Genworth Finl has a market cap of $2.93 billion; its shares were traded at around $5.75 with a P/E ratio of 13.8 and P/S ratio of 0.3.
Highlight of Business Operations:Our loss mitigation activities, including those relating to workouts, loan modifications, pre-sales, rescissions, claims administration (including curtailment of claim amounts) and targeted settlements, net of reinstatements, which occurred during the three months ended March 31, 2012 resulted in a reduction of expected losses of $158 million compared to $122 million during the three months ended March 31, 2011.
Workouts and loan modifications, which related to loans representing 1% of our primary risk in-force as of March 31, 2012, and occurred during the period then ended, resulted in a reduction of expected losses during the three months ended March 31, 2012 of $92 million compared to $94 million during the three months ended March 31, 2011. Our workout and loan modification programs with various lenders and servicers are designed to help borrowers in default regain current repayment status on their mortgage loans, which ultimately allowed many of these borrowers to remain in their homes. The loans that are subject to workouts and loan modifications that were completed could be subject to potential re-default by the underlying borrower at some future date. However, such borrower re-defaults currently remain stable at anticipated levels. In addition, pre-sales, claims administration and other non-cure workouts that occurred during the three months ended March 31, 2012 resulted in a reduction of expected losses of $60 million compared to $17 million that occurred during the three months ended March 31, 2011.
Our U.S. Life Insurance segment decreased $129 million primarily attributable to a decrease of $197 million in our life insurance business principally related to higher ceded reinsurance in the current year. We initially ceded $209 million of certain term life insurance reserves under a new reinsurance treaty as part of a life block sale transaction. This decrease was partially offset by growth in our term universal life insurance product and less favorable mortality in our term and term universal life insurance products compared to the prior year. Our long-term care insurance business increased $58 million from the aging and growth of our in-force block and higher claims and lower termination rates on older issued policies. Also included in the increase in the current year was a reclassification of loss adjustment expenses of $11 million from acquisition and operating expenses, net of deferrals, and an $11 million increase in reserves associated with a methodology change related to pending claims. These increases were partially offset by a favorable actuarial adjustment of $16 million in the current year related to a multi-stage system conversion. Our fixed annuities business increased $10 million largely attributable to higher sales of our life-contingent products in the current year.
The aggregate fair value of securities sold at a loss during the three months ended March 31, 2012 and 2011 was $357 million from the sale of 103 securities and $397 million from the sale of 74 securities, respectively, which was approximately 90% and 94%, respectively, of book value. The loss on sales of securities in the three months ended March 31, 2012 was primarily driven by widening credit spreads. Generally, securities that are sold at a loss represent either small dollar amounts or percentage losses upon disposition. The securities sold at a loss in the first quarter of 2012 included one corporate security sold for a total loss of $8 million and one municipal bond sold for a total loss of $4 million related to portfolio repositioning activities. The securities sold at a loss in the first quarter of 2011 included two U.S. corporate securities that were sold for a total loss of $11 million related to portfolio repositioning activities.
During the first quarter of 2012, financial markets showed signs of improvement from the volatility that characterized the market in the fourth quarter of 2011 due to increased uncertainty regarding both the U.S. and European economies and concerns over the spread of economic and financial system risk from peripheral European countries to the larger European countries and the impact on the European banking sector of a possible default on Greek debt. During the three months ended March 31, 2012, we reduced our exposure to the peripheral European countries by $42 million to $657 million with unrealized losses of $28 million. Our exposure as of March 31, 2012 was diversified with direct exposure to local economies of $271 million, indirect exposure through debt issued by subsidiaries outside of the European periphery of $142 million and exposure to multinational companies where the majority of revenues come from outside of the country of domicile of $244 million.
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