Genworth Incurs Q3 Loss on Claim Reserve, Beats Revenue - Analyst Blog

Genworth Financial Inc.'s (GNW) third-quarter net operating loss of 64 cents per share missed the Zacks Consensus Estimate earnings of 16 cents. Results compared unfavorably with 28 cents per share earned in the year-ago quarter.

Net loss of $1.70 per share plunged from 22 cents earned in the year ago quarter.

Genworth's results suffered in the quarter due to an increase in claim reserve following the completion of the review of long-term insurance claim reserve and goodwill impairment. As a result, shares lost 14% in the aftermarket trading session.

Operational Performance

Total revenue of Genworth increased 3.9% year over year to $2.4 billion. The improvement was prompted by higher premiums (up 8.1%). The top line outperformed the Zacks Consensus Estimate by 1.6%.

Total benefits and expenses increased 63% year over year to $3.8 billion due to higher benefits and other changes in policy reserves and goodwill impairment recorded in the quarter.

Segment-wise Quarterly Review

U.S. Life Insurance: The segment reported net operating loss of $322 million against $111 million profit in the year-ago quarter. Poor results in long-term care insurance and a soft performing life insurance business resulted in a huge loss in the quarter.

Loss at long-term care insurance reflected the completion of the review of long-term care insurance claim reserves, resulting in higher claim reserves of $345 million.

Global Mortgage Insurance: The segment's net operating income of $85 million decreased 2.3% year over year. Though loss at U.S. Mortgage Insurance narrowed, lower profit at International Mortgage Insurance resulted in overall decline.

Corporate and Run-Off: Net operating loss was $80 million, wider than $59 million loss incurred in the year-ago quarter.

Financial Update

Genworth exited the third quarter with cash, cash equivalents and invested assets of $77.3 billion, up 5.2% from 2013 end.

Long-term borrowings of Genworth totaled $4.7 billion as of Sep 30, 2014, down about 10% from $5.2 million at 2013 end.

Performance of Other Life Insurers

While earnings at Reinsurance Group of America Inc. (RGA) and StanCorp Financial Group Inc. (SFG) surpassed their respective Zacks Consensus Estimate, Torchmark Corp.  (TMK) missed the same in the third quarter.

Zacks Rank

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