Genworth Acting CEO: Company Committed to Generating, Managing Capital
May 7, 2012 by Fran Matso Lysiak
Fran Lysiak |
As Genworth Financial Inc.’sfirst-quarter profit declined 20% on $36 millionin losses on its mortgage insurance business in Australia, the company’s acting chief executive officer said Genworthremains committed to working on ways to generate and manage capital.
On May 1, Michael D. Fraizer, who led Genworth Financial (NYSE: GNW) through its initial public offering by General Electric in 2004, abruptly resigned as chairman of the board and CEO. Chief Financial Officer Martin P. Kleinwas named acting CEO, while James S. Riepewas named nonexecutive chairman. (Best’s News Service, May 1, 2012).
Net income available to Genworth’s common shareholders dropped to $47 million, and included a $41 million loss from Genworth’s sale of a life block. However, the deal generated about $170 million in capital, after-tax, for its U.S. life insurance companies, the company said.
When asked about a potential sale of the company during a conference call Klein said the board “is very engaged on strategies, which could be, ultimately, a number of different things.”
The important focus is improving the performance of the businesses to gain the flexibility to execute strategies and working on the statutory performance of the life business to return to ordinary dividend capacity, Klein noted.
“Regular ordinary dividend capacity is very, very important,” he said, noting the company is focusing on the return of the mortgage insurance business to profitability next year and managing its Australia losses. “Those are all very important things because as we manage those performances, we’ll be in a much better position to take better actions to improve shareholder value.”
Genworth’s global mortgage insurance business reported a $36 million net operating loss, compared with $16 million in net operating income, on $53 million in reserve strengthening in Australia, after-tax.
Last month, citing higher losses in Australia, Genworth Financial delayed its planned initial public offering of up to 40% of its mortgage insurance business in that country, which it previously targeted for the second quarter of this year. At that time, Genworth said it’s seeking to complete the IPO in early 2013 (Best’s News Service, April 19, 2012).Jerome Upton, Genworth global mortgage insurance’s chief financial officer, said in the conference call the key driver of the reserve strengthening was the impact of the coastal Queensland economic downturn on housing. “These areas have been hit hard by depressed tourism, particularly as the Australia dollar strengthened, (with) lower levels of consumer and retail spending and reduced housing demand, driving home prices lower.”
Genworth’s businesses include global mortgage insurance, which includes U.S. and international mortgage insurance and insurance and wealth management, which includes U.S. life insurance, wealth management and international protection.
In its U.S. mortgage insurance business, net operating loss narrowed to $43 million from an $83 million loss, in part, on fewer new delinquencies.
On May 1, Genworth also named Kevin Schneider, president and CEO of its U.S. mortgage insurance business as president and CEO of the recently formed global mortgage insurance business, effective immediately. U.S. Mortgage Insurance Chief Commercial Officer Rohit Guptareplaced Schneider as president and CEO of U.S. mortgage insurance.
Schneider joined Genworth in 2003. He also will oversee Genworth’s majority investment in its publicly listed Canadian entity, Genworth MI Canada.
In the company’s U.S. life insurance business, Genworth said it received approval from Delaware for an “extraordinary” cash dividend of $100 million that was paid to the holding company in April, representing part of the proceeds from the sale of the Medicare supplement business last year.
In January, Genworth agreed to sell its broker-dealer unit to Cetera Financial for about $78.5 million. With the sale of Genworth Financial Investment Services, a tax and accounting financial adviser unit, Genworth would focus on its core asset-management business (Best’s News Service, Jan. 11, 2012).
“The completed life block sale transaction, the sale of Genworth Financial Investment Services, and a $100 million life company dividend payment in April for a portion of the Medicare supplement sale proceeds are all important steps as we rebuild value,” Klein said.
In May 2004, Genworth’s$2.83 billion IPO was the largest of that year. General Electric, which spun off its insurance unit with the IPO, priced the offering at $19.50 a share for 145 million shares of Class A common stock (Best’s News Service, May 27, 2004).
Genworth Life Insurance Co., Genworth Life & Annuity Insurance Co. and Genworth Life Insurance Company of New York each currently have a Best’s Financial Strength Rating of A (Excellent).
On the afternoon of May 2, Genworth’s stock was trading at $6.23 a share, up 1.3% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
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(c) 2012 A.M. Best Company, Inc. |
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A.M. Best Company, Inc. |
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