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Genworth Financial (GNW) Down 17.8% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Edwards Lifesciences (EW) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

A month has gone by since the last earnings report for Genworth Financial (GNW). Shares have lost about 17.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Genworth Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Genworth Financial Q4 Earnings Miss, Revenues Beat

Genworth Financial incurred fourth-quarter 2018 adjusted operating loss of 58 cents per share against the Zacks Consensus Estimate of earnings of 24 cents and 65 cents earned in the year-ago quarter.

Total revenues of Genworth Financial were $2.1 billion, up 29.6% year over year. The top line beat the Zacks Consensus Estimate by 0.6%.

Net investment income grew 0.4% year over year to $815 million on higher investment yields, partially offset by lower variable investment income.

Total benefits and expenses increased 22.8% year over year to $2.4 billion, primarily owing to higher benefits and other changes in policy reserves and acquisition and operating expenses.

Full Year Highlights

Adjusted operating income of 36 cents per share for 2018 missed the Zacks Consensus Estimate of $1.18. The bottom line plunged 74% from 2017.

Operating revenues of $8.6 billion decreased 6.8% from 2017 but beat the Zacks Consensus Estimate by 0.2%

Segmental Results

U.S. Mortgage Insurance: Adjusted operating income of $124 million soared nearly 67.6% year over year. Loss ratio improved 1500 basis points (bps) year over year to 7%.

Canada Mortgage Insurance: Adjusted operating income was $48 million, up 11.6% year over year. Loss ratio deteriorated 900 bps year over year to 18% from higher average reserves on delinquencies in Alberta.

Australia Mortgage Insurance: Adjusted operating income of $18 million rebounded from $125 million loss incurred in the year-ago period. Loss ratio was 29% compared with (7%) in the year-ago quarter.

U.S. Life Insurance: Adjusted operating loss was $425 million, wider than the year-ago loss of $69 million due to higher loss at Long Term Care Insurance, Life Insurance as well as Fixed Annuities.
Runoff: Adjusted operating loss was $2 million against earnings of $13 million in the year- ago quarter. 

Corporate and Other: Adjusted operating loss was $54 million against $390 million earned in the year-ago quarter

Financial Update
Genworth Financial exited the quarter with cash, cash equivalents and invested assets of $73 billion, down 5.1% from the level at year-end 2017.
Long-term borrowings of Genworth Financial totaled $4 billion as of Dec 31, 2018, down 4.7% from 2017 end.

Book value per share (excluding accumulated other comprehensive income) was $20.78 as of Dec 31, 2018, down 0.2% from the year-ago quarter’s figure.
Business Update

The deadline for the Genworth Financial and China Oceanwide Holdings Group merger has been extended to Mar 15.


How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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