Genworth Profit Tumbles 66% as CEO McInerney Shrinks Insurerby
Insurer halted sales of life policies, annuities this year
McInerney counts on mortgage guaranty unit for rebound
Genworth Financial Inc., the insurer burned by losses on long-term care, said first-quarter profit dropped 66 percent as Chief Executive Officer Tom McInerney shrinks the company.
Net income fell to $53 million, or 11 cents per share, from $154 million, or 31 cents, the Richmond, Virginia-based insurer said Thursday in a statement. Operating profit, which excludes some investment results, was 21 cents a share, beating by 8 cents the average estimate of nine analysts surveyed by Bloomberg.
McInerney has been selling assets to boost capital and help reduce debt after incurring a loss of more than $1.2 billion in 2014 tied to long-term care insurance, which helps pay for home health aides and nursing home stays. The CEO said in February that he halted sales of traditional life insurance policies and fixed annuities. Genworth booked a charge of $9 million in the first quarter tied to restructuring.
“We are pleased with the continued strong performance of our mortgage insurance businesses and improved results in our U.S. life insurance businesses,” McInerney said in the statement. “We also enhanced our strategic and financial flexibility by proactively reducing holding company debt.”
McInerney is also seeking regulatory approval to isolate the long-term care operation. He gained consent from bondholders last month to changes which give him more flexibility to divest assets and reshape operations without triggering a default designation. The insurer had $12 million of costs tied to the consent solicitation, according to the statement. Profit was also hurt by losses of $11 million on debt repayment and $6 million from the sale of life insurance blocks.
Genworth slumped 23 percent from Dec. 31 through 4:02 p.m. Thursday in New York trading, after plunging 56 percent in 2015 and 45 percent a year earlier. Results were released after the close of regular trading.
The U.S. life operation posted a first-quarter operating profit of $91 million, up from $81 million a year earlier. Fixed annuities contributed $26 million, down from $31 million a year earlier. Traditional life policies provided $31 million, compared with $40 million. Even in lines where sales have been suspended, the company continues to collect premiums and pay claims on policies that were sold in prior years.
Genworth’s long-term care unit contributed $34 million, up from $10 million a year earlier.
McInerney has said the mortgage-guaranty operations are an area of growth for the company. Profit from the U.S. mortgage insurer gained 17 percent to $61 million from a year earlier as claims costs declined and sales improved. The Canadian mortgage guarantor contributed $33 million, down from $40 million. The Australian unit’s profit fell 37 percent to $19 million, driven by new delinquencies from areas including Queensland and Western Australia.
Book value, a measure of assets minus liabilities, climbed to $28.19 a share as of March 31 from $25.76 at the end of 2015. The insurer ended the first quarter with about $760 million of cash and liquid assets at the holding company, compared with $1.37 billion on Dec. 31, partly because of debt repayments and legal costs.
Genworth agreed in March to a $219 million settlement to resolve a lawsuit brought by shareholders who accused the insurer and McInerney of securities violations tied to disclosures about the long-term care business. Most of the costs will be borne by Genworth’s insurers, the company said.