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

November 02, 2012 | About:
10qk

10qk

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Genworth Financial Inc. (GNW) filed Quarterly Report for the period ended 2012-09-30.

Genworth Financial Inc has a market cap of $2.69 billion; its shares were traded at around $6.22 with a P/E ratio of 9.1 and P/S ratio of 0.3.

Highlight of Business Operations:

Our U.S. Life Insurance segment increased $87 million primarily attributable to a $55 million increase in our life insurance business principally related to a $31 million unfavorable unlocking in our term universal and universal life insurance products related to interest assumptions in the current year, unfavorable mortality in our term life insurance products compared to the prior year and from growth of our term universal life insurance product. These increases were partially offset by higher ceded reinsurance in the current year and a $9 million unfavorable claims adjustment in the prior year that did not recur from the use of the U.S. Social Security Administrations Death Master File to identify certain life insurance policies where the covered person may be deceased but a claim had not yet been reported. Our long-term care insurance business increased $20 million primarily from the aging and growth of our in-force block and higher average reserve costs on new claims in the current year. The increase was also attributable to a reclassification of loss adjustment expenses of $11 million from acquisition and operating expenses, net of deferrals. These increases in our long-term care insurance business were partially offset by favorable reserve adjustments of $44 million primarily related to the continuation of a multi-stage system conversion in the current year compared to a $13 million favorable valuation adjustment in the prior year. Our fixed annuities business increased $12 million largely attributable to an $8 million favorable reserve adjustment in the prior year that did not recur from terminating contracts related to deaths not previously reported and from higher sales of our life-contingent products in the current year.

Our U.S. Life Insurance segment increased $54 million primarily attributable to an increase of $149 million in our long-term care insurance business from the aging and growth of our in-force block and higher average reserve costs on new claims in the current year. Also included in the increase was a reclassification of loss adjustment expenses of $32 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 in the current year. These increases in our long-term care insurance business were partially offset by favorable reserve and actuarial adjustments of $60 million primarily related to the continuation of a multi-stage system conversion in the current year compared to a $13 million favorable valuation adjustment in the prior year. Our fixed annuities business increased $20 million largely attributable to an $8 million favorable reserve adjustment in the prior year that did not recur from terminating contracts related to deaths that had not been previously reported, higher sales of our life-contingent products and unfavorable mortality in the current year. These increases were partially offset by a decrease of $115 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 transaction. The decrease was also attributable to a $9 million unfavorable claims adjustment in the prior year that did not recur from the use of the U.S. Social Security Administrations Death Master File to identify certain life insurance policies where the covered person may be deceased but a claim had not yet been reported. These decreases were partially offset by growth in our term universal and universal life insurance products, a $31 million unfavorable unlocking in our term universal and universal life insurance products primarily related to interest assumptions in the current year and unfavorable mortality in our term and term universal life insurance products compared to the prior year.

Our U.S. Life Insurance segment decreased $35 million primarily attributable to a $25 million decrease in our long-term care insurance business from a reclassification of loss adjustment expenses of $32 million to benefits and other changes in policy reserves in the current year, partially offset by growth of our in-force block. Our life insurance business decreased $7 million primarily driven by lower expenses related to our term life insurance products as we did not offer these products during these periods and from expense management, partially offset by a $13 million favorable cumulative impact from a change in premium taxes in Virginia in the prior year that did not recur. Our fixed annuities business decreased $3 million primarily related to a favorable adjustment of $4 million associated with guarantee funds in the current year compared to a $4 million accrual related to guarantee funds in the prior year, partially offset by higher sales in the current year.

The aggregate fair value of securities sold at a loss during the nine months ended September 30, 2012 and 2011 was $911 million from the sale of 193 securities and $954 million from the sale of 231 securities, respectively, which was approximately 93% of book value for both periods. The loss on sales of securities during the nine months ended September 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 nine months ended September 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, three foreign bonds sold for a total loss of $5 million in the second quarter of 2012 and one foreign corporate security that was sold for a total loss of $2 million in the third quarter of 2012 related to portfolio repositioning activities. The securities sold at a loss during the nine months ended September 30, 2011 included two U.S. corporate securities that were sold for a total loss of $11 million in the first quarter of 2011, one foreign corporate security that was sold for a total loss of $11 million in the second quarter of 2011 and one U.S. corporate security that was sold for a total loss of $4 million in the third quarter of 2011 related to portfolio repositioning activities.

During the third 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 nine months ended September 30, 2012, we reduced our exposure to the peripheral European countries by $98 million to $601 million with unrealized losses of $13 million. Our exposure as of September 30, 2012 was diversified with direct exposure to local economies of $234 million, indirect exposure through debt issued by subsidiaries outside of the European periphery of $120 million and exposure to multinational companies where the majority of revenues come from outside of the country of domicile of $247 million.

Read the The complete Report

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10qk
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