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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Genworth Financial Inc | NYSE:GNW | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.02 | -0.31% | 6.53 | 6.61 | 6.48 | 6.58 | 2,266,338 | 23:18:15 |
RICHMOND, Va., April 28, 2016 /PRNewswire/ --
Genworth Financial, Inc. (NYSE: GNW) today reported results for the period ended March 31, 2016. The company reported net income of $53 million, or $0.11 per diluted share, in the first quarter of 2016, compared with net income of $154 million, or $0.31 per diluted share, in the first quarter of 2015. Net operating income for the first quarter of 2016 was $103 million, or $0.21 per diluted share, compared with net operating income of $154 million, or $0.31 per diluted share, in the first quarter of 2015. Net income and net operating income in the quarter included $54 million after-tax, or $0.11 per diluted share, of litigation settlement and legal expenses.
Strategic Update
On February 4, 2016, the company announced a restructuring plan for its U.S. life insurance businesses to: (1) suspend sales of its traditional life insurance and fixed annuity products; (2) further reduce expense levels in 2016; (3) repatriate existing business from Brookfield Life and Annuity Insurance Company Limited (BLAIC), its primary Bermuda domiciled reinsurance subsidiary, to its U.S. life insurance companies in 2016; and (4) separate and potentially isolate its LTC business. The company made progress on this plan in the quarter including:
In January 2016, the company completed the sale of certain blocks of term life insurance to Protective Life Insurance Company. This transaction is expected to generate capital in excess of $150 million in aggregate to Genworth, including an anticipated tax payment of approximately $175 million to the holding company that is scheduled to be settled in July 2016 and is committed to be used to facilitate the separation and potential isolation of the LTC business.
During the fourth quarter of 2015, the company announced it had entered into an agreement to sell its European mortgage insurance business to AmTrust Financial Services, Inc., which is currently expected to result in net proceeds of approximately $50 million to the U.S. MI business. The transaction is now expected to close in the second quarter of 2016 and is subject to customary conditions, including requisite regulatory approvals.
"We are pleased with the continued strong performance of our MI businesses and improved results in our U.S. life insurance businesses during the quarter," said Tom McInerney, President and CEO. "We also enhanced our strategic and financial flexibility by proactively reducing holding company debt, successfully completing a bond consent solicitation and making progress on our U.S. life insurance restructuring plan."
Consolidated Net Income & | ||||||||||||||||
Net Operating Income | ||||||||||||||||
Three months ended March 31 |
||||||||||||||||
(Unaudited) |
||||||||||||||||
2016 |
2015 |
|||||||||||||||
Per |
Per |
|||||||||||||||
diluted |
diluted |
Total | ||||||||||||||
(Amounts in millions, except per share) |
Total |
share |
Total |
share |
% change | |||||||||||
Net income available to Genworth's common stockholders |
$ |
53 |
$ |
0.11 |
$ |
154 |
$ |
0.31 |
(66) % | |||||||
Net operating income |
$ |
103 |
$ |
0.21 |
$ |
154 |
$ |
0.31 |
(33) % | |||||||
Weighted average diluted shares |
499.4 |
498.9 |
||||||||||||||
Three months ended March 31 |
||||||||||||||||
(Unaudited) |
||||||||||||||||
2016 |
2015 |
|||||||||||||||
Book value per share |
$ |
28.19 |
$ |
30.81 |
||||||||||||
Book value per share, excluding accumulated other comprehensive income (loss) |
$ |
19.80 |
$ |
21.38 |
||||||||||||
In the first quarter of 2016, net income was primarily impacted by a net after-tax loss of $11 million related to the early extinguishment of Genworth Holdings' senior notes, an after-tax loss of $6 million from a life block transaction, an after-tax expense of $9 million related to restructuring costs and after-tax fees incurred related to the bond consent solicitation of $12 million.
Net income was also impacted by net investment losses, net of taxes and other adjustments, of $13 million in the quarter, compared to $1 million in the prior year. Total impairments, net of tax, were $7 million in the quarter, compared to $2 million in the prior year.
Net investment income increased to $789 million in the quarter, compared to $781 million in both the prior quarter and prior year primarily from favorable prepayment speed adjustments related to residential mortgage-backed securities. The reported yield for the current quarter was 4.51 percent. The core yield2 was 4.36 percent, up slightly from the prior quarter.
Net operating income (loss) results are summarized in the table below:
Net Operating Income (Loss) |
|||||||||
(Amounts in millions) |
Q1 16 |
Q4 15 |
Q1 15 | ||||||
U.S. Mortgage Insurance |
$ |
61 |
$ |
41 |
$ |
52 | |||
Canada Mortgage Insurance |
33 |
37 |
40 | ||||||
Australia Mortgage Insurance |
19 |
22 |
30 | ||||||
U.S. Life Insurance |
91 |
(135) |
81 | ||||||
Runoff |
4 |
11 |
11 | ||||||
Corporate and Other |
(105) |
(58) |
(60) | ||||||
Total Net Operating Income (Loss) |
$ |
103 |
$ |
(82) |
$ |
154 |
Net operating income (loss) represents net operating income (loss) from continuing operations excluding net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and other adjustments, net of taxes. A reconciliation of net operating income (loss) of segments and Corporate and Other activities to net income (loss) is included at the end of this press release.
Unless specifically noted in the discussion of results for the MI businesses in Canada and Australia, references to percentage changes exclude the impact of translating foreign denominated activity into U.S. dollars (foreign exchange). Percentage changes, which include the impact of foreign exchange, are found in a table at the end of this press release. The impact of foreign exchange on results in the first quarter of 2016 was an unfavorable $6 million and $3 million versus the prior year in the MI businesses in Canada and Australia, respectively.
U.S. Mortgage Insurance
Operating Metrics | |||||||||||
(Dollar amounts in millions) |
Q1 16 |
Q4 15 |
Q1 15 | ||||||||
Net operating income |
$ |
61 |
$ |
41 |
$ |
52 | |||||
New insurance written |
|||||||||||
Primary Flow |
$ |
7,400 |
$ |
7,800 |
$ |
6,300 | |||||
Loss ratio |
24% |
39% |
33% |
U.S. MI net operating income was $61 million, compared with $41 million in the prior quarter and $52 million in the prior year. The loss ratio in the current quarter was 24 percent, down 15 points sequentially from a seasonal decrease in new delinquencies, favorable net cures and aging of existing delinquencies and the continued growth in insurance in force resulting in higher earned premiums. The loss ratio was down nine points from the prior year primarily reflecting the continued decline in delinquencies from the 2005 to 2008 book years. Results versus the prior year also reflected lower net investment income, primarily related to the affiliated preferred securities that were exchanged with the holding company in July 2015.
Flow new insurance written (NIW) of $7.4 billion decreased five percent from the prior quarter from a seasonally smaller purchase originations market but increased 17 percent versus the prior year primarily from a larger purchase originations market and growth in market share. During the first quarter of 2016, the company's concentration of single premium flow NIW was slightly higher than the prior quarter, and modestly lower than the prior year as it continues its selective participation in this market. Future volumes of its single premium products will vary in part depending on the company's evaluation of the risk return profile of these products.
Canada Mortgage Insurance
Operating Metrics |
|||||||||||
(Dollar amounts in millions) |
Q1 16 |
Q4 15 |
Q1 15 | ||||||||
Net operating income |
$ |
33 |
$ |
37 |
$ |
40 | |||||
New insurance written |
|||||||||||
Flow |
$ |
2,500 |
$ |
4,700 |
$ |
3,300 | |||||
Bulk |
$ |
3,200 |
$ |
7,300 |
$ |
5,000 | |||||
Loss ratio |
24% |
23% |
22% |
Canada MI reported net operating income of $33 million versus $37 million in the prior quarter and $40 million in the prior year. The loss ratio in the quarter was 24 percent, up one point from the prior quarter and up two points compared to the prior year primarily driven by an increase in new delinquencies, net of cures, primarily from experience in Alberta. Results versus the prior year included unfavorable foreign exchange of $6 million and higher expenses, partially offset by higher premiums.
Flow NIW was down 45 percent3 sequentially primarily from a seasonally smaller originations market and down 12 percent3 from the prior year primarily from targeted underwriting changes and a slowing housing market in oil producing regions. In addition, the company completed several bulk transactions in the quarter of approximately $3.2 billion, consisting of low loan-to-value prime loans.
Australia Mortgage Insurance
Operating Metrics |
|||||||||||
(Dollar amounts in millions) |
Q1 16 |
Q4 15 |
Q1 15 | ||||||||
Net operating income |
$ |
19 |
$ |
22 |
$ |
30 | |||||
New insurance written |
|||||||||||
Flow |
$ |
4,400 |
$ |
4,600 |
$ |
5,800 | |||||
Loss ratio |
26% |
17% |
15% |
Australia MI reported net operating income of $19 million versus $22 million in the prior quarter and $30 million in the prior year. The loss ratio in the quarter was 26 percent, up nine points sequentially and up 11 points from the prior year. Sequentially, aging of existing delinquencies was unfavorable and new delinquencies were up 12 percent from normal seasonal variation, primarily from Queensland and Western Australia. Results in the prior year included an accrual for expected recoveries relating to paid claims, favorably impacting the loss ratio in the prior year by nine points. Results versus the prior year were impacted by an unfavorable $7 million related to the company's further sell down of approximately 14 percent of its ownership in the Australia MI business in May 2015 and $3 million of unfavorable foreign exchange.
Flow NIW was down four percent3 sequentially and down 16 percent3 from the prior year from a smaller high loan-to-value originations market primarily driven by regulatory focus on the market and tightened lender risk appetite as well as the impact from the termination of a customer contract in the second quarter of 2015.
U.S. Life Insurance
Operating Metrics |
|||||||||||
(Amounts in millions) |
Q1 16 |
Q4 15 |
Q1 15 | ||||||||
Net operating income (loss) |
|||||||||||
Long Term Care Insurance |
$ |
34 |
$ |
19 |
$ |
10 | |||||
Life Insurance |
31 |
(173) |
40 | ||||||||
Fixed Annuities |
26 |
19 |
31 | ||||||||
Total U.S. Life Insurance |
$ |
91 |
$ |
(135) |
$ |
81 | |||||
Sales |
|||||||||||
Long Term Care Insurance |
|||||||||||
Individual |
$ |
5 |
$ |
8 |
$ |
10 | |||||
Group |
2 |
2 |
1 | ||||||||
Life Insurance |
|||||||||||
Term Life |
5 |
6 |
9 | ||||||||
Universal Life |
2 |
3 |
4 | ||||||||
Linked Benefits |
2 |
1 |
4 | ||||||||
Fixed Annuities |
168 |
314 |
326 |
Long Term Care Insurance
LTC had net operating income of $34 million, compared with $19 million in the prior quarter and $10 million in the prior year. Results versus the prior quarter reflected favorable experience driven by seasonally higher terminations. The current quarter also reflected a $4 million after-tax unfavorable correction to the calculation for reduced benefit options, partially offset by lower expenses. Results versus the prior year reflected a more favorable benefit from rate actions, partially offset by less favorable experience driven by lower terminations and higher severity given the mix of new claims with a higher average reserve. Prior quarter results included $10 million of after-tax favorable items. Prior year results included $7 million of after-tax unfavorable items. The loss ratio in the current quarter was approximately 68 percent. Individual LTC sales were $5 million in the quarter.
Life Insurance
Life insurance had net operating income of $31 million, compared with a net operating loss of $173 million in the prior quarter and net operating income of $40 million in the prior year. Results in the quarter reflected favorable prepayment speed adjustments related to residential mortgage-backed securities. Results in the prior quarter included an after-tax charge of $194 million related to the company's annual review of life assumptions. Life insurance sales were $9 million in the quarter.
Fixed Annuities
Fixed annuities net operating income was $26 million, compared with $19 million in the prior quarter and $31 million in the prior year. Results in the quarter reflected favorable impacts from single premium immediate annuity mortality experience versus the prior quarter, but less favorable versus the prior year. Sales in the quarter totaled $168 million.
Runoff
Runoff net operating income was $4 million, compared with $11 million in the prior quarter and the prior year reflecting less favorable equity market performance versus both the prior quarter and prior year.
Corporate And Other
Corporate and Other net operating loss was $105 million, compared with $58 million in the prior quarter and $60 million in the prior year. Results in the current quarter included expenses of $54 million after-tax related to litigation settlement and legal expenses.
Capital & Liquidity
Genworth maintains solid capital positions in its operating subsidiaries.
Key Capital & Liquidity Metrics |
||||||||||||||
(Dollar amounts in millions) |
Q1 16 |
Q4 15 |
Q1 15 |
|||||||||||
U.S. MI |
||||||||||||||
Consolidated Risk-To-Capital Ratio4 |
15.3:1 |
16.3:1 |
14.1:1 |
|||||||||||
Genworth Mortgage Insurance Corporation Risk-To-Capital Ratio4 |
15.5:1 |
16.4:1 |
13.8:1 |
|||||||||||
Private Mortgage Insurer Eligibility Requirements (PMIERs) Sufficiency Ratio5 |
113 |
% |
109 |
% |
N/A |
|||||||||
Canada MI |
||||||||||||||
Minimum Capital Test (MCT) Ratio4 |
234 |
% |
234 |
% |
233 |
% | ||||||||
Australia MI |
||||||||||||||
Prescribed Capital Amount (PCA) Ratio4 |
168 |
% |
159 |
% |
163 |
% | ||||||||
U.S. Life Insurance Companies |
||||||||||||||
Consolidated Risk-Based Capital (RBC) Ratio4 |
390 |
% |
393 |
% |
453 |
% | ||||||||
Unassigned Surplus4 |
$ |
(330) |
$ |
(329) |
$ |
138 |
||||||||
Holding Company Cash6 and Liquid Assets7 |
$ |
760 |
$ |
1,374 |
$ |
1,070 |
Key Points
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 insurance holding company committed to helping families achieve the dream of homeownership and address the financial challenges of aging through its leadership positions in mortgage insurance and long term care insurance. Headquartered in Richmond, Virginia, Genworth traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com.
From time to time, Genworth releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the "Investors" section of genworth.com. From time to time, Genworth's publicly traded subsidiaries, Genworth MI Canada Inc. and Genworth Mortgage Insurance Australia Limited, separately release financial and other information about their operations. This information can be found at http://genworth.ca and http://www.genworth.com.au.
Conference Call and Financial Supplement Information
This press release and the first quarter 2016 financial supplement are now posted on the company's website. Additional information regarding business results and strategic update will be posted on the company's website, http://investor.genworth.com, by 7:30 a.m. on April 29, 2016. Investors are encouraged to review these materials.
Genworth will conduct a conference call on April 29, 2016 at 8:00 a.m. (ET) to discuss business results and provide a progress update on strategic priorities. The conference call will be accessible via telephone and the Internet. The dial-in number for the conference call is 877 888.4034 or 913 489.5101 (outside the U.S.); conference ID # 6410174. To participate in the call by webcast, register at http://investor.genworth.com at least 15 minutes prior to the webcast to download and install any necessary software.
Replays of the call will be available through May 13, 2016 at 888 203.1112 or 719 457.0820 (outside the U.S.); conference ID # 6410174. The webcast will also be archived on the company's website.
Use of Non-GAAP Measures
This press release includes the non-GAAP financial measures entitled "net operating income (loss)" and "net operating income (loss) per common share." Net operating income (loss) per common share is derived from net operating income (loss). The chief operating decision maker evaluates segment performance and allocates resources on the basis of net operating income (loss). The company defines net operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on reinsurance restructuring for certain blocks of business. The company excludes net investment gains (losses) and infrequent or unusual non-operating items because the company does not consider them to be related to the operating performance of the company's segments and Corporate and Other activities. A component of the company's net investment gains (losses) is the result of impairments, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to the company's discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions and restructuring costs are also excluded from net operating income (loss) because, in the company's opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from net operating income (loss) if, in the company's opinion, they are not indicative of overall operating trends.
While some of these items may be significant components of net income (loss) available to Genworth's common stockholders in accordance with GAAP, the company believes that net operating income (loss) and measures that are derived from or incorporate net operating income (loss), including net operating income (loss) per common share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses net operating income (loss) as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from net operating income (loss) have occurred in the past and could, and in some cases will, recur in the future. Net operating income (loss) and net operating income (loss) per common share on a basic and diluted basis are not substitutes for net income (loss) available to Genworth's common stockholders or net income (loss) available to Genworth's common stockholders per common share on a basic and diluted basis determined in accordance with GAAP. In addition, the company's definition of net operating income (loss) may differ from the definitions used by other companies.
In the first quarter of 2016, the company recorded an estimated gain of $20 million, net of taxes, related to the planned sale of the mortgage insurance business in Europe. The company also recognized an estimated loss of $134 million, net of taxes, in the fourth quarter of 2015 for the planned sale of this business.
In January 2016, the company paid a make-whole expense of $13 million, net of taxes, related to the early redemption of Genworth Holdings, Inc.'s 2016 notes. The company also repurchased $28 million principal amount of Genworth Holdings, Inc.'s notes with various maturity dates for a gain of $2 million, net of taxes, in the first quarter of 2016. These transactions were excluded from net operating income (loss) for the periods presented as they related to a gain (loss) on the early extinguishment of debt.
In the first quarter of 2016, the company completed a life block transaction resulting in an after-tax loss of $6 million in connection with the early extinguishment of non-recourse funding obligations.
In the first quarter of 2016, the company recorded an after-tax expense of $9 million related to restructuring costs as part of an expense reduction plan as the company evaluates and appropriately sizes its organizational needs and expenses. In the fourth quarter of 2015, the company also recorded an after-tax expense of $3 million related to restructuring costs.
There were no infrequent or unusual items excluded from net operating income (loss) during the periods presented other than fees incurred during the first quarter of 2016 related to Genworth Holdings, Inc.'s bond consent solicitation of $12 million, net of taxes, for broker, advisor and investment banking fees.
The tables at the end of this press release reflect net operating income (loss) as determined in accordance with accounting guidance related to segment reporting, and a reconciliation of net operating income (loss) of the company's segments and Corporate and Other activities to net income (loss) available to Genworth's common stockholders for the three months ended March 31, 2016 and 2015, as well as for the three months ended December 31, 2015.
Adjustments to reconcile net income (loss) attributable to Genworth's common stockholders and net operating income (loss) assume a 35 percent tax rate and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.
This press release includes the non-GAAP financial measure entitled "core yield" as a measure of investment yield. The company defines core yield as the investment yield adjusted for those items that are not recurring in nature. Management believes that analysis of core yield enhances understanding of the investment yield of the company. However, core yield is not a substitute for investment yield determined in accordance with GAAP. In addition, the company's definition of core yield may differ from the definitions used by other companies. A reconciliation of core yield to reported GAAP yield is included in a table at the end of this press release.
Definition of Selected Operating Performance Measures
The company reports selected operating performance measures including "sales" and "insurance in force" or "risk in force" which are commonly used in the insurance industry as measures of operating performance.
Management regularly monitors and reports sales metrics as a measure of volume of new and renewal business generated in a period. Sales refer to: (1) new insurance written for mortgage insurance; (2) annualized first-year premiums for long term care and term life insurance products; (3) annualized first-year deposits plus five percent of excess deposits for universal and term universal life insurance products; (4) 10 percent of premium deposits for linked-benefits products; and (5) new and additional premiums/deposits for fixed annuities. Sales do not include renewal premiums on policies or contracts written during prior periods. The company considers new insurance written, annualized first-year premiums/deposits, premium equivalents and new premiums/deposits to be a measure of the company's operating performance because they represent a measure of new sales of insurance policies or contracts during a specified period, rather than a measure of the company's revenues or profitability during that period.
Management regularly monitors and reports insurance in force and risk in force. Insurance in force for the mortgage insurance businesses is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. For risk in force in the mortgage insurance businesses, the company has computed an "effective" risk in force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Risk in force for the U.S. mortgage insurance business is the obligation that is limited under contractual terms to the amounts less than 100 percent of the mortgage loan value. Effective risk in force has been calculated by applying to insurance in force a factor of 35 percent that represents the highest expected average per-claim payment for any one underwriting year over the life of the company's businesses in Canada and Australia. In Australia, the company has certain risk share arrangements where it provides pro-rata coverage of certain loans rather than 100 percent coverage. As a result, for loans with these risk share arrangements, the applicable pro-rata coverage amount provided is used when applying the factor. The company considers insurance in force and risk in force to be measures of the company's operating performance because they represent measures of the size of the business at a specific date which will generate revenues and profits in a future period, rather than measures of the company's revenues or profitability during that period.
Management also regularly monitors and reports a loss ratio for the company's businesses. For the mortgage insurance businesses, the loss ratio is the ratio of incurred losses and loss adjustment expenses to net earned premiums. For the long term care insurance business, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. The company considers the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of the businesses.
An assumed tax rate of 35 percent is utilized in certain adjustments to net operating income (loss) and in the explanation of specific variances of operating performance and investment results.
These operating performance measures enable the company to compare its operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements regarding the outlook for the company's future business and financial performance. Forward-looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including, but not limited to, the following:
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Condensed Consolidated Statements of Income | |||||||||
(Amounts in millions, except per share amounts) | |||||||||
Three months ended | |||||||||
March 31, | |||||||||
2016 |
2015 | ||||||||
Revenues: |
|||||||||
Premiums |
$ |
794 |
$ |
1,143 | |||||
Net investment income |
789 |
781 | |||||||
Net investment gains (losses) |
(19) |
(16) | |||||||
Policy fees and other income |
221 |
227 | |||||||
Total revenues |
1,785 |
2,135 | |||||||
Benefits and expenses: |
|||||||||
Benefits and other changes in policy reserves |
860 |
1,192 | |||||||
Interest credited |
177 |
180 | |||||||
Acquisition and operating expenses, net of deferrals |
394 |
267 | |||||||
Amortization of deferred acquisition costs and intangibles |
99 |
95 | |||||||
Interest expense |
105 |
107 | |||||||
Total benefits and expenses |
1,635 |
1,841 | |||||||
Income from continuing operations before income taxes |
150 |
294 | |||||||
Provision for income taxes |
23 |
91 | |||||||
Income from continuing operations |
127 |
203 | |||||||
Income (loss) from discontinued operations, net of taxes |
(19) |
1 | |||||||
Net income |
108 |
204 | |||||||
Less: net income attributable to noncontrolling interests |
55 |
50 | |||||||
Net income available to Genworth Financial, Inc.'s common stockholders |
$ |
53 |
$ |
154 | |||||
Income from continuing operations available to Genworth Financial, Inc.'s |
|||||||||
common stockholders per common share: |
|||||||||
Basic |
$ |
0.14 |
$ |
0.31 | |||||
Diluted |
$ |
0.14 |
$ |
0.31 | |||||
Net income available to Genworth Financial, Inc.'s common stockholders per |
|||||||||
common share: |
|||||||||
Basic |
$ |
0.11 |
$ |
0.31 | |||||
Diluted |
$ |
0.11 |
$ |
0.31 | |||||
Weighted-average shares outstanding: |
|||||||||
Basic |
498.0 |
497.0 | |||||||
Diluted |
499.4 |
498.9 |
Reconciliation of Net Operating Income (Loss) to Net Income (Loss) | ||||||||
(Amounts in millions, except per share amounts) | ||||||||
Three |
Three | |||||||
months ended |
months ended | |||||||
March 31, |
December 31, | |||||||
2016 |
2015 |
2015 | ||||||
Net operating income (loss): |
||||||||
U.S. Mortgage Insurance segment |
$ |
61 |
$ |
52 |
$ |
41 | ||
Canada Mortgage Insurance segment |
33 |
40 |
37 | |||||
Australia Mortgage Insurance segment |
19 |
30 |
22 | |||||
U.S. Life Insurance segment: |
||||||||
Long Term Care Insurance |
34 |
10 |
19 | |||||
Life Insurance |
31 |
40 |
(173) | |||||
Fixed Annuities |
26 |
31 |
19 | |||||
Total U.S. Life Insurance segment |
91 |
81 |
(135) | |||||
Runoff segment |
4 |
11 |
11 | |||||
Corporate and Other |
(105) |
(60) |
(58) | |||||
Net operating income (loss) |
103 |
154 |
(82) | |||||
Adjustments to net operating income (loss): |
||||||||
Net investment gains (losses), net (see below for reconciliation) |
(13) |
(1) |
— | |||||
Gains (losses) on sale of business, net |
20 |
— |
(134) | |||||
Gains (losses) on early extinguishment of debt, net |
(11) |
— |
— | |||||
Gains (losses) from life block transactions, net |
(6) |
— |
— | |||||
Expenses related to restructuring, net |
(9) |
— |
(3) | |||||
Fees associated with bond consent solicitation, net |
(12) |
— |
— | |||||
Income (loss) from continuing operations available to Genworth |
||||||||
Financial, Inc.'s common stockholders |
72 |
153 |
(219) | |||||
Net income attributable to noncontrolling interests |
55 |
50 |
52 | |||||
Income (loss) from continuing operations |
127 |
203 |
(167) | |||||
Income (loss) from discontinued operations, net of taxes |
(19) |
1 |
(73) | |||||
Net income (loss) |
108 |
204 |
(240) | |||||
Less: net income attributable to noncontrolling interests |
55 |
50 |
52 | |||||
Net income (loss) available to Genworth Financial, Inc.'s common |
||||||||
stockholders |
$ |
53 |
$ |
154 |
$ |
(292) | ||
Net income (loss) available to Genworth Financial, Inc.'s common |
||||||||
stockholders per common share: |
||||||||
Basic |
$ |
0.11 |
$ |
0.31 |
$ |
(0.59) | ||
Diluted |
$ |
0.11 |
$ |
0.31 |
$ |
(0.59) | ||
Net operating income (loss) per common share: |
||||||||
Basic |
$ |
0.21 |
$ |
0.31 |
$ |
(0.17) | ||
Diluted |
$ |
0.21 |
$ |
0.31 |
$ |
(0.17) | ||
Weighted-average shares outstanding: |
||||||||
Basic |
498.0 |
497.0 |
497.6 | |||||
Diluted8 |
499.4 |
498.9 |
497.6 | |||||
Reconciliation of net investment gains (losses): |
||||||||
Net investment gains (losses), gross |
$ |
(19) |
$ |
(16) |
$ |
(16) | ||
Adjustments for: |
||||||||
Deferred acquisition costs and other intangible amortization and certain |
||||||||
benefit reserves |
9 |
6 |
12 | |||||
Net investment gains (losses) attributable to noncontrolling interests |
(9) |
7 |
3 | |||||
Taxes |
6 |
2 |
1 | |||||
Net investment gains (losses), net of taxes and other adjustments |
$ |
(13) |
$ |
(1) |
$ |
— |
Condensed Consolidated Balance Sheets | |||||
(Amounts in millions) | |||||
March 31, |
December 31, | ||||
2016 |
2015 | ||||
Assets |
|||||
Cash, cash equivalents and invested assets |
$ |
76,728 |
$ |
75,746 | |
Deferred acquisition costs |
4,235 |
4,398 | |||
Intangible assets and goodwill |
291 |
357 | |||
Reinsurance recoverable |
17,587 |
17,245 | |||
Deferred tax and other assets |
577 |
675 | |||
Separate account assets |
7,624 |
7,883 | |||
Assets held for sale |
131 |
127 | |||
Total assets |
$ |
107,173 |
$ |
106,431 | |
Liabilities and equity |
|||||
Liabilities: |
|||||
Future policy benefits |
$ |
36,776 |
$ |
36,475 | |
Policyholder account balances |
26,354 |
26,209 | |||
Liability for policy and contract claims |
8,177 |
8,095 | |||
Unearned premiums |
3,378 |
3,308 | |||
Deferred tax and other liabilities |
4,045 |
3,028 | |||
Borrowings related to securitization entities |
173 |
179 | |||
Non-recourse funding obligations |
310 |
1,920 | |||
Long-term borrowings |
4,232 |
4,570 | |||
Separate account liabilities |
7,624 |
7,883 | |||
Liabilities held for sale |
131 |
127 | |||
Total liabilities |
91,200 |
91,794 | |||
Equity: |
|||||
Common stock |
1 |
1 | |||
Additional paid-in capital |
11,952 |
11,949 | |||
Accumulated other comprehensive income (loss): |
|||||
Net unrealized investment gains (losses): |
|||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired |
2,043 |
1,236 | |||
Net unrealized gains (losses) on other-than-temporarily impaired securities |
14 |
18 | |||
Net unrealized investment gains (losses) |
2,057 |
1,254 | |||
Derivatives qualifying as hedges |
2,302 |
2,045 | |||
Foreign currency translation and other adjustments |
(174) |
(289) | |||
Total accumulated other comprehensive income (loss) |
4,185 |
3,010 | |||
Retained earnings |
617 |
564 | |||
Treasury stock, at cost |
(2,700) |
(2,700) | |||
Total Genworth Financial, Inc.'s stockholders' equity |
14,055 |
12,824 | |||
Noncontrolling interests |
1,918 |
1,813 | |||
Total equity |
15,973 |
14,637 | |||
Total liabilities and equity |
$ |
107,173 |
$ |
106,431 |
Impact of Foreign Exchange on Operating Results9 Three months ended March 31, 2016 | ||||||
Percentages |
Percentages |
|||||
Including Foreign |
Excluding Foreign |
|||||
Exchange |
Exchange10 |
|||||
Canada Mortgage Insurance (MI): |
||||||
Flow new insurance written |
(24) |
% |
(12) |
% | ||
Flow new insurance written (1Q16 vs. 4Q15) |
(47) |
% |
(45) |
% | ||
Australia MI: |
||||||
Flow new insurance written |
(24) |
% |
(16) |
% | ||
Flow new insurance written (1Q16 vs. 4Q15) |
(4) |
% |
(4) |
% | ||
Reconciliation of Core Yield to Reported Yield | |||
Three | |||
months ended | |||
March 31, | |||
(Assets - amounts in billions) |
2016 | ||
Reported Total Invested Assets and Cash |
$ |
76.0 |
|
Subtract: |
|||
Securities lending |
0.4 |
||
Unrealized gains (losses) |
6.3 |
||
Adjusted end of period invested assets |
$ |
69.3 |
|
Average Invested Assets Used in Reported Yield Calculation |
$ |
70.0 |
|
Subtract: |
|||
Restricted commercial mortgage loans and other invested assets related to |
|||
securitization entities11 |
0.2 |
||
Average Invested Assets Used in Core Yield Calculation |
$ |
69.8 |
|
(Income - amounts in millions) |
|||
Reported Net Investment Income |
$ |
789 |
|
Subtract: |
|||
Bond calls and commercial mortgage loan prepayments |
11 |
||
Other non-core items12 |
15 |
||
Restricted commercial mortgage loans and other invested assets related to |
|||
securitization entities11 |
3 |
||
Core Net Investment Income |
$ |
760 |
|
Reported Yield |
4.51 |
% | |
Core Yield |
4.36 |
% |
1 Unless otherwise stated, all references in this press release to net income (loss), net income (loss) per share, book value, book value per share and stockholders' equity should be read as net income (loss) available to Genworth's common stockholders, net income (loss) available to Genworth's common stockholders per share, book value available to Genworth's common stockholders, book value available to Genworth's common stockholders per share and stockholders' equity available to Genworth's common stockholders, respectively.
2 This is a financial measure not calculated based on U.S. Generally Accepted Accounting Principles (Non-GAAP). See the Use of Non-GAAP Measures section of this press release for additional information.
3 Percent change excludes the impact of foreign exchange.
4 Company estimate for the first quarter of 2016, due to timing of the filing of statutory statements.
5 Calculated as available assets divided by required assets as defined within PMIERs. Company estimate for the first quarter of 2016.
6 Holding company cash & liquid assets comprises assets held in Genworth Holdings, Inc. (the issuer of outstanding public debt) which is a wholly-owned subsidiary of Genworth Financial, Inc.
7 Comprises cash and cash equivalents of $760 million, $1,124 million and $820 million, respectively, and U.S. government bonds of zero, $250 million and $250 million, respectively, as of March 31, 2016, December 31, 2015, and March 31, 2015.
8 Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of the loss from continuing operations, the company was required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 1.4 million for the three months ended December 31, 2015 would have been antidilutive to the calculation. If the company had not incurred a loss from continuing operations in these periods, dilutive potential weighted-average common shares outstanding would have been 499.0 million for the three months ended December 31, 2015.
9 All percentages are comparing the first quarter of 2016 to the first quarter of 2015 unless otherwise stated.
10 The impact of foreign exchange was calculated using the comparable prior period exchange rates.
11 Represents the incremental assets and investment income related to restricted commercial mortgage loans and other invested assets.
12 Includes cost basis adjustments on structured securities and various other immaterial items.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/genworth-financial-announces-first-quarter-2016-results-300259691.html
SOURCE Genworth Financial, Inc.
Copyright 2016 PR Newswire
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