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Genworth Financial (GNW) Posts Q4 Loss of 17c/Share; Will Initiate U.S. Life Restructuring Plan

February 4, 2016 4:48 PM EST

Genworth Financial (NYSE: GNW) reported Q4 EPS of ($0.17), which may not compare with the analyst estimate of $0.21. Revenue for the quarter came in at $0 versus the consensus estimate of $2.17 billion.

Strategic Update

In 2016, the company plans to initiate a series of internal restructuring actions aimed at separating and isolating its LTC business, subject to regulatory and other potential third-party approvals. These actions are focused on addressing LTC legacy block issues that continue to pressure ratings across the organization.

Also, the company has decided to suspend all sales of traditional life insurance and fixed annuity products in the first quarter of 2016 given the continued impact of ratings and recent sales levels of these products. This action is expected to reduce cash expenses by approximately $50 million pre-tax annually and the company expects to record an approximately $15 million pre-tax restructuring charge in the first quarter of 2016 related to this decision. In addition, and as previously announced, the company still expects to achieve annualized cash expense reductions of $100 million pre-tax or more. Actions taken in 2015 are expected to reduce cash expenses by approximately $90 to $100 million pre-tax on an annualized basis, bringing total expected cash expense reductions to $150 million or more.

As of December 31, 2015, the U.S. mortgage insurance (MI) business was compliant with the private mortgage insurer eligibility requirements (PMIERs) capital requirements, with a prudent buffer. The company generated a total of approximately $535 million in PMIERs capital credit in 2015 from three reinsurance transactions approved by the government-sponsored enterprises (GSEs) covering the 2009 through 2015 books of business as well as the intercompany sale of its ownership of affiliated preferred securities for approximately $200 million. With regard to the executed reinsurance transactions, the GSEs reserve the right to reassess the PMIERs capital credit on those transactions if certain conditions are not met, including if the statutory risk-to-capital ratio of the business exceeds 18:1. The company intends to maintain a prudent level of capital in excess of the PMIERs capital requirements.

In January 2016, the company completed the sale of certain blocks of term life insurance to Protective Life Insurance Company. The company expects this transaction to generate capital of approximately $100 to $150 million in aggregate to Genworth, which includes an expected tax payment of over $200 million to the holding company that is scheduled to be settled in July 2016, partially offset by a decrease in the unassigned surplus of the U.S. life insurance companies.

In December 2015, the company completed the sale of its lifestyle protection insurance business to AXA with estimated net proceeds of approximately $400 million, subject to post-closing adjustments. In January 2016, the company redeemed its senior notes due in 2016 using $321 million of proceeds from this transaction.

During the fourth quarter, the company announced it had entered into an agreement to sell its European mortgage insurance business to AmTrust Financial Services, Inc. that is expected to result in net proceeds of approximately $55 million to the U.S. MI business. The transaction is expected to close in the first quarter of 2016 and is subject to customary conditions, including requisite regulatory approvals.

For earnings history and earnings-related data on Genworth Financial (GNW) click here.



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