Genworth Financial reports Q4 (Dec) results, misses on revs, provides strategic update; initiating US life restructuring plan to separate and isolate LTC and suspend sales of traditional life and fixed annuity products  (2.78 +0.30)
2/4/2016, 4:56:56 PM ET
  • Reports Q4 (Dec) loss of $0.59 per share, includes items, appears to not be comparable to the Capital IQ Consensus of $0.21; revenues fell 3.3% year/year to $2.16 bln vs the $2.18 bln Capital IQ Consensus.

Strategic Update

  • In 2016, the co plans to initiate a series of restructuring actions aimed at separating and isolating its LTC business. These actions are focused on addressing LTC legacy block issues that continue to pressure ratings across the organization. Also, the co has decided to suspend all sales of traditional life insurance and fixed annuity products in Q1 given the continued impact of ratings and recent sales levels of these products. This action is expected to reduce cash expenses by approximately $50 mln pre-tax annually.
  • 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 co 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 Q4, the co 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 Q1

blog gnw 2-8-2016

Thanks to the Seeking Alpha link above I am considering GNW as a trade. You can see on the chart above the measured move that indicates a target of 1.76.

In the earnings report above GNW had a loss of $0.59 versus a gain of $0.21 on their quarterly report.  It also says “includes items, appears to not be comparable to the Capital IQ Consensus of $0.21”. This leave myself and many other traders / investors in the dark about their correct numbers.

The chart above shows a stock in steady decline. The weekly chart is no better. Read the Seeking Alpha link above an you decide.

I am going to open a small position at $1.77 and then wait for signs of a recovery.

Good Luck

Dave C.



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