The Highs And Lows Of 4Q Earnings
February 17, 2015 by Cyril Tuohy, cyril.tuohy@innfeedback.com
Front row seats to Genworth Financial’s earnings call was the hot ticket in this batch of earnings releases as the company announced that the completion of its active life margin review was “substantially complete.”
The findings “positive in the aggregate,” in the words of president and CEO Thomas McInerney, were good and bad, but not quite as bad as many had feared and the stock rallied 3.2 percent $8.06 in late morning trading Wednesday.
A block of long-term care policies owned by the company was found to have a “positive margins,” but other blocks of long-term care policies acquired by the Richmond, Va.-based company’s New York subsidiary were found to have “negative margins,” due to higher claims severity and lower interest rates.
As a result, the company took an after-tax charge of $478 million, the company said.
The company, which operates in the international mortgage insurance and life insurance arenas, also said it had boosted claim reserves by $24 million.
In the end, the financials weren’t pretty.
The company reported a fourth quarter net loss of $760 million on revenue of $2.32 billion compared with net income of $208 million on revenue of $2.41 billion in the year-ago quarter.
The company also reported a full-year 2014 net loss of $1.24 billion on revenue of $9.56 billion, compared with 2013 net income of $560 million on revenue of $9.40 billion.
McInerney said the troubles affecting company’s older blocks of long-term business had overshadowed strong performances in other parts of the business.
He also said the company had implemented a restructuring plan — read layoffs — to save the company $100 million a year by 2016.
Several years ago, many long-term care companies left the business. With people living longer, many carriers discovered that they had underpriced their policies, which made it difficult for insurers to turn a profit.
McInerney, however, said Genworth remained committed to the long-term care insurance business, and that the company would ask state regulators to raise prices and reduce benefits on in-force blocks of long-term care policies.
“In addition to securing future premium increases or benefit reductions, we will continue to develop higher return, lower risk new long-term care and combo products to address the growing long-term care needs and increasing size of the aging U.S. population,” McInerney said.
If Genworth Financial and its long-term care business offered one of the dramatic highlights of this season’s quarterly earnings dramas brought on in part by the volatility of interest rates, Ameriprise Financial reminded that market that the life and retirement business is filled with stories of the “slow and steady.”
The Minneapolis-based planning and wealth management company turned in a robust fourth quarter in part on the strength of its advice and wealth management segment.
The company reported fourth quarter 2014 net income of $426 million, an increase of 43 percent over the year-ago period, and also reported full-year 2014 net income of $1.66 billion, an increase of 14 percent over 2013.
Fourth quarter earnings per share of $2.23, jumped 42 percent over the year-ago quarter, the company also reported.
James M. Cracchiolo, chairman and CEO, said the company had brought in another 73 financial advisors in the fourth quarter.
“The productivity of the advisors we’re attracting continues to grow and our recruiting pipeline for 2015 looks good,” Cracchiolo said in an earnings conference call with analysts last month.
Productivity was $496,000 per advisor, an increase of 13 percent compared to a year ago, the company also reported.
Ameriprise is active in the retail financial advice, asset management, annuities and life insurance business.
Chief financial officer and executive vice president Walter S. Berman said the company expects to generate as much as 70 percent of pretax operating earnings from its Advice & Wealth Management and Asset Management segments.
“As we bring in experienced advisors and help transfer their books, their productivity ramps up over time,” Berman said.
That, in turn, is helping to expand the company’s profit margins.
“Margins in the employee channel were approximately 10 percent in the quarter and were almost 19 percent in the franchise channel,” he said. “We feel good about the improvement we’re seeing across this business to dive profitability even higher.”
Retail client asset values in the fourth quarter rose to $444 billion, a jump of 9 percent from the year-ago quarter, the company also said.
Company executives also said that the company’s “Confident Retirement” marketing campaign strategy, which targets baby boomers, is being expanded to a younger demographic, people in the accumulation stage of their financial lives.
Members of Generation X and Generation Y “fit within our sweet spot,” Cracchiolo said.
