Q1 Earnings Top, Revs Miss Ests at Genworth - Analyst Blog

With first-quarter 2014 operating net earnings of 39 cents per share, Genworth Financial Inc. GNW delivered yet another quarter of positive earnings surprise. Earnings surpassed the Zacks Consensus Estimate by 8.3% and the year-ago number by 28%.

Net income shot up 79% year over year to 37 cents per share.

Genworth witnessed solid performance at its mortgage insurance businesses benefitting from an improved loss ratio. Long-term care premiums also continue to increase, which in turn favorably impacted earnings in the U.S. Life Insurance Division.

Following a solid performance, shares of Genworth gained 0.58% in the after-market session.

Operational Performance

Genworth's total revenue slipped 0.8% year over year to $2.32 billion. The decline was primarily due to lower net investment income (down 1.1%) and lower insurance, investment product fees, and other (down 21.4%). The top line also missed the Zacks Consensus Estimate by 4.2%.

Total benefits and expenses decreased 2.4% year over year to $2.0 billion.

Quarterly Review Segment-wise

U.S. Life Insurance: Net operating income improved 10.6% year over year to $94 million. Favorable results across long-term care insurance and fixed annuity product lines aided the improvement.

Global Mortgage Insurance: The segment's net operating income of $132 million in the quarter increased 29% year over year. Better results at U.S. Mortgage Insurance and at International Mortgage Insurance aided the upside.

Corporate and Run-Off: Net operating loss was $32 million in the reported quarter, narrower than $36 million loss incurred in the year-ago quarter.

Financial Update

Genworth exited first quarter with cash, cash equivalents and invested assets of $75.5 billion, up 2.8% year over year.

Genworth's long-term borrowings stood at $5.15 billion as of March 31, 2014, slightly down from $5.16 million at 2013-end.

IPO Update

Genworth Mortgage Insurance Australia Limited has filed prospectus with the Australian Securities and Investments Commission for an initial public offering IPO of 40% of its shares.

Upon culmination, gross proceeds from the IPO are estimated between $400 and $700 million while fees and expenses in connection with the offering are projected between $23 million and $32 million.

Proceeds from the IPO are expected to be deployed to pay down some of the intercompany funding arrangements with subsidiaries. The remaining will be allotted to Genworth.

The company intends to complete the IPO during the first half of 2014.

Performance of Other Life Insurers

StanCorp Financial Group Inc.'s SFG first-quarter 2014 operating net earnings of $1.14 per share missed the Zacks Consensus Estimate by 7.3%. Earnings however improved 6.5% year over year.

Reinsurance Group of America Inc. RGA reported first-quarter operating income of $1.61 per share, significantly below the Zacks Consensus Estimate of $1.97. Results were also down 2.4% year over year.

Torchmark Corp. TMK reported first-quarter net operating income of $1.52 per share, beating the Zacks Consensus Estimate by a couple of pennies. Earnings were also up 9.4% year over year.

Zacks Rank

Genworth presently carries a Zacks Rank #3 (Hold).