Genworth Financial CFO: 2013 First Profitable Year for US Mortgage Insurance Since 2007
February 10, 2014 by Fran Matso Lysiak
RICHMOND, Va. – As Genworth Financial Inc.’s fourth-quarter and full-year 2013 profits rose in part on the company’s improved mortgage insurance business in the United States, its chief financial officer said the actions Genworth has taken on its long-term care insurance business are starting to have “a meaningful impact” on financial results.
Net income in the final quarter of 2013 rose 24% to $208 million as quarterly results also got a boost from $29 million in incremental tax benefits related mostly to tax liability corrections, tax benefits on foreign subsidiaries, and state tax adjustments.For the year, net income jumped 72% to $560 million.
Martin Klein, CFO of Genworth Financial (NYSE: GNW) told Best’s News Service a very good fourth quarter capped off a “transformational year”as the company achieved many of the things it wanted to achieve in its turnaround.
The U.S. mortgage insurance business had its third profitable quarter out of four in 2013, and last year represented the first profitable year since 2007, Klein said, noting this business’s earnings should be up significantly in 2014.
All of the businesses did pretty well but “the actions we’ve been taking in long-term care in particular are beginning to have a meaningful impact in our results,” Klein said.
In Genworth’s U.S. life insurance business, as of Dec. 31, 2013, long-term care insurance in-force premium rate increase approvals from 41 states represented about $195 million to $200 million of the expected $250 million to $300 million premium increase when fully implemented by 2017, the company said.
Its U.S. mortgage insurance business posted net operating income of $6 million, compared with a net operating loss of $32 million in the prior year fourth quarter. For 2013, the business posted net operating income of $37 million, compared with a net operating loss of $138 million in 2012.
The overall level of delinquencies has been declining pretty rapidly, Klein said. Also, the more profitable new business that Genworth has been writing is starting to become larger versus the older books that have been posting losses, he said.
New flow delinquencies dropped about 21% from the prior year, reflecting the continued “burn through” of delinquencies from the 2005 to 2008 book years, the company said.
Net operating income for Genworth’s long-term care insurance business jumped to $42 million from $7 million in the prior year as results benefited by $34 million from the premium hikes approved and implemented to date and on reduced benefits.
Individual long-term care sales of $24 million were lower than the prior quarter. Sales are expected to continue at these levels in the near term due to stopping sales of AARP-branded products in the retail channel and the introduction of higher priced products in additional states, the company said.
Total sales of long-term care insurance in 2014 will be down compared to 2013, largely due to terminating the AARP distribution agreement, wrote equity analysts with Sandler O’Neill, in a research note.
Total 2013 revenues for Genworth fell 2% to $9.4 billion.
In December, Genworth Holdings Inc. completed a $400 million senior notes offering and subsequently made contributions of $300 million to Genworth Mortgage Holdings LLC and $100 million to Genworth Mortgage Insurance Corp. ahead of higher capital requirements expected to be imposed by government-owned and government-sponsored enterprises as a part of expected revisions to their eligibility standards for qualifying mortgage insurers. The company expects some or all of the $300 million to go to Genworth Mortgage Insurance Corp. subject to the release of the final revisions to the eligibility standards.
Genworth Life Insurance Co. currently has a Best’s Financial Strength Rating of A (Excellent).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
