Genworth CEO Discusses Q3 2010 Results – Earnings Call Transcript

Genworth CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript
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Genworth Financial, Inc. (

GNW

)

Q3 2010 Earnings Call Transcript

October 29, 2010 9:00 am ET

Executives

Alicia Charity – SVP, IR

Mike Fraizer – Chairman, President and CEO

Pat Kelleher – SVP and CFO

Kevin Schneider – SVP, President and CEO, U.S. Mortgage Insurance

Tom Stinson – President, Insurance Products

Analysts

Mark Finkelstein – Macquarie

Steven Schwartz – Raymond James & Associates

Steven Eisman – FrontPoint

Eric Berg – Barclays

Colin Devine – Citi

Andrew Kligerman – UBS

Presentation

Operator

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» Genworth Financial, Inc. Q2 2010 Earnings Call Transcript
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» Genworth Financial, Inc. Q3 2009 Earnings Call Transcript

Good morning, ladies and gentlemen and welcome to the Genworth Financial’s third quarter earnings conference call. My name is Melody and I will be your coordinator today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of today’s conference call. As a reminder, this conference is being recorded for replay purposes. Also, we ask that you refrain from using cell phones, speaker phones or headsets during the Q&A portion of today’s call.

I would now like to turn the presentation over to Alicia Charity, Senior Vice President, Investor Relations. Ms. Charity, you may proceed.

Alicia Charity

Thank you and good morning and thanks for joining us for Genworth Financial’s Third Quarter 2010 Earnings Conference Call. Our press release and financial supplement were released last evening and are posted on our Web site. We also posted some supplemental materials on our Web site that details loss experience in the U.S. Mortgage Insurance business. Again this quarter, we’ll also post management’s prepared comments following the call for your reference.

This morning, you’ll hear first from Mike Fraizer, our Chairman and CEO, and then Pat Kelleher, our Chief Financial Officer. Following our prepared comments, we’ll open the call up for a question-and-answer period. Kevin Schneider, President and CEO of U.S. Mortgage Insurance; Jerome Upton, Chief Operating Officer of our International Segment and Ron Joelson, our Chief Investment Officer will be available to take questions.

With regard to forward-looking statements and the use of non-GAAP financial information, some of the statements we make during this call may contain forward-looking statements. Our actual results may differ materially from such statements. We advise you to read the cautionary note regarding forward-looking statements in our earnings release under risk factor section of our most recent Annual Report on Form 10-K filed with the SEC in February of 2010.

Morning’s discussion also includes non-GAAP financial measures that we believe may be helpful to investors. In our supplements and earnings release, non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules.

And finally, when we talk about international segment results, please note that all percentage changes, exclude the impact of foreign exchange. In addition, we will today discuss Canadian Mortgage Insurance business and it will reflect total company results including the minority interest unless otherwise indicated.

And now, let me turn the call over to Mike Fraizer.

Mike Fraizer

Thanks, Alicia and thanks everyone for your time today. We made important progress in a number of key areas in the third quarter while navigating a tough U.S mortgage insurance environment.

International earnings showed strong growth with improvement across our Canadian, Australian and European mortgage insurance platform supported by better economic conditions in Canada and Australia. We also saw a turn in Lifestyle Protection earnings reflecting lower losses and improved pricing.

U.S Mortgage Insurance had a disappointing quarter from the standpoint of the move we made to strengthen Florida reserves. At the same time we continue to experience favorable trends across other areas led by delinquencies and loan modifications.

Specifically, we saw improving trends in delinquencies which outperformed expectations of a seasonal increase demonstrating additional burn through of exposures associated with the 2005, 2006 and 2007 books.

Turning to loss mitigation activities, the bulk of benefits now come from loan modifications as expected with clearly improved rates of redefault. Looking ahead, we believe servicer based loan modification programs should continue to ramp up as only a few servicers are hitting full stride here and we will work intently to support these.

We’re also seeing gradual improvement in the size of the private mortgage insurance market and competitiveness versus the FHA. However, the dynamic of late-stage delinquencies being tougher to cure with more going to foreclosure is real. So we have to keep working to deal with it and work to offset it.

Pat will provide more color across these areas in his remarks.

Turning to retirement and protection we had mixed performance. Sales were strong particularly in life and long-term care insurance along with positive net flows in wealth management. Earnings were solid in Long Term Care Insurance but remained lower in Life Insurance impacted by the higher lapses we’ve been seeing on certain term policies, higher life reserved funding cost and sound mortality performance but at levels not as strong as experienced in the prior periods.

This morning I want to focus on four topics, first highlight two examples of how we are driving growth and investing in targeted areas, second update you on actions we continue to take to improve in-force performance, most recently focused on our old black of Long Term Care Insurance, third provide an update on the housing regulatory front and finally provide perspectives on our medium term return on equity targets.

Let’s begin with where we are investing in key growth areas that support earnings and return expansion. As a reminder we see organic growth from our existing business platforms as our biggest opportunity complemented by two additional strategies, targeted, small, bolt-on acquisition opportunities that fit with existing platforms and in particular at Wealth Management and elective entry in the new international markets which we think have strong future growth and profit potential where we bring established capabilities.

To drive organic growth we focus on three fundamental agendas introducing refreshed or innovative products, driving distribution, penetration and expansion and improving value-added support services.

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