Genworth’s Profit Surges as U.S. Mortgage-Unit Results Improve
Genworth Financial Inc. (GNW), the seller of life insurance and long-term care coverage, said profit more than tripled in the third quarter as results improved at the unit that guarantees U.S. home loans.
Net income advanced to $108 million, or 22 cents a share, from $35 million, or 7 cents, a year earlier, the Richmond, Virginia-based company said today in a statement. Operating profit, which excludes some investing results, was 24 cents a share, missing the 26-cent average estimate of 10 analysts surveyed by Bloomberg.
Genworth Chief Executive Officer Tom McInerney is benefiting from a rebound in the U.S. housing market, after enacting a plan to secure the company’s investment-grade credit rating this year. McInerney, 57, is cutting expenses and raising premiums for long-term care insurance amid pressure from low interest rates.
“A year and a half ago, there was a perception that the U.S. mortgage-insurance unit could sink the company,” Mark Palmer, an analyst at BTIG LLC, said by phone before results were announced. “Now, the conversation has changed dramatically to how profitable could the unit ultimately become.”
Home prices have jumped this year and unemployment has declined, helping the U.S. mortgage-insurance unit, which covers losses when homeowners default and foreclosures fail to recoup costs. The unit’s loss narrowed to $3 million from $37 million a year earlier.
Mortgage insurance is typically required in the U.S. when borrowers pay less than 20 percent of the cost of a home up front. Genworth also sells the coverage in countries including Australia and Canada.
McInerney replaced Michael Fraizer, who stepped down May 1, 2012, after Genworth shelved a planned initial public offering of its Australian mortgage insurer. Chief Financial Officer Martin Klein had been acting CEO. McInerney said last month that an IPO of that unit will probably come in 2014.
Genworth said in June it would cut 400 jobs, helping the company save as much as $90 million a year. McInerney has said he’s working to raise premiums on some long-term care policies sold in prior years, and the company has tightened terms for new coverage. Insurers including MetLife Inc. (MET) and Prudential Financial Inc. retreated from long-term-care coverage as rising costs and low interest rates pressured results.
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