Genworth Financial Inc. (GNW) reported third quarter 2012 operating income of 25 cents per share, surpassing the Zacks Consensus Estimate by 31.6%. Results also compared favorably with the year-ago earnings of 13 cents. Operating profit for the quarter stood at $121 million, soaring 95% year over year.
The third quarter results benefited from better performances at Global Mortgage Insurance and at Insurance and Wealth Management division.
Including net investment gain of $1 million and goodwill impairment charge of $86 million, the company reported net income of $34 million or 7 cents compared with the loss of $16 million or 3 cents per share in the year-ago quarter.
Genworth’s total revenue crawled up 0.6% year over year to $2.54 billion in the quarter. Top line fared better largely due to net investment gains, reversing the year-ago quarter’s loss, coupled with higher Insurance and investment product fees and other. It also surpassed the Zacks Consensus Estimate by 0.7%.
Premium revenue at Genworth declined 10.3% year over year to $1.3 billion in the quarter.
Net investment income waned 2% year over year to $825 million.
Insurance and Wealth Management: Net operating income dipped 23.5% year over year to $104 million. The dip in operating income was due to lower income from U.S. Life Insurance (down 15.7% year over year), International Protection (plummeting 63.6% year over year) and Wealth Management (down 16.7% year over year).
Genworth expects to close its second life block transaction in the fourth quarter of 2012. The transaction is estimated to generate in excess of $100 million in initial after-tax capital benefits for the U.S. life insurance.
Global Mortgage Insurance: Segment net operating income of $56 million in the quarter rebounded from a loss of $11 million in the year-ago quarter. A substantial lower loss at U.S. Mortgage Insurance and higher income from International Mortgage Insurance aided the improvement.
Corporate and Run-Off: The net operating loss narrowed to $39 million in the quarter under review from an operating loss of $63 million in the prior-year period.
Genworth exited the quarter with cash, cash equivalents and invested assets of $79.4 billion, exhibiting an augmentation of nearly 3% from the end-level of 2011.
Genworth’s long-term borrowings stood at $4.9 billion at quarter end, up 3.5% from 2011 end level.
We retain our long-term 'Neutral' recommendation on Genworth Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
MetLife Inc. (MET), competing closely with Genworth, is scheduled to release its third quarter earnings results on October 31, after the bell while Prudential Financial Inc. (PRU), is scheduled to release its third quarter earnings results on November 7, after the closing bell.
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