Genworth Financial Inc. startled investors Tuesday with good earnings news.
The Richmond, Virginia-based insurer reported $216 million in net income for the first quarter on $2.2 billion in revenue, up from $108 million in net income on $1.8 billion in revenue per share. Earnings were about 20% higher than what Wall Street securities analysts had predicted, and revenue was 1.5% higher.
China Oceanwide Holdings Group Co. Ltd., a Beijing-based conglomerate, has been seeking regulatory approval to acquire Genworth for $2.7 billion. Genworth said it has shareholder approval to proceed and still hopes to complete the transaction by the middle of the year. Genworth has stopped holding its regular quarterly earnings conference calls with securities analysts while the deal is pending.
Long-Term Care Insurance
Genworth has been struggling to cope with the effects of low interest rates and inaccurate assumptions on the performance of its large block of in-force long-term care insurance.
The LTCI business generated $16 million in adjusted operating income in the latest quarter on $634 million in premium revenue, compared with $16 million in operating income on $618 million in premium revenue for the first quarter of 2016.
Net investment income increased to $356 million, from $329 million, even though the average yield on the company’s investments fell to 4.98%, from 5.19% in the year-earlier quarter.
Genworth generated just $3 million in new LTCI sales in the first quarter, down from $7 million in new sales in the first quarter of 2016.
The company has been depending heavily on increases in premiums for the consumers who already have its LTCI policies to boost revenue.
This year, the company’s efforts to raise premiums may be slowing.