What's a Genworth? Insurance and investment specialist Genworth Financial might ask what your nest egg is worth. The company specializes in life insurance and retirement investments. Internationally Genworth offers mortgage insurance and other payment protection products. In the US it is the exclusive provider of long-term care insurance to AARP members. The firm also provides private residential mortgage insurance in the US. Genworth focuses its retirement investment products, including fixed annuities and mutual funds, on affluent individuals. Genworth serves over 15 million customers in 25 countries; its products are sold through banks, independent distributors and financial advisors.
While US operations account for about three-fourths of revenues, Genworth's international operations include significant mortgage insurance businesses in Australia, Canada, Mexico, and parts of Europe. The firm is looking to expand its mortgage insurance operations into emerging markets. The international offerings also include "lifestyle protection" products that help to cover any payments on other loans in the event of accident, illness, death, or disability.
In 2012 the company announced plans to raise a bit of cash by spinning off a minority stake (about 40%) in its Australian mortgage insurance business through an IPO. It had previously launched a public offering of its Canadian mortgage insurance business in 2009.
Genworth's largest source of income is its US life insurance division, which accounts for about 60% of annual revenues. The international mortgage division makes up about 15% of sales, and international protection 10%. The smaller US mortgage insurance and wealth management divisions each account for less than 10% of sales, as does the runoff segment (consisting of the divested Medicare operations).
Genworth reported a 3% increase in revenues to $10.3 billion in 2011 due to higher insurance and investment fees in the life insurance and wealth management segments, as well as higher investment returns. The growth was offset by a 3% decrease in total insurance premiums (its largest revenue source), primarily within the runoff and international protection segments, despite an increase in international mortgage premiums. Net income decreased 8% due to higher acquisition expenses and operating costs.
Genworth has been streamlining its operations through asset sales during 2011 and 2012. The asset sales allow Genworth to improve its cash position and focus on its core offerings: life policies, long-term care insurance, mortgage insurance, lifestyle protection products, fixed annuities, and wealth management services. It has groomed its largest segment, US life, to focus on term universal and universal life insurance policies, while discontinuing term and whole life products.
It is specifically focused on expansion of its independent advisor offerings in the wealth management field. For instance, the Genworth Financial Wealth Management unit launched a new investment portfolio risk mitigation product in 2011. Genworth is also looking to grow its mortgage businesses in developing countries.
Mergers, Acquisitions, & Divestitures
Despite steady growth in the sales of its Medicare supplemental products, in 2011 the company sold the block of products (held by the former Continental Life Insurance Company unit) to Aetna for $290 million. The company sold its Genworth Financial Investment Services unit, which provides tax and accounting financial advisory services, to investment brokerage firm Cetera Financial Group in 2012. In addition, in 2011 the company stopped offering mortgage insurance policies in New Zealand. It is also is planning to spin off a portion of its Australian mortgage unit.
In late 2010 Genworth expanded its asset management operations with the purchase of hedge fund and managed futures producer Altegris Capital. The purchase brought in alternative investments and $2.2 billion in assets under management.
The company was formed in 2004 to acquire certain insurance and financial services business from General Electric (GE). GE retained a controlling stake in Genworth Financial after its stock offering, but sold its remaining stake in 2006.
During the downturn in the US housing market (starting in 2008), the company faced losses in its US mortgage insurance segment. After considering divestitures, Genworth instead simply yanked hard on those operations, making its underwriting criteria more stringent and restricting new business. The company also conducted extensive restructuring programs, including a 15% workforce reduction in 2009 and a de-risking of its investment portfolio, to recover from the economic downturn. Nonetheless, the company saw income and cash flow losses during those years as a result of poor returns on investments. – less