Genworth Posts First Profit in Three Quarters; Shares Rally

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Genworth Financial Inc. posted its first profit in three quarters as the insurer benefited from results at its U.S. unit that backs mortgages. The stock advanced in extended trading.

Net income slipped to $154 million from $184 million a year earlier, Richmond, Virginia-based Genworth said Tuesday in a statement. That compares with net losses of more than $750 million in each of the last two periods of 2014. First-quarter operating profit, which excludes some investment results, was 31 cents a share, beating the 25 cent average estimate of 10 analysts surveyed by Bloomberg.

Chief Executive Officer Tom McInerney is seeking to turn around the company after a 53 percent share decline in the 12 months through the close of regular trading Tuesday. The losses last year were fueled by higher-than-expected costs tied to long-term care coverage, which pays for home health aides or nursing home stays.

“Investor confidence was shaken by the long-term care episode,” Mark Palmer, an analyst with BTIG, said by phone before earnings were released. “Genworth is now a show-me story, and it will require multiple quarters of stable performance before investors are going to be able to feel confident that we won’t see another flare-up of these types of issues.”

Share Gain

Genworth jumped 6.8 percent to $8.53 in extended trading at 5:37 p.m. in New York. The insurer’s book value, a measure of assets minus liabilities, rose to $30.81 a share on March 31 from $30.04 three months earlier.

The mortgage-guaranty business, which covers losses when borrowers default and foreclosures fail to recoup costs, has been a bright spot for Genworth amid a home-price rebound. Operating income at the U.S. mortgage guarantor rose 58 percent to $52 million.

The insurer also backs loans in Canada and Australia through publicly traded businesses in which it owns majority stakes. Profit at the international mortgage insurance segment dropped 35 percent to $64 million.

Life Insurance

The life insurance division generated $81 million in profit, down 14 percent from a year earlier on declines in its long-term care unit.

McInerney has been cutting jobs and seeking a buyer for a U.K. lifestyle-protection unit that helps consumers pay debt if they become unable to meet their obligations after an accident or job loss. Genworth is also looking to sell a life-and-annuity operation, people familiar with the matter said this month. McInerney needs to boost capital after ratings firms downgraded the company’s debt and U.S. regulators tightened requirements for mortgage insurers.

“We are encouraged with the results in spite of continued challenges and remain focused on initiatives aimed at strengthening and building our businesses,” McInerney said in the statement.

Standard & Poor’s cut Genworth’s credit rating to junk level in November. The downgrade, a day after Genworth posted third-quarter results, could hurt sales of some products, the company said at the time. The insurer finished the first quarter with about $1.07 billion of cash and liquid assets at the holding company, compared with $1.1 billion on Dec. 31.

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