Genworth Profit Rises 17% as McInerney Takes Over as CEO
Genworth Financial Inc. (GNW), the seller of life insurance and long-term care coverage, said fourth- quarter profit increased 17 percent in the first earnings report under Chief Executive Officer Thomas McInerney.
Net income rose to $166 million, or 34 cents a share, from $142 million, or 29 cents, a year earlier, the Richmond, Virginia-based company said today in a statement. Operating profit, which excludes some investing results, was 34 cents a share, beating the 27-cent average estimate of 10 analysts surveyed by Bloomberg.
McInerney, who became CEO on Jan. 1, faces long-term care policies that have proven more costly than Genworth had forecast and a U.S. mortgage-insurance unit that has lost money as claims surged after the housing market collapsed. The parent announced plans last month to protect bond holders by isolating the unprofitable business.
“The company’s share price had been suppressed by persistent concerns that the U.S. mortgage-insurance unit could create a contagion effect,” Mark Palmer, an analyst at BTIG LLC, said before results were announced. McInerney’s hiring “indicates that Genworth is going to focus intently on improving its life-insurance operations.”
Genworth fell 2.4 percent to $8.95 in extended trading at 4:57 p.m. in New York. The shares surged 22 percent this year through the end of regular trading, the second-best performance in the 81-company Standard & Poor’s 500 Financials Index. (S5FINL)
A change in Canadian mortgage-insurance rules added $78 million to fourth-quarter results, according to the statement. The benefit comes from the reversal of an accrued liability tied to government-guarantee fees.
The U.S. mortgage-insurance unit’s operating loss narrowed to $34 million from $96 million a year earlier, as rising home prices helped cushion losses at the business. Profit at the long-term care segment narrowed to $7 million from $28 million.
“U.S. mortgage insurance continued its recovery in the fourth quarter, and the company achieved a number of its strategic goals to improve financial flexibility,” McInerney said in the statement. “However, results in the U.S. Life Insurance Division were mixed, and I am disappointed in our long-term care results.”
Genworth has said it’s boosting premiums for some long-term care customers, as low interest rates and higher costs weigh on earnings. Competitors including New York-based MetLife Inc. and Prudential Financial Inc., based in Newark, New Jersey, have retreated from the coverage.
McInerney, formerly an executive at Amsterdam-based ING Groep NV, was named CEO Dec. 11. Chief Financial Officer Marty Klein had been serving in the role since Michael Fraizer stepped down May 1 after delaying an initial public offering for Genworth’s Australia mortgage-guaranty unit.
The Australian mortgage-guaranty unit’s profit climbed 15 percent to $62 million in the fourth quarter. Klein said in October that a partial sale of the unit probably won’t occur until late 2013.
Genworth’s full-year profit rose to $323 million from $49 million in 2011. With today’s results, the insurer has reported six straight profitable quarters.
Book value, a measure of assets minus liabilities, rose to $33.62 a share on Dec. 31 from $33.40 on Sept. 30. Holding- company cash was about $1 billion at the end of 2012, compared with about $1.4 billion three months earlier, as the insurer made tax-related payments to operating units.
Klein said in October that Genworth was readying its international-protection and wealth-management businesses for potential sales as part of a strategic review. The firm is focusing on life, long-term care and mortgage insurance.
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