Genworth(US:GNW)2019-10-30 15:47Financial Data and Key Metrics Changes - Genworth reported adjusted operating income of $123 million for Q3 2019, driven by strong performance in the U.S. mortgage insurance business [6][20] - Net income to Genworth shareholders was $18 million, with income from continuing operations at $128 million [20] - The loss from discontinued operations attributable to Genworth shareholders was $110 million, reflecting the planned sale of Genworth Canada [19] Business Line Data and Key Metrics Changes - U.S. mortgage insurance (USMI) adjusted operating income was $137 million, down $10 million sequentially but up $19 million year-over-year [21] - The reported loss ratio for USMI was 11%, up 11 points from the prior quarter [21] - In Australia, flow new insurance written (NIW) increased by 27% sequentially and 32% year-over-year, with adjusted operating income at $12 million [23] Market Data and Key Metrics Changes - Primary insurance in-force in USMI reached an all-time high of $186 billion, up 14% year-over-year [21] - The U.S. mortgage origination market remained strong, with flow NIW for the quarter at $18.9 billion, up 20% sequentially and 83% year-over-year [21] - Australia's loss ratio was reported at 36%, up 2 points from the prior quarter [23] Company Strategy and Development Direction - The company is focused on closing the transaction with Oceanwide and has agreed to sell its 57% stake in Genworth Canada to Brookfield for approximately USD 1.8 billion [9][10] - Genworth's long-term care insurance multiyear rate action plan continues to be a strategic focus, with $594 million of impacted in-force premiums and a weighted average premium increase of 43% [8] - The company aims to improve the health of the long-term care insurance industry through actuarially justified premium rate increases [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying strength and capital levels across mortgage insurance businesses, while also acknowledging challenges in the long-term care segment [6][17] - The company is optimistic about the completion of the Oceanwide transaction and the expected capital investment plan of $1.5 billion post-closing [16][17] - Management noted that the low interest rate environment poses challenges but also opportunities for the mortgage insurance business [39][40] Other Important Information - The planned sale of Genworth Canada has been reported as discontinued operations, affecting the financial position and results [18] - The company is in discussions with regulators regarding the reapproval of the Oceanwide transaction, with a focus on ensuring data protection during the transition period [12][14] - Genworth's capital positions remain strong, with U.S. mortgage insurance maintaining a PMIER sufficiency ratio of 129% [33] Q&A Session Summary Question: Does the reapproval process include CFIUS? - Management confirmed that no further approval from CFIUS is needed as they are satisfied with the mitigation plan [44] Question: Can you provide more detail on the Choice 2 claims data? - Management indicated that while claims are trending higher than expected, they anticipate offsetting this with future premium rate increases [46] Question: How are conversations with Canadian regulators different now? - Management noted that discussions are more constructive and detailed now that Brookfield is the acquirer [51] Question: How much of the improved margins in long-term care is due to price hikes? - Management emphasized that substantial premium increases since 2012 are contributing significantly to improved margins [55] Question: Is the increased severity in long-term care claims due to longer durations or larger amounts? - Management clarified that the increased severity is primarily due to model adjustments rather than an acceleration of claim severity [62]