Genworth Financial Inc. (GNW) priced $400 million of 7.625% senior notes, with maturity after 10.5 years. Genworth intends to deploy the net proceeds for general corporate purposes.
Genworth ended 2010 with a total debt balance of $4.95 billion, compared $4.57 billion at the end of 2009, reflecting an increase of 8%. The debt-to-capital ratio was 26% at 2010 end, a 100 basis-point year over year reduction. However, with the issuance of $400 million of debt, debt-to-capital ratio will increase by 100 basis points.
The company incurred interest expenses of $457 million in 2010, 16% higher than $393 million in the prior-year period. With the new debt issuance, the company will have to defray an additional $30.5 million annually.
Genworth reported fourth-quarter 2010 operating loss of 28 cents, lagging the Zacks Consensus earnings estimate of 16 cents. Results were considerably lower than the operating profit of 19 cents reported in fourth-quarter 2009.
A substantially higher year-over-year loss at the U.S. Mortgage Insurance segment partially offset by better results at Retirement & Protection and at International resulted in the company’s soft performance.
We expect the elevated unemployment rate to continue pressuring the 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 Zacks Consensus Estimate for first-quarter 2011 is 23 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $1.11 per share and $1.70 per share.
We maintain our Underperform recommendation on Genworth. 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. It 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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