RICHMOND, Va., July 29, 2014 /PRNewswire/ — Genworth Financial, Inc. (NYSE: GNW) today reported results for the second quarter of 2014. The company reported net income1 of $176 million, or $0.35 per diluted share, compared with net income of $141 million, or $0.28 per diluted share, in the second quarter of 2013. Net operating income2 for the second quarter of 2014 was $158 million, or $0.31 per diluted share, compared with net operating income of $133 million, or $0.27 per diluted share, in the second quarter of 2013.
“Genworth made continued progress in our turnaround strategy during the quarter with the completion of the partial IPO of our Australia MI business,” said Tom McInerney, President and CEO. “Our second quarter 2014 results were strong in our mortgage insurance businesses, which benefitted from continued solid loss performance, but disappointing in our long term care insurance business, where we experienced adverse claims development. We continue to pursue state approvals for premium rate increases in long term care and recently launched a new long term care insurance product in 42 states that balances flexibility for customers with appropriate risk-adjusted returns for Genworth.”
U.S. Life Insurance Division
U.S. Life Insurance Division net operating income was $69 million, compared with $94 million in the prior quarter and $79 million a year ago.
Key Points
- U.S. Life Insurance Division net operating income was $69 million, compared with $94 million in the prior quarter and $79 million a year ago.
- Compared to the prior quarter, sales of life insurance and individual long term care insurance (LTC) products were higher but lower in fixed annuities.
- The consolidated risk-based capital (RBC) ratio is estimated to be approximately 490 percent4, up from 480 percent at the end of the first quarter of 2014.
- As of June 30, 2014, 43 states have approved premium rate increases as part of the 2012 in force premium rate increases. The company continues to expect to achieve $250 to $300 million of premium increases when fully implemented.
- In September 2013, the company announced that it began filing for LTC premium rate increases on certain Privileged Choice® and Classic Select® policies sold between 2003 and 2012. As of June 30, 2014, 18 states have approved these rate increases.
Life Insurance
Life insurance net operating income was $39 million, compared with $21 million in the prior quarter and $27 million in the prior year. Mortality experience improved versus the prior quarter. Results compared to the prior year benefitted from slower reserve growth resulting from a correction to reserves and unlocking of mortality and interest assumptions which were completed in the third quarter of 2013. In addition, investment spread and mortality improved modestly versus the prior year.
Sales of $26 million increased versus the prior quarter and prior year. The company is transitioning to a broader set of competitive permanent product offerings, including indexed universal life and linked benefit products, and growth in sales on these products is expected to continue through the remainder of 2014. Linked benefit product deposits were $42 million in the quarter, up from $25 million in the prior quarter and in the prior year.
Long Term Care Insurance
Long term care insurance net operating income was $6 million, compared with $46 million in the prior quarter and $26 million in the prior year. Results benefitted from premium increases and reduced benefits of$3 million versus the prior quarter and $34 million versus the prior year related to the premium increases approved and implemented to date. Benefits and other changes in policy reserves increased $46 millionafter-tax versus the prior quarter and $47 million after-tax versus the prior year. Excluding the impact from the premium increases approved and implemented to date, benefits and other changes in policy reserves2increased $45 million after-tax versus the prior quarter primarily from higher incurred losses resulting from higher severity on new and existing claims and increased $66 million after-tax versus the prior year primarily from higher severity and frequency on new and existing claims. As a result of recent experience, and in connection with its regular review of claims reserve assumptions for its long term care insurance products, the company is conducting a comprehensive review of the adequacy of its claim reserves. The company intends to complete this review before the release of financial results for the third quarter of 2014. The company continues to believe that the existing assumptions and methodology provide the most reliable best estimate. However, given the review underway, that will consider both long-term and recent experience, the company will likely change some of its assumptions, which could increase its long term care insurance claim reserves, and any increase may or may not be material.
Individual LTC sales of $24 million were higher than the prior quarter and lower than the prior year. The company is continuing to invest in distribution and marketing to increase LTC sales over time and expects to begin seeing some impact from these actions during the second half of the year. The company launched its Privileged Choice Flex 3.0 product in July 2014 in 42 states which gives millions more Americans the flexibility to choose the right fit for their long term care needs, combined with the simplicity of prepackaged benefits.
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About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance holding company committed to helping families become more financially secure, self-reliant and prepared for the future. Genworth has leadership positions in long term care insurance and mortgage insurance and competitive offerings in life insurance and fixed annuities that assist consumers in solving their insurance, retirement and home ownership needs.
