April 29, 2010 / 9:22 PM / in 8 years

UPDATE 3-Genworth Q1 trails Street; mortgage insurance improves

* Q1 oper EPS $0.30 vs $0.03 a year ago

* Q1 oper EPS, excl items $0.23 vs est $0.27

* US MI losses fall significantly (Adds details, analyst comments)

By Anurag Kotoky

BANGALORE, April 29 (Reuters) - Insurer Genworth Financial Inc (GNW.N) posted a quarterly profit that fell short of Wall Street estimates, but said its U.S. mortgage insurance segment continued to show improvement. Performance at the company’s life insurance segment was weaker than expected, Raymond James analyst Steven Schwartz told Reuters.

“It looks like they had some adverse mortalities ... It could be due to a very bad winter throughout most of the United States, but mortality has been very bad for the industry,” he said by phone.

Operating income at Genworth’s life insurance segment fell about 3 percent to $37 million, as the company suffered from less favorable mortality rates and a drop in premium payments by its long-term policy holders.

Losses at its U.S. mortgage insurance segment -- closely watched by the investors these days -- narrowed to $36 million, from $135 million in the year-ago period.

Mortgage insurance is bought by homebuyers securing loans with down payments of less than 20 percent to repay the lender if there is a default. Genworth clung on to its U.S. mortgage business even as the nation’s housing market nosedived.

Battered by losses from the downturn in the U.S. housing markets, Genworth said in December its U.S. mortgage insurance business would not turn an operating profit until mid-2011.

U.S. Mortgage insurance flow delinquencies declined 5 percent sequentially to the lowest level of new flow delinquencies seen since the first quarter of 2008, the company said.

Although delinquencies showed some improvement, and U.S. mortgage insurance showed improvement, it could actually be very seasonal, analyst Schwartz said.

“I think that has to do with Christmas and bonuses ... I think people spend, they party in the fourth quarter and then they get behind on their payments,” he said. But as bonuses are paid in the first half of the year when people get busy with their lives, they tend to catch up with payments.

For the first quarter, the life and mortgage insurer earned $212 million, or 48 cents a share, for the first quarter, compared with a loss of $469 million, or $1.08 a share, a year back.

Operating profit available to common stockholders -- the key measure for insurance analysts as it excludes investment losses and gains -- was 30 cents a share. It was 3 cents a share in the year-ago quarter.

Excluding a gain from the sale of stake in Genworth MI Canada (MIC.TO), the company earned 23 cents a share on an operating basis.

Analysts on average expected a profit of 27 cents a share, according to Thomson Reuters I/B/E/S.

Genworth shares closed up 4 percent at $18.09 Thursday on the New York Stock Exchange. They have recovered sharply from their 52-week low of 78 cents in March last year. (Reporting by Anurag Kotoky in Bangalore; Editing by Ratul Ray Chaudhuri, Gopakumar Warrier and Anil D‘Silva)

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