Genworth: Mortgage Insurance Solid, Investment Result Weak

On Jul 13, 2016, we issued an updated research report on Genworth Financial, Inc. (NYSE:GNW) .

Genworth remains focused on its mortgage insurance business and on the separation of its long-term care businesses. In addition, the life insurer is strategically making divestments to streamline its businesses. Such asset sales are expected to improve performance, enhance financial and strategic flexibility, strengthen mortgage insurance, increase excess capital, earnings and return on equity (ROE) and restructure the U.S. Life business.

Solid performance by the mortgage division has been boosting the company’s dividend receipts. For 2016, Genworth expects dividends between $100 million and $150 million. However, the company’s efficient capital management efforts could raise dividend to as much as $200 million in 2016. Dividends from Canada and Australia divisions are projected between $100 million and $150 million in 2016.

Also, the company intends to rationalize costs for annual cash savings. This apart, Genworth expects annualized cash expense reductions of $150 million or more by second-quarter 2016.

However, the company has been witnessing a downtrend in its investment results. Exposure to low interest rate environment primarily resulted in the downside. We do not expect any substantial improvement in the conditions in the near term.

The Zacks Consensus estimate is currently pegged at 19 cents, which translates to a year-over-year decline of 20.8%. Our proven model does not conclusively show that the company is likely to beat estimates this quarter. This is because the company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks are Universal American Corp (NYSE:UAM) , GWG Holdings, Inc. (NASDAQ:GWGH) and Manulife Financial Corporation (NYSE:MFC) . While Universal American sports a Zacks Rank #1 (Strong Buy), both GWG Holdings and Manulife Financial hold a Zacks Rank #2 (Buy).