Genworth Financial Lowers Debt - Analyst Blog

Genworth Financial Inc. (GNW) lowered its debt level by repaying $250 million of outstanding borrowings under its five-year revolving credit facilities. The company made twin payments of $125 million under the facility.

Genworth still has $480 million of borrowings outstanding under these facilities, $240 million under each of the two facilities expiring in May and August of 2012.

The repayment will lower the debt levels of the company as well as alleviate interest expense. The company ended the third quarter of 2010 with long-term borrowings of $4.4 billion, up 20% year over year. Interest expense also shot up by 19% year over year to $114 million.

Genworth's third-quarter 2010 operating earnings lagged the Zacks Consensus Estimate as well as the year-ago figure. Operating income was $29 million compared with $81 million in the year-ago period. Higher year-over-year loss at the U.S. Mortgage Insurance segment as well as weak results at Retirement and Protection and at International resulted in the company's soft performance.

The Zacks Consensus Estimate for fourth-quarter 2010 is 21 cents per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, 80 cents per share and $1.40 per share.

We expect the elevated unemployment rate to continue to impose pressure on the mortgage insurance business. Though the business is showing signs of improvement, the line is still experiencing losses. Additionally, the improvements in its other business lines are expected to be modest given the economy's sluggish recovery.

The quantitative Zacks #5 Rank (short-term strong-Sell rating) for the company indicates downward pressure on the shares over the near term.

Based in Richmond, Virginia, Genworth Financial offers a variety of products to customers in areas such as life insurance and lifestyle protection, long-term care insurance, annuities, asset management and mortgage insurance through financial intermediaries, advisors, independent distributors and sales specialists.