Genworth Financial Incorporation (GNW) reported third-quarter 2010 operating earnings of 6 cents, lagging the Zacks Consensus Estimate of 25 cents by a substantial 19 cents. Results were considerably lower than 18 cents reported in third-quarter 2009. Operating income was $29 million compared with $81 million in the year-ago period.
Higher year-over-year loss at the U.S. Mortgage Insurance segment as well as weak results at Retirement and Protection and at International resulted in the company’s soft performance.
Net income available to common shareholders was $83 million or 17 cents per share in the reported quarter compared with $19 million or 4 cents available to common shareholders in the year-ago period. Net income in the reported quarter included investment gains of $54 million compared with an investment loss of $62 million in the prior-year period.
Genworth’s total revenue improved 11.5% in the quarter to $2.67 billion from $2.39 billion in the prior-year quarter. Results surpassed the Zacks Consensus Estimate of $2.54 billion. An improvement in investment income as well as insurance and investment product fees largely drove the overall revenue climb.
Premium revenue at Genworth declined 3% year over year to $1.44 billion in the quarter. Net investment income increased 7.4% year over year to $815 million. Net investment gains were $105 million from a loss of $122 million in third-quarter 2009.
In the quarter under review, total benefits and expenses of Genworth declined 5.4% over the prior-year quarter to $2.5 billion.
Segment Update
Retirement and Protection: Net operating income declined to $111 million in the quarter from $134 million in third-quarter 2009. Earnings decline at Long Term Care and Life Insurance was primarily responsible for the slide.
International: Net operating income improved to $121 million in the quarter from $96 million in third-quarter 2009. Improved profit in Canada and Australia coupled with solid results from lifestyle protection from other international mortgage insurance largely contributed to the overall improvement.
U.S. Mortgage Insurance: Operating loss widened to $152 million compared with a loss of $116 million in the prior-year quarter. Higher reserves and increased new delinquencies affected results negatively.
Corporate and Other: Net operating loss was $51 million compared with an operating loss of $33 million in third-quarter 2009.
Financial Update
Cash, cash equivalents and invested assets of Genworth at the end of the quarter were $75.6 million compared with $69.2 million at the end of fourth quarter 2009.
Genworth’s long-term borrowings increased to $4.4 million at quarter-end from $3.6 million at the end of fourth-quarter 2009.
We expect the elevated unemployment rate to continue pressuring mortgage insurance business. Though the business is showing signs of improvement, the line is still experiencing losses. Additionally, the improvements in its other business lines are expected to be slow given the economy’s sluggish recovery.
The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
GENWORTH FINL (GNW): Free Stock Analysis Report
Zacks Investment Research
