MET MetLife Inc

Genworth Financial Inc. (GNW) expects to deliver an operating loss in the range of $70 million to $90 million or 14 cents to 18 cents per share in the second quarter of 2011.

The Zacks Consensus Estimate is earnings of 24 cents per share in the second quarter of 2011. The company delivered operating earnings of $118  million or 24 cents per share in the year ago quarter.

The company estimates a net loss between $92 million and $112 million or 19 cents to 23 cents per share in the second quarter. The net loss takes into account reserve strengthening of approximately $300 million in its U.S. Mortgage Insurance business. Net income was $42 million or 8 cents per share in the second quarter of 2010.

Genworth expects investment income of $880 million in the second quarter, a modest improvement from $830 million in the last quarter. The company estimates after-tax impairments to decline to approximately $20 million in the second quarter. 

The company estimates, as of June 30. 2011, net unrealized investment gains to be approximately $235 million, net of tax and other items, compared with net unrealized investment losses of $37 million as of March 31, 2011.

The company noted, following the reserve strengthening, average flow reserve per delinquency increased to $29,200 from $25,400 at the end of the first quarter. The company is on course to meet its yearly savings target of $400 to $500 million and has already achieved mitigation loss savings of $250 million during the first half of 2011.

Outlook by Segment

Genworth expects a U.S. Mortgage Insurance business operating loss in the second quarter to between $250 million and $255 million. To offer capital support to the Mortgage Insurance business, the company is implementing a non-cash intercompany transaction. The company intends to deploy a portion of its common shares of Genworth MI Canada Inc. (estimated market value of $375 million) for the purpose. Including this transaction, consolidated the risk-to-capital ratio is projected to be 25:1 to 26:1.  

Operating income, in the second quarter at the International segment is projected between $105 million and $110 million. The company expects full year dividends from the segment to be approximately $350 million.

Operating income at the Retirement and Protection segment is estimated between $145 million and $150 million.  The consolidated statutory risk based capital ratio for the U.S. life companies at the end of the second quarter is expected to be 380-390%.

In the first quarter, Genworth Financial reported an operating income of 20 cents per share, lagging the Zacks Consensus Estimate by a penny. Results were also modestly lower than the operating profit of 23 cents 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.

We maintain our Underperform rating on Genworth Financial. The quantitative Zacks #5 Rank (short term Strong Sell rating) on the stock indicates downward 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. It competes with Prudential Financial Inc. (PRU) and MetLife Inc. (MET).

 
GENWORTH FINL (GNW): Free Stock Analysis Report
 
METLIFE INC (MET): Free Stock Analysis Report
 
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
 
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