Genworth Posts $284 Million Loss, Misses Analysts' Estimates

  • Results deteriorate at Australia, Canada mortgage insurers
  • Shares fall, CEO says long-term care remains challenged

Genworth Financial Inc.’s third-quarter profit missed analysts’ estimates as results deteriorated at its Canadian and Australian mortgage insurance units.

The net loss of $284 million, or 57 cents a share, narrowed from $844 million, or $1.70, a year earlier, the Richmond, Virginia-based company said Thursday in a statement. Operating profit, which excludes costs tied to the sale of a life insurance block, was 13 cents a share, compared with 22 cents in a Bloomberg survey of nine analysts.

Chief Executive Officer Tom McInerney has been divesting assets to boost capital after the insurer posted a $1.24 billion annual loss in 2014 tied to higher-than-expected claims costs on its long-term care coverage, which pays for home health aides and nursing-home stays. He also announced deals this year to sell two European units, both at a loss.

“It’s a question of selling assets and trying to outrun long-term-care reserve charges,” Sean Dargan, an analyst at Macquarie Group Ltd., said in a phone interview before results were announced. “They need to find a way to meet their debt maturities.”

Operating earnings at its Australian home loan guarantor fell 56 percent to $21 million from the same period a year earlier, fueled in part by the strength of the U.S. dollar and less favorable tax benefits. The Canadian mortgage insurance unit saw profit decline 17 percent to $38 million.

Book Value

Book value, a measure of assets minus liabilities, decreased to $27.29 a share from $27.52 at the end of June. Genworth slipped 12 percent to $4.60 in extended trading at 5:55 p.m. in New York. The insurer, which posted results after the close of regular trading, tumbled 39 percent this year through 4:01 p.m.

Genworth ended September with about $983 million of cash and liquid assets at the holding company, compared with $1.15 billion at the end of the second quarter. The parent company paid about $200 million in July to the U.S. mortgage insurance subsidiary, which is facing tighter capital rules.

The U.S. mortgage insurer’s profit jumped to $37 million from a loss of $2 million a year earlier.

Genworth, which initially sought to sell a life and annuity operation known as GLAIC, said in August that a large-scale divestiture could hurt its ratings and earnings diversification. Instead, McInerney is seeking buyers for blocks of life contracts, such as the policies that Protective Life Corp. agreed last month to take on for about $661 million through a reinsurance transaction. Third-quarter results included a loss of $296 million tied to that deal.

CFO Switch

McInerney faced the departure of Chief Financial Officer Martin Klein this month. The new CFO, Kelly Groh, will have to work to repair accounting errors in the insurer’s calculation of long-term care liabilities. Klein, who led the company as acting CEO for most of 2012, was hired as CFO of Athene Holding Ltd., the annuity seller with ties to Apollo Global Management LLC.

Genworth’s U.S. life unit posted an operating profit of $40 million, compared with a $322 million loss a year earlier when there were reserve charges at its long-term care unit. The LTC business posted a loss of $10 million in the third quarter this year. Operating income from fixed-annuities decreased 27 percent to $19 million.

“Long-term care insurance remains challenged, but we continue to receive significant premium rate increases, and claims experience remained in line with our expectations,” McInerney said in the statement.

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