred loss of 39 cents per share.
Shares lost 5.37% in the aftermarket trading session to reflect the underperformance.
Operational Performance
Total revenue of Genworth inched down 0.5% year over year to $2.15 billion. The decrease was due to lower premiums (down 0.9%) and lower insurance and investment product fees and other (down 1.3%). Revenues also missed the Zacks Consensus Estimate of $2.4 billion.
Total benefits and expenses increased about 1.4% year over year to $1.9 billion due to higher benefits and other changes in policy reserves, and acquisition and operating expenses in the quarter.
Segment-Wise Quarterly Review
U.S. Life Insurance: The segment reported net operating profit of $57 million, down 17.4% from the year-ago quarter. Higher profits at Long Term Care Insurance and Fixed Annuities were more than offset by lower profits at Life Insurance.
Long-term Care Insurance, Life Insurance as well as Fixed Annuities witnessed unfavorable mortality on existing claims in the quarter.
Global Mortgage Insurance: The segment’s net operating income of $110 million decreased 19% year over year. Though profits at U.S. Mortgage Insurance improved, lower profits at International Mortgage Insurance resulted in an overall decline.
Loss ratio at U.S. Mortgage Insurance remained flat sequentially on lower new delinquencies and favorable net cures and aging of existing delinquencies.
At International Mortgage Insurance, loss ratio at Canada Mortgage Insurance was lower sequentially though it increased year over year. Australia Mortgage Insurance loss ratio increased year over year and sequentially on higher new delinquencies.
Corporate and Run-Off: Net operating loss was $48 million, narrower than $51 million loss incurred in the year-ago quarter.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $76.1 billion, down 1.7% from 2014 end.
Long-term borrowings of Genworth totaled $4.6 billion as of Jun 30, 2015, down about 0.7% from 2014 end.
Business Updates
Genworth targeted pretax cash savings of more than $100 million by the end of 2016. To that end initiatives taken to reduce headcount and program spend in the first half of 2015 are expected to help by about $30 million in 2015 and $40–$50 million in 2016.
Genworth estimated that an additional capital between $500 million and $700 million will be required to be fully compliant with the final PMIERs. It also expects to comply with Mortgage Insurer Eligibility Requirements by Dec 31, 2015. As such the company executed a transaction to generate about $500 million of additional PMIERs capital credit.
Genworth lowered its stake by 14.1% in Australia Mortgage Insurance but retained majority holdings.
The insurer is also in exclusive negotiations to divest its Lifestyle Protection Insurance Business.
Performance of Other Life Insurers
While earnings at StanCorp Financial Group Inc. SFG surpassed the Zacks Consensus Estimate, Reinsurance Group of America Inc. RGA and Torchmark Corp. TMK missed the same in the second quarter.
Zacks Rank
Genworth presently carries a Zacks Rank #3 (Hold).
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