On Aug 26, we upgraded
Genworth Financial Inc
) to Neutral from Underperform on the back of its solid second
quarter results. This life and mortgage insurer carries a Zacks
Rank #3 (Hold).
Why the Upgrade?
On Jul 30, Genworth Financial reported second-quarter 2013 net
operating income of 27 cents per share. Though the results fell
short of the Zacks Consensus Estimate, it was well above the
year-ago level of 14 cents. Genworth Financial delivered earnings
surprise in 3 of the last 4 quarters with an average of 16.6%
During the reported quarter, Global Mortgage Insurance put up a
robust performance, long-term care insurance witnessed progress
on rate actions and the company garnered benefits from the
expense reduction initiatives.
Given better performance in the first half, Genworth expects U.S.
mortgage insurance to be profitable in 2013 and for 2014 to be
marked by even better results.
In an effort to enhance its operational performance, in June this
year, Genworth Financial decided to sever 400 positions. Genworth
will have $80 to $90 million in annual pre-tax expense savings
when the plan is fully implemented.
Additionally, in third quarter last year, Genworth filed for rate
increases for its long term care in force premium. The company
expects $200 to $300 million of additional annual premiums after
full implementation over the next five years. As of Jun 30, 2013,
it received approvals of approximately $115 to $120 million of
the targeted premium increase.
The Zacks Consensus Estimate for 2013 and 2014 is currently
pegged at $1.16 and $1.45 respectively. The estimates translate
to a year-over-year increase of 43.6% and 24.4% respectively.
Other Stocks to Consider
China Life Insurance Co. Ltd.
) with Zacks Rank #1 (Strong Buy) and
Lincoln National Corporation
StanCorp Financial Group Inc
) with Zacks Rank #2 (Buy) are also worth considering.
GENWORTH FINL (GNW): Free Stock Analysis
CHINA LIFE INS (LFC): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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