Genworth’s Profit Climbs on Gains at Mortgage, Life UnitsZachary Tracer and Dakin Campbell
Genworth Financial Inc. said third-quarter profit more than tripled as results improved from a year earlier at units that back mortgages and sell life insurance.
Net income advanced to $108 million, or 22 cents a share, from $35 million, or 7 cents, the company said today in a statement. Operating profit, which excludes some investing results, was 24 cents a share, missing by 2 cents the average estimate of 10 analysts surveyed by Bloomberg.
Chief Executive Officer Tom McInerney, 57, is cutting expenses and raising premiums for long-term care insurance amid pressure from low interest rates. While fewer homeowners have fallen behind on payments, improving results at the U.S. mortgage-insurance unit from last year, the business posted its first unprofitable quarter in 2013.
The subsidiary continues to “burn through” problem loans from 2005 to 2008, Richmond, Virginia-based Genworth said in the statement. Still, losses at the division increased from the second quarter because of “a seasonal increase in new delinquency development” and a decline in borrowers catching up on payments.
Climbing home prices and lower unemployment have helped the business, which covers losses when homeowners default and foreclosures fail to recoup costs. The unit’s third-quarter loss narrowed to $3 million from $37 million a year earlier.
Genworth fell 2.2 percent to $14.25 at 5:19 p.m. in extended trading in New York. The insurer had rallied 94 percent this year through today’s close under McInerney, who started Jan. 1. Book value, a measure of assets minus liabilities fell to $29.55 per share from $29.76 on June 30.
Premium increases for long-term care insurance helped boost operating profit at the U.S. life insurance division to $111 million from $86 million a year earlier. Sales of life products were little changed.
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. Operating income for the entire mortgage-insurance unit climbed to $87 million from $57 million in last year’s third quarter.
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. and Prudential Financial Inc. retreated from long-term-care coverage as rising costs and low interest rates pressured results.