Genworth(US:GNW)2019-07-31 16:03Financial Data and Key Metrics Changes - Genworth reported adjusted operating income of $204 million or $0.40 per diluted share for Q2 2019, with net income of $168 million [7][18] - U.S. Mortgage Insurance (MI) achieved adjusted operating income of $147 million, a 7% increase year-over-year, driven by strong new insurance written and persistency [7][19] - The overall loss ratio for U.S. MI was zero, down eight points from the prior quarter and up eight points from the prior year [19] Business Line Data and Key Metrics Changes - U.S. MI reported flow new insurance written (NIW) of $15.8 billion, a 65% sequential increase and a 39% year-over-year increase [20] - Canadian MI adjusted operating income declined 7% year-over-year to $41 million, with flow NIW increasing 11% year-over-year [8][22] - Australian MI adjusted operating income decreased to $13 million, primarily due to lower cancellation activity [8] Market Data and Key Metrics Changes - The U.S. mortgage origination market remained strong, with increased purchase and refinance originations due to low interest rates [20] - Canada's first half loss ratio was 15%, with expectations for the full year to remain in the 15% to 25% range [22] - Australia's flow new business levels increased 12% sequentially and 8% year-over-year, driven by higher market penetration [23] Company Strategy and Development Direction - Execution of a multi-year rate action plan remains a high strategic priority, with 56 state approvals impacting $467 million of in-force premiums [9] - The company is exploring disposition options for Genworth Canada to facilitate the Oceanwide transaction, which includes potential private sales [10][12] - Genworth aims to improve financial flexibility and reduce outstanding indebtedness through the sale of Genworth Canada [15] Management's Comments on Operating Environment and Future Outlook - Management highlighted a solid macroeconomic environment with steady growth, low unemployment, and stable housing trends [19] - The company remains committed to executing its strategy and improving value while navigating the Oceanwide transaction [17] - Management expressed confidence in the ongoing discussions with regulators and the potential for timely approvals [49] Other Important Information - The company has received expressions of interest for a privately negotiated sale of Genworth Canada and is conducting due diligence on potential buyers [13] - The PMIER sufficiency ratio for U.S. MI remains strong at 123%, with over $650 million in capital above required levels [32] - The holding company ended the quarter with over $400 million in cash and liquid assets, with ongoing evaluations for potential dividends [38] Q&A Session Summary Question: Changes in long-term care reviews - Management indicated that they are early in the review process and trends are holding well, but interest rates have changed [46][47] Question: Deal approval process with Oceanwide - Management confirmed that U.S. regulators will need to evaluate any definitive agreement regarding the sale of the Canadian business [49] Question: Formal review process for U.S. regulators - Management stated that it depends on the regulators' judgment whether it requires a full review or can be considered an amendment [52] Question: CFIUS review for the Canadian sale - Management noted that CFIUS is focused on national security and does not expect significant issues with the Canadian sale [53] Question: Capital received from the Canadian sale - Management explained that the capital received would create excess capital for U.S. MI, and they are evaluating dividends independently [55]