Whether Genworth's market moves will improve earnings for its Life and LTC units remains to be seen.

In the wake of lackluster second quarter financial results for Genworth Financial’s U.S. Life and Long Term Care Insurance divisions, and the departure of James Boyle, the company’s executive vice president and CEO of the Life Division, a question arises: Will the company have to revise its go-to-market strategy to remain a viable player in the life and LTC spaces?

One issue of concern to company-watchers is Boyle’s short-term tenure at the Life unit, of which he took the helm only last January.

In a press statement released yesterday, the insurer noted that Boyle had accepted the position of Chairman at HealthFleet, Inc., a healthcare technology company.  The company added that Genworth President and CEO Tom McInerney will, effective immediately, also serve as CEO of the U.S. Life Insurance Division.

“Under [Boyle’s] leadership, the U.S. Life Insurance Division made continued progress on its turnaround plan, including improving the focus on our distribution efforts and product development,” McInerney said in the statement. “The U.S. Life Insurance team remains focused on driving further improvement across its businesses.” 

“I have been working closely with Jim and his team on developing the new Genworth LTC business model, as well as working with government leaders and regulators to change the regulatory framework for the LTC Insurance market,” he added. “Therefore, the Board and I believe it makes sense for me to assume the additional role of CEO of the U.S. Life division at this time.”

In a reply to a request for comment LifeHealthPro on Boyle’s departure, a Genworth spokesperson said the company had nothing to add to the press statement. As to the direction of Genworth’s Life Insurance Division, the spokesperson insisted that the unit’s priorities will “remain the same” under McInerney’s stewardship. Thus the company will continue to “complete the turn-around, rebuild the franchise and improve operational capabilities.”

Turning to Genworth’s three-part long-term care insurance strategy, the spokesperson added that Genworth will seek premium rate increases on pre-2002 LTC blocks of business. The aim: to bring these policies “closer to a break-even point over time and reduce the strain on earnings and capital.”

The company will also unveil new LTC products adhering to stricter underwriting standards, the solutions’ pricing to be based on “more conservative assumptions.” Whether these moves will improve earnings for Genworth’s Life and LTC units (which failed to match their 2013 results) remains to be seen. The U.S. Life’s operating income in the second quarter was $69 million, down from $79 million for the second quarter of 2013. And LTC operating income fell to just $6 million from $26 million a year ago—the marked dip due to rising LTC claims.

“[Genworth] is conducting a comprehensive review of the adequacy of its claim reserves,” and expects to have it completed before the release of Q3 results,” the company said in a press statement.

To the casual observer, financial challenges stemming from Genworth’s “adverse long-term care insurance claims experience” might not have been evident before yesterday’s second quarter earnings release. Indeed, the company’s year-over-year first quarter financial results were also positive.

On April 29, the company reported net incomeof $184 million, or $0.37 per diluted share, compared with net income of $103 million, or $0.21 per diluted share, in the first quarter of 2013. Net operating incomefor the first quarter of 2014 was $194 million, or $0.39 per diluted share, compared with net operating income of $151 million or $0.30 per diluted share, in the first quarter of 2013.

In a written statement, Genworth President and CEO Tom McInerney said the Q1 results reflected “continued progress” in Genworth’s turn-around strategy. He added the company’s mortgage insurance businesses benefitted from improved loss ratios; and that LTC premium increases “continued to positively impact earnings in our U.S. Life Insurance Division.”

Earlier this month, financial analyst George Thoreson echoed the positive assessment of Genworth’s outlook, observing that the company’s balance sheet had been helped by a rebounding housing market and reduced competition in the LTC and mortgage insurance businesses. The company had also reduced its debt, achieved operational efficiencies and boosted cash reserves from asset sales.

“The combination of improved macroeconomic, industry, and company-specific conditions worked favorably to increase [Genworth’s] share price to about $17.65/share today for a 220 percent gain,” commented Thoreson on July 2nd in Seeking Alpha, a crowd-sourced content service for financial markets. “There are potentially more gains — shares have not yet reached the intrinsic value estimate of $22/share — but we are going to sell GNW and lock in the gain to reduce risk.”

Thoreson stated, however, that Genworth’s current share price is not justified by the company’s declining risk-adjusted returns. The company, he noted, will have to significantly improve its return on equity—now pacing at 4.1 percent annually, less than half the performance of its industry peers — to justify a renewed “buy” recommendation.

Genworth, he wrote, is “still at best a ‘fair’ company [to invest in] until a sustainable two fold improvement in ROE is demonstrated.”