Genworth Financial (NYSE: GNW ) witnessed a decline in its first-quarter net income as its mortgage insurance segment reported an operating loss of $81 million. The financial security company, as I had mentioned in my previous study of it, has been banking too much on its retirement and protection segment. But with credit trends improving in the country, the mortgage business does offer some hope.
On the whole
Genworth's overall net income fell to $82 million in the quarter from $178 million in the first quarter of 2010. Revenues improved slightly to $2.5 billion from $2.4 billion. But, in order to evaluate the company's overall performance in the quarter, we need to question the performance of all its three segments individually. Then, we'll have a much better understanding of what's going on here.
Genworth's retirement and protection segment's operating revenue grew 6% year-on-year, triggered by life sales and long term care insurance. The segment's earnings increased to $127 million compared with $122 million a year ago.
The company's international segment performed remarkably well as it witnessed an impressive 36% increase in its net operating income. Earnings and margins in lifestyle protection improved in Canada and Australia while flow new insurance written in Canada went up by 5% from the corresponding quarter last year.
Home on the range
Mortgage insurers are still feeling the heat of the U.S. housing crisis. And Genworth is no exception. Its U.S. mortgage insurance segment incurred an operating loss of $81 million in the quarter -- more than a two-fold increase from last year's loss of $36 million.
Several other mortgage insurers such as MGIC Investment (NYSE: MTG ) and PMI Group (NYSE: PMI ) have similarly borne the brunt of the crisis. But the loss mitigation activities savings of $122 million in the quarter, the company believes, put it on track to achieve an estimated full-year benefit of $400 million to $500 million. Besides, the total flow delinquencies declined by 7% sequentially, reflecting lower new delinquencies, improved cures, and higher flow paid claims.
The Foolish bottom line
The improving credit scenario paints a good picture for Genworth's mortgage business and I expect greater things from the company. But, at this point in time, I would still reiterate my stance about being vigilant of this stock.