Genworth struggles to find positives in bleak Q3 earnings

Executives at Genworth Financial, the Richmond, VA.-based provider of life, long-term care, and mortgage insurance, had to dig deep into the third quarter financial results Thursday to find positive signs in the wake of precipitous drops in earnings, revenue, and investment income compared to the year-ago period.

They found some, saying the numbers showed continued progress against its strategic priorities, the delivery of long-term growth, and improving shareholder value.

Yet, the top-line figures missed Wall Street expectations and fell from a year ago as "we experienced volatility in our LTC results due to the required liability remeasurement," President and CEO Tom McInerney said.

Genworth earnings fell $134 million

Q3 adjusted operating earnings of adjusted operating income fell to $134 million, or $0.90 per share, from $156 million, or $0.31 per share, in Q3 of last year. Primary new insurance written totaled $14.4 billion vs. $15.1 billion in Q3 2022.

Revenue slipped $1.83 billion, from $1.85 billion in the year-earlier period. Net investment income of $801million fell from $808 million in Q3 2022 as the company said lower income from U.S. Government Treasury Inflation-Protected Securities and lower asset levels were mostly offset by higher investment yields.

The bugaboo, as McInerney noted, was long-term care insurance, which recorded a $71 million loss, for the quarter, compared to $26 million in Q3 2022.

“We continue to improve the financial condition of our legacy LTC business,” McInerney told investors in a Thursday morning call. “Primarily through our multiyear rate action plan, the most effective tool we have to bring our legacy LTC insurance portfolio to break even on a go-forward basis.”

McInerney said the current transformation of the U.S. LTC market will address both financing and services for Genworth’s customers and ultimately will help reduce the likelihood of people needing care and less care than they need.

Bringing new LTC products to market

“We are engaging with our state regulators and working with a few highly rated reinsurers to partner with us as we bring new LTC products to the market,” he said.

McInerney also touted the company’s initial launch of CareScout Services, its network of senior care providers, in Texas.

“Texas is a large LTC insurance market, and Genworth has approximately 43,000 policyholders there,” he said.

Genworth’s 81.6% ownership of Enact Holdings Inc., (formerly Genworth MI) its private mortgage insurer, has literally paid dividends. Genworth said Enact’s quarterly dividend of $0.16 per share generated proceeds of $21 million in September and it expects a special board-approved cash dividend of $113 million payable in December.

“Based on our ownership position, we continue to expect to receive $245 million from Enact from its quarterly dividends, share repurchases, and special dividends for the full year,” said Jerome Upton, Genworth’s chief financial officer.

Genworth stock, which had ticked up in the last year, fell more than 8% following the earnings release, to $5.51 per share in late-day trading Thursday.
“We are delivering on our strategic priorities, while proactively managing our liabilities and risk,” McInerney. “The multiyear rate action plan and the additional benefit from three LTC legal settlements are enhancing our ability to honor policyholder commitments and stabilize the legacy LTC block. We see tremendous value in Enact as evidenced by its strong capital returns and our ability to grow CareScout over time and in our ability to drive shareholder value through capital returns.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].