Genworth to Separate Struggling Long-Term Care Segment
February 9, 2016 by Maria Armental, email@example.com
Genworth Financial Inc. plans to separate its money-losing long-term care business and stop selling traditional life and fixed annuities as part of a cost-cutting move.
The Richmond, Va., company unveiled the plans Thursday as it reported a narrower fourth-quarter loss. Genworth estimated it will take a $15 million pretax restructuring charge in the current quarter related to the actions.
Shares, which have lost nearly two-thirds of their value over the past 12 months, dropped 16% to $2.35 in after-hours trading.
The insurer focuses on sales of long-term care insurance, which helps pay for such things as nursing-home and home-based health care. Many other insurers have been moving away from the policies as medical costs rise and policyholders live longer, requiring higher payouts, and lower interest rates weighed on investment returns. But the line of business has remained a core part of Genworth’s operations.
Genworth has been freeing up money to comply with tighter federal requirements for mortgage insurers that do business with Fannie Mae and Freddie Mac. Company officials said the insurer has met the Private Mortgage Insurer Eligibility Requirements and ended the year “with a prudent buffer.”
Over all, Genworth reported a loss $292 million, or 44 cents a share, compared with a year-earlier loss of $760 million, or $1.81 a share. The latest results included more than $400 million in charges.
On an operating basis, Genworth reported a loss of 17 cents a share, compared with a loss of 83 cents a share a year earlier.
Operating results exclude investment gains or losses and other items that aren’t considered recurring on a quarterly basis.
Revenue declined 3.1% to $2.16 billion.
Analysts surveyed by Thomson Reuters had projected an operating profit of 21 cents a share on $2.17 billion in revenue.
The long-term care business reported net operating income of $19 million, compared with a net operating loss of $10 million in the previous quarter and a net operating loss of $506 million in the year-ago period.