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Genworth Financial Inc. Reports Operating Results (10-Q)

August 03, 2012 | About:

10qk

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Genworth Financial Inc. (GNW) filed Quarterly Report for the period ended 2012-06-30.

Genworth Financial Inc has a market cap of $2.5 billion; its shares were traded at around $4.14 with a P/E ratio of 17.5 and P/S ratio of 0.2.

Highlight of Business Operations:

The profitability of our lifestyle protection insurance business declined during the first half of 2012 as a result of significantly lower premiums driven by lower consumer lending levels. Additionally, losses increased slightly with lower but still favorable claim reserve adjustments while claim payments remained at a consistent level. New claim registrations decreased in the second quarter of 2012 from the first quarter of 2012 but remained consistent with levels in the second quarter of 2011. We could see further increases in losses if claim registrations increase particularly with continued rising unemployment in Europe. Our declining premiums resulted in a loss ratio of 23% for the six months ended June 30, 2012 compared to 15% for the six months ended June 30, 2011. The loss ratio was 24% in the second quarter of 2012 compared to 23% in the first quarter of 2012.

Workouts and loan modifications, which related to loans representing 1% of our primary risk in-force as of June 30, 2012, and occurred during the period then ended, resulted in a reduction of expected losses during the six months ended June 30, 2012 of $176 million compared to $195 million during the six months ended June 30, 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 and in line with current experience levels. In addition, pre-sales, claims administration and other non-cure workouts that occurred during the six months ended June 30, 2012 resulted in a reduction of expected losses of $129 million compared to $38 million that occurred during the six months ended June 30, 2011.

The aggregate fair value of securities sold at a loss during the three months ended June 30, 2012 and 2011 was $326 million from the sale of 66 securities and $294 million from the sale of 78 securities, respectively, which was approximately 95% and 91%, respectively, of book value. The loss on sales of securities during the three months ended June 30, 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 second quarter of 2012 included three foreign bonds that were sold for a total loss of $5 million related to portfolio repositioning activities. The securities sold at a loss in the second quarter of 2011 included one foreign corporate security that was sold for a total loss of $11 million related to portfolio repositioning activities.

The aggregate fair value of securities sold at a loss during the six months ended June 30, 2012 and 2011 was $683 million from the sale of 158 securities and $691 million from the sale of 145 securities, respectively, which was approximately 93% of book value for both periods. The loss on sales of securities during the six months ended June 30, 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 during the six months ended June 30, 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 in the first quarter of 2012 and three foreign bonds sold for a total loss of $5 million in the second quarter of 2012 related to portfolio repositioning activities. The securities sold at a loss during the six months ended June 30, 2011 included two U.S. corporate securities that were sold for a total loss of $11 million in the first quarter of 2011 and one foreign corporate security that was sold for a total loss of $11 million in the second quarter of 2011 related to portfolio repositioning activities.

During the second quarter of 2012, financial markets showed signs of improvement despite mixed economic signals from the United States and Europe. While European Central Bank policies and actions were clearly supportive and fears of a disorderly Greek default were stemmed, a lack of fundamental economic strength in Europe weighed on financial markets. During the six months ended June 30, 2012, we reduced our exposure to the peripheral European countries by $107 million to $592 million with unrealized losses of $56 million. Our exposure as of June 30, 2012 was diversified with direct exposure to local economies of $231 million, indirect exposure through debt issued by subsidiaries outside of the European periphery of $130 million and exposure to multinational companies where the majority of revenues come from outside of the country of domicile of $231 million.

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10qk
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