A Mixed Bag Revealed In 2Q Earnings Reports

By Cyril Tuohy InsuranceNewsNet

Genworth Falls Short of Expectations

Genworth reported a second-quarter loss of $193 million, or 39 cents per diluted share, compared with net income of $176 million, or 35 cents per share in the year-ago period.

Adjusted for one-time costs, earnings came to 24 cents a share, missing Zacks Investment Research analysts’ expectations by 2 cents a share.

After-tax losses were $306 million related to the planned sale of its “lifestyle protection” insurance business, the company also reported. Genworth said earlier this month that it is reversing course and will not sell its life and annuity operation, an announcement that sent stock prices tumbling.

Genworth’s lifestyle protection products include critical illness and cancer coverage, term life and family income coverage, and personal accident coverage.

Net operating income for the second quarter was $119 million, or 24 cents per diluted share, compared with net operating income of $154 million, or 31 cents per share diluted in the year-ago period, the company said in a news release.

“We are encouraged with our second quarter results in the Global Mortgage Insurance Division and remain focused on initiatives aimed at strengthening and improving U.S. Life Insurance Division results," Tom McInerney, president and CEO, said in a news release.

The sale of the company’s lifestyle protection business to AXA as well as the sale of 14 percent of its stake in its Australian mortgage until will generate about $600 million to help the company fix its long-term care business.

The long-term care business suffered when the company underpriced the coverage and found itself paying out expensive claims as people lived longer and long-term care costs rose.

Prudential Beats Forecasts

Prudential reported second-quarter net income of $1.41 billion, or $3.03 per share diluted, compared with $1 billion, or $2.22 per share diluted in the year-ago period.

After-tax adjusted operating income came to $1.3 billion, or $2.91 per share. An average estimate of 11 analysts by Zacks Investment Research called for $2.46 per share.

“In the U.S., our annuities business is benefiting from growth in fees, and current quarter product sales contributed to our risk diversification,” chairman and CEO John Strangfeld said in a news release.

“A double-digit increase in retirement account values from a year ago reflects the growth of our pension risk transfer business, which continued to perform well in the current quarter,” he added.

In February, the consumer hygiene products company Kimberly-Clark announced it would transfer $2.5 billion in pension liabilities to Prudential and MassMutual, allowing the insurance carriers to take on the risk of paying the retirement checks of 21,000 Kimberly-Clark retirees.

Higher fees helped boost account values in the company’s annuity and asset management businesses, company executives said.

The company’s integration of the life insurance portfolio acquired from The Hartford in 2012 is almost finished, Strangfeld also said.

FBL Financial Surpasses Estimates

FBL Financial, the West Des Moines, Iowa-based parent company of Farm Bureau Life, reported second quarter net income of $32.4 million, or $1.29 per share diluted, compared to $28.6 million, or $1.14 per share diluted, for the year-ago period.

Operating income totaled $27.8 million, or $1.11 per common share, compared to $26.1 million, or $1.05 per common share, for the year-ago period, the company also reported.

The average estimate of three analysts surveyed by Zacks Investment Research was for operating earnings of $1.01 per share.

Second quarter revenue was $186.7 million compared with $175.8 million in the year-ago quarter, the company also reported.

Two years ago, FBL announced it was restructuring its distribution channel. CEO James P. Brannen said the changes were helping to generate “positive momentum,” which was trickling down to the bottom line.

“This positive momentum reinforces our strategies: to serve our Farm Bureau market niche, to increase our exclusive agent count and to manage spreads, capital and expenses. Executing these strategies is our focus for the remainder of 2015," he said in a news release.

The company also said that it had experienced unfavorable mortality results due to higher than average life insurance claim severity.

Voya Financial Misses Targets

Voya reported second-quarter net income of $285 million, an increase of 15 percent from the year-ago period, but fell short of analysts’ estimates.

After adjusting for costs, after-tax operating earnings were $179 million, or 78 cents per share diluted, compared with $213 million, or 83 cents per share diluted in the year-ago period, the company said.

Analysts were looking for the company to deliver 83 cents a share.

In response to an analyst’s question about higher expenses in the company’s retirement and employee benefits segment, Ewout Steenbergen, executive vice president and chief financial officer, said Voya had invested in the expansion and distribution.

The $3 million in second-quarter expenses would not recur in the third and fourth quarters, he said.

Higher expenses were also “directly correlated” with investment volume, he also said. As premiums rise and new sales increase, higher administrative expenses are expected to follow — as well as higher trail commissions in employee benefits, he said.

Voya last year was rebranded from the ING U.S., which itself was spun off from the Dutch financial services giant ING Group. Since the spinoff, Voya has focused even more heavily on the retirement space, life insurance and medical stop loss insurance.

Primerica In-Line With Estimates

Primerica reported second quarter net income of $49.1 million, or 94 cents per share diluted, compared with $49.2 million, or 89 cents per share diluted, in the year-ago period.

Operating revenues increased 6 percent to $350.8 million, the company also said.

Net operating income was $48.7 million, or 93 cents per share diluted, in-line with the consensus issued by Zacks Investment Research.

Term life insurance operating revenues rose 9 percent to $201.4 million, helped by the company’s 5 percent increase in its life insurance-licensed sales force to 101,008 at the end of June, the company also reported.

The company also reported 15 percent growth in the number of new representatives obtaining a life insurance license over the year-ago period due to new recruiting initiatives, recognition programs and technology platform enhancements, the company said.

Revenues from the company’s investment and savings products segment, which includes mutual funds, managed accounts, annuities and retirement plans for small businesses, rose 5 percent to $135 million, the company also said.

“The excitement generated by the incentives, technology and product enhancements launched at our July convention should continue to generate growth in the second half of 2015,” CEO Glenn Williams said in a news release.

CNO Financial Group Delivers Earnings Beat

CNO Financial Group, the holding company for Bankers Life, Washington National and Colonial Penn, reported second-quarter net income of $46.8 million, or 24 cents per share diluted, compared with $78.1 million, or 35 cents a share in the year-ago period.

Excluding the “extinguishment of debt,” which cost the company 11 cents a share in the second quarter, CNO Financial delivered net income of 35 cents a share, beating the average estimates of three analysts with Zacks Investment Research by a penny.

Second quarter net operating income was $60.8 million, or 31 cents a share diluted, compared with $71.3 million, or 32 cents per share diluted in the year-ago period, the company also reported.

Second quarter revenues of $959.5 million were also lower — barely — compared with $1 billion in the year-ago period, the company also said.

“We continue to strike a balance between sales growth and pricing discipline, while producing quality earnings and strong cash flows," CEO Ed Bonach said in a news release.

"The diversification of our businesses coupled with enhancing the customer experience are important contributors to growing the enterprise,” he also said. “Our recently completed recapitalization improves our financial flexibility and increases our deployable capital."

LPL Financial In-Line With Expectations

Second quarter net income for LPL Financial Holdings rose 17 percent to $50.2 million, or 52 cents per share diluted, compared with $43 million, or 42 cents per share diluted in the year-ago period, the company reported.

Earnings, adjusted for nonrecurring gains and costs, came to 65 cents per share, matching the average estimate of four analysts surveyed by Zacks Investment Research.

Net revenues of $1 billion were flat compared with the year-ago quarter, the company also reported.

LPL Financial, which has settled fines in the millions of dollars with regulators over the past two years, said it was working toward a technology and compliance infrastructure that would “mitigate future exception.”

“We have now made significant progress with industry, federal, and state regulators, and are close to resolving the remaining significant matters that we have been working on,” chairman and CEO Mark Casady said.

“While we operate in an industry that is complex and highly regulated, we believe we have built a compliance infrastructure that will mitigate future exceptions and will help lower annual regulatory charges beginning in 2016," he said.

The company allocated $6.7 million in the second quarter to settle regulatory-related matters, the company said.

Advisor recruiting and productivity helped new advisory assets grow to $4.3 billion for the three months ended June 30, 2015, the company said.

In the second quarter hybrid registered investment advisors assets grew over 35 percent and assets managed or serviced by advisors associated with independent RIA firms, a category known as hybrid RIAs, grew 36.4 percent to $111.6 billion, the company said.

The $111.6 billion represents the assets manage by 359 hybrid RIAs, compared to $81.8 billion in assets managed by 282 hybrid RIAs in the year-ago period.

In the second quarter, the number of advisors affiliated with LPL Financial rose by 290 advisors, or 2.1 percent, to 14,130 compared with the year-ago period, the company also said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].