Genworth reports strong Q3 performance, CareScout advancement

Genworth Financial, Inc. reported a strong performance in Q3 2024, with significant achievements in strategic priorities, especially the advancement of the CareScout Quality Network, a group of long-term care providers, and preparations to introduce a CareScout insurance offering to meet growing long-term care funding needs in 2025. The quarter was marked by continued capital returns through share repurchases and enhancements in the legacy long-term care (LTC) business via the multi-year rate action plan.

Key highlights:

• Net income in the quarter was driven by Enact, its mortgage insurance company, which had strong operating performance
• Net investment gains, net of taxes, increased net income by $52 million in the current quarter, compared with net investment losses of $48 million in the prior quarter and $34 million in the prior year.
• Expanded the CareScout Quality Network to 49 states through October, covering more than 75% of the aged 65-plus population in the United States; on track to achieve 80% to 85% coverage by year-end.
• Executed $36 million in share repurchases in the quarter; $144 million executed year-to-date through October at an average price of $6.29 per share
• Repurchased $17 million in principal of holding company debt at a discount

Consolidated metrics:

• Net Income: $85 million (up from $76 million in Q2 2024 and $29 million in Q3 2023).
• Earnings Per Share: $0.19 (up from $0.17 in Q2 2024 and $0.06 in Q3 2023).
• Adjusted Operating Income: $48 million (down from $125 million in Q2 2024, but up from $42 million in Q3 2023).
• Adjusted Operating Income Per Share: $0.11 (down from $0.28 in Q2 2024 and $0.09 in Q3 2023).
• Weighted-Average Diluted Shares: 435.8 million.

Operating highlights:

1. Enact (a mortgage insurance company providing products and services to help lenders and borrowers achieve homeownership):
   • Adjusted Operating Income: $148 million (down from $165 million in Q2 2024 but up from $134 million in Q3 2023).
   • Primary New Insurance Written: $13.6 billion, slightly below Q2 2024.
   • Loss Ratio: Improved to 5% (from 7% in Q3 2023).
   • Equity: $4 billion, marking growth from previous quarters.
   • Highlights: This quarter's results included a $65 million pre-tax reserve release due to favorable cure performance. Enact's primary insurance in-force grew 2% year-over-year, supported by high persistency rates. The estimated PMIERs sufficiency ratio improved to 173%, equating to $2.19 billion above requirements.
2. Long-Term Care Insurance:
   • Adjusted Operating Loss: $(46) million, deeper than $(29) million in Q2 2024.
   • Premiums: Increased to $581 million in Q3 2024.
   • Net Investment Income: $483 million, slightly lower than $494 million in Q2 2024.
   • Highlights: Premium growth reflects seasonality, while liability remeasurement losses were due to higher claim rates and lower terminations, with partial offsets from improved cash flow assumptions

3. Life and Annuities:
   • Total Adjusted Operating Loss: $(27) million, a decline from Q2 2024's $(1) million.
   • Life Insurance: $(40) million, affected by unfavorable mortality rates.
   • Fixed Annuities: $6 million, down from $12 million in Q2 2024.
   • Variable Annuities: $7 million, down slightly from $10 million in Q2 2024.
   • Highlights: Results reflect unfavorable mortality and reduced net spread income due to block runoff.

4. Corporate and Other:
   • Adjusted Operating Loss: $(27) million, primarily due to tax timing and increased expenses from CareScout initiatives.

Capital and liquidity metrics:

• Genworth Life Insurance Company Consolidated risk-based capital: 317%, down slightly due to higher capital requirements.
• Holding Company Cash and Liquid Assets: $369 million, bolstered by cash inflows of $81 million from Enact and $60 million in intercompany tax payments. Outflows included $36 million for share repurchases and $29 million in debt-related costs.

Stock Performance: Up more than 16% year-to-date, to $7.00 per share.

Shareholder Returns:
Genworth repurchased $36 million of common stock, reducing shares outstanding to 428 million. Total share repurchases reached $503 million year-to-date at an average price of $5.54 per share.

CEO remarks:

Tom McInerney, president & CEO, emphasized progress on strategic goals, including the CareScout Quality Network's rapid expansion, future CareScout insurance offerings, and ongoing commitment to shareholder returns through repurchases and strengthening the LTC business.

“Our first priority is to create shareholder value to Enact’s growing market value and returns. We remain very pleased with our, 81 percent ownership of an act which has contributed approximately $819 million in capital to Genworth since its IPO including $81 million in the third quarter. Since its IPO Enact has delivered a total shareholder return of 95% as of November 4th, which relative to the S&P 500's total return of 34% over the same period of time reflects the significant value Enact has created for general shareholders. Consistent and significant cash flows from Enact enable Genworth shareholder return programs year-to-date. Through October, we repurchased approximately $144 million worth of shares bringing our total repurchases to $503 million since May of 2022.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.