Annuities will continue to take a back seat to other insurance and wealth management products at Genworth Financial, according to the insurer's finance chief.
Annuities will continue to take a back seat to other insurance and wealth management products at Genworth Financial, according to the insurer's finance chief.
“We narrowed our focus last year in the [United States] and international markets,” said Patrick B. Kelleher, Genworth Financial Inc.'s CFO, in an interview.
“We made decisions on what we're best at. In the U.S. life business, that includes our ‘main street' life insurance product, long term care insurance and wealth management.”
The carrier, which reported a second quarter loss of $50 million, or 11 cents per share, was able to narrow its losses from the year ago period of $109 million, or 25 cents per share. Operating income in the Richmond, Va., carrier's retirement and income protection division hit $127 million, down from $150 million in the second quarter of 2008.
Sales of fee-based retirement income products, such as variable annuities, fell to $154 million, from $705 million.
Earlier this year, Genworth had its financial strength rating downgraded by A.M. Best Co. of Oldwick, N.J. to A from A+; its financial strength cut to A from AA- by Standard and Poor's of New York; insurance financial strength ratings to A2 from A1 by Moody's Investors Service and insurer financial strength cut to A- from A+ by Fitch Ratings.
Mr. Kelleher acknowledged that in the past distributors, such as wirehouses and banks, suspended sales of Genworth's annuities because the rating agencies downgrades.
However, the insurer is meeting targets for sales of life insurance and long term care coverage, he added.
Genworth's sales of life insurance were $49 million, down from $85 million in the second quarter of 2009, while operating income from that line was down to $58 million, from $87 million. Meanwhile, long term care insurance sales dropped to $44 million, from $66 million. However, operating income rose to $43 million, compared to $34 million in the second quarter of 2008. “We will continue to sell annuities as a complement to distribution services,” Mr. Kelleher said.
The insurer's U.S. mortgage insurance realized a deeper net operating loss during the second quarter, hitting $134 million, down from the $59 million loss in the same period a year ago. But the insurer is addressed those losses with prices increases for new business of about 35%, compared with 2008.
A combination of mortgage “workouts” for borrowers on the verge of foreclosure and investigations into old loan files from 2005 to 2007 has helped Genworth mitigate its losses, Mr. Kelleher noted. Fraudulent loan applications allow the carrier to rescind mortgage coverage.
Although losses from mortgages have hobbled the company in the past, Mr. Kelleher predicts better times ahead. “We're seeing positive market influences, which will impact our business: Signs of economic recovery and stabilizing home prices that will start to recover.”
“We're expecting a return to profitability, but the timing will depend on how things come together,” he noted.
