AET Aetna Inc. (delisted)

Genworth Financial Inc. (GNW) closed the divestiture of its Medicare supplement business and related blocks of in-force business. The assets were sold to Aetna Inc. (AET) for $276 million. The company also expects to record an after-tax gain of approximately $35 million from the sale.

The divestiture included the sale of Continental Life Insurance Company of Brentwood, Tennessee and its subsidiary, American Continental Insurance Company.

Genworth estimated approximately $240 million will be available for utilization within its life insurance companies from the transaction. 

With the divestment of the Medicare supplement business, Genworth will now focus more on its Retirement and Protection segment. The segment’s operating income surged 31% year over year to $149 million in the second quarter.

Genworth reported a second quarter operating loss of 15 cents, wider than the Zacks Consensus Estimate of a loss of 3 cents. Results were way behind 24 cents earned in the last year. A substantially higher year-over-year loss at the U.S. Mortgage Insurance segment, partially offset by better results at Retirement & Protection and at International, resulted in the company’s soft performance.

The Zacks Consensus Estimate for third-quarter 2011 is 22 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, 52 cents and $1.46 per share.

We retain our Neutral recommendation on Genworth Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for Genworth indicates no clear directional pressure on the shares over the near term.

Based in Richmond, Virginia, Genworth Financial offers a variety of products to customers in areas such as life insurance and lifestyle protection, long-term care insurance, annuities, asset management and mortgage insurance through financial intermediaries, advisors, independent distributors and sales specialists.

 
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