We are maintaining our Neutral recommendation on
Genworth Financial Inc.
). Better performances at the segments are dwarfed by the rating
downgrade by Moody's.
After incurring losses over an extended period, the mortgage
business in the second quarter posted a profit. The segment
rebounded from loss largely on the heels of substantial lower loss
at U.S. Mortgage Insurance. Also, in the second quarter, the
company ended an external reinsurance contract that benefited it by
$12 million. Further, total flow delinquencies declined by 15% year
over year besides a dip in new delinquencies.
Better performances at the divisions of Genworth enable it to
remain on track of paying dividend to the parent company. Insurance
and Wealth Management has paid $120 million in dividend at the end
of second quarter with an interim dividend of $45 million paid in
In total, it represents $165 million, more than half of the $300
million goal slated for 2012 from this division. From the
international mortgage division, Genworth estimates dividend
between $50 million to $110 million for 2012.
GENWORTH FINL (GNW): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis
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) lowered the insurance financial strength rating of U.S. life
insurance subsidiaries to "A3" from "A2." The senior debt presently
carries a "Baa3" rating, the lowest investment grade rating.
Genworth remains apprehensive as it believes these actions will
weigh on the performance of the company, particularly lowering
sales in life insurance businesses.
Genworth is scheduled to release its third quarter earnings results
on October 31, after the bell. The Zacks Consensus estimate is
currently pegged at 20 cents. It represents a year-over-year
decline of 5.3%.
Genworth currently holds a Zacks #2 Rank, translating into a
short-term Buy rating.
Prudential Financial, Inc.
), which closely compete with Genworth, carry Zacks #3 Rank
translating into a short-term Hold rating.