Genworth Halts Life, Annuity Sales After Loss; Shares Fallby
Insurer reports $292 million loss for fourth quarter
CEO McInerney seeks to narrow focus, isolate long-term care
Genworth Financial Inc. suspended sales of traditional life insurance and fixed annuity products so the company can focus on stabilizing the unit that provides long-term care coverage.
The insurer posted a fourth-quarter loss of $292 million, or 59 cents a share, Richmond, Virginia-based Genworth said Thursday in a statement. The company declined 16 percent to $2.33 in extended trading at 5:15 p.m. in New York.
Chief Executive Officer Tom McInerney has been selling assets and seeking to stabilize operations after the insurer suffered a $1.24 billion loss for 2014 tied to long-term care coverage, which pays for home-health aides and nursing home stays. He is also working to win regulators’ approvals to increase LTC rates and guard the company’s bond rating.
“In our U.S. life insurance businesses, we are actively pursuing multiple restructuring actions to separate and isolate our LTC business and narrow our commercial focus,” he said in the statement.
The insurer has plunged 25 percent this year through Thursday’s close and more than 80 percent since the end of 2013. Results were released after the end of regular trading.
The suspension of traditional life insurance and fixed annuity sales will cut cash expenses by about $50 million annually, the company said. Genworth expects to record a $15 million charge in the first quarter tied to the restructuring.
Another Annual Loss
The fourth-quarter result compares with a $760 million loss for the same period in 2014, which was fueled by costs to set aside more funds to cover claims on long-term care policies. Genworth’s annual loss narrowed to $615 million from $1.24 billion a year earlier.
The U.S. life segment posted a fourth-quarter operating loss of $173 million, compared with profit of $1 million a year earlier. The company had to lower profitability assumptions after an annual review of claims trends. Genworth is also among insurers that have been hurt by lower-than-expected interest rates, which reduce investment income on bonds backing policies.
The LTC operation posted a profit of $19 million for the last three months of 2015, compared with a loss of more than $500 million a year earlier. Profit from fixed annuities fell 17 percent to $19 million.
Operating earnings at the Canadian mortgage-insurance unit increased about 3 percent to $37 million. The Australian home-loan guarantor posted a profit of $22 million, down from $33 million a year earlier. Profit at the U.S. mortgage insurer almost doubled to $41 million as claims costs declined. Mortgage insurers cover losses for lenders when homeowners default and foreclosure fails to recoup costs.
Book value, a measure of assets minus liabilities, fell to $25.76 a share as of Dec. 31 from $27.29 at the end of September. Genworth ended December with about $1.37 billion of cash and liquid assets at the holding company, compared with $983 million at the end of the third quarter.
McInerney struck a deal in October to sell a European mortgage unit to AmTrust Financial Services Inc., saying the proceeds would help satisfy higher capital rules on companies that back home loans in the U.S. The insurer said at the time that it expected to record an after-tax loss of about $140 million in the fourth quarter tied to the transaction.