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Genworth Financial Announces Key Business Realignment Actions to Accelerate Growth and Achieve Cost Efficiencies

RICHMOND, Va., March 29 /PRNewswire-FirstCall/ -- Genworth Financial, Inc. (NYSE: GNW) today announced several strategic steps to align high-growth business platforms and better position the company globally as the financial security company of choice for distributors and consumers. The company expects to make approximately $100 million of investments in these initiatives over two years. In addition, the company has identified approximately $220 million of cost savings and efficiencies over the same period. Net after-tax savings to the company are expected to be approximately $75 million over two years, and are consistent with the company's previously stated earnings outlook for 2007.

    Investment initiatives and details of efficiencies include:

  • Expansion of the Retirement and Protection segment sales and wholesaling forces, as well as product development, operations and service support strengthening;
  • Investments in multiple global growth platforms including country expansion initiatives across Europe and elsewhere; and
  • Enhancements to investment and capital markets innovation programs.
  • The result of cost studies undertaken concurrent with the announced realignment in January is that duplicated functions have been eliminated and growth platforms more closely aligned to focus on meeting the needs of distributors and providing comprehensive solutions to consumers.

New growth investments will include a 20-25 percent expansion in the number of U.S.-based wholesalers and sales support staff across retirement, life insurance and long-term care insurance lines, to maximize distribution capabilities. Additional investments are being made in programs designed to further Genworth's leadership in designing capital markets solutions to enhance balance sheet efficiency. Internationally, additional investments will be made in recently entered and potential new countries that, coupled with expansion of established platforms, will support accelerating global growth.

In addition to the growth investments within the Retirement and Protection segment, recently completed legal entity mergers and the combination of multiple functional teams, will create greater efficiency and alignment across the business.

As part of the cost study results and expense initiatives, Genworth said it expects to incur a non-operating, after-tax charge of approximately $15 million in the first quarter of 2007. Also, the company will include its group life and health insurance business as part of discontinued operations in the reporting of first quarter results, reflecting the pending sale of this business for $650 million that is expected to close in the second quarter of 2007.

"These strategic moves strengthen our position in the rapidly growing retirement income, protection and wealth management markets in the U.S., and further solidify our global leadership in the mortgage insurance and payment protection insurance markets, " said Michael D. Fraizer, chairman and chief executive. "We will be able to better leverage our product expertise and service capabilities to meet consumer and distributor needs. We also will become even more agile in finding innovative capital markets approaches to manage our capital needs. Along the way we continue to identify ways to consolidate or free up resources to invest in our high-growth platforms."

The company affirmed its 2007 outlook for $3.15 to $3.25 net operating earnings per diluted share. "These initiatives are coming together as anticipated when we developed our outlook for 2007," said Fraizer. "Taken together, they give us a comprehensive new platform to accelerate growth into the future, and keep us on track to achieve a 12 percent operating return on equity by 2008, and a 13 to 14 percent operating return on equity by the 2010- 2011 timeframe."

In January, Genworth combined its U.S. Retirement and Protection businesses into one segment, which includes managed money, retirement income, institutional, life insurance and long term care insurance. A new International segment was formed to include non-U.S. mortgage insurance, payment protection insurance and international new business development. A third segment was formed to encompass the U. S. Mortgage Insurance business.

Conference Call

Genworth will hold a conference call on March 30, 2007 at 1 p.m. EDT to discuss how the segment reporting structure changes will be reflected in the financial statements, as well as the financial impacts of the realignment. Historical financial data in the company's quarterly financial supplement has been re-presented to conform to the new segment reporting as well as to reflect the inclusion of the group life and health insurance business as discontinued operations. The re-segmented December 31, 2006 financial supplement is available in the investor section of the company's website at http://www.genworth.com.

Genworth's conference call will be accessible via telephone and the Internet. The dial-in numbers for Genworth's March 30 conference call are: 1-866-875-7108 (U.S. and Canada), or 1-706-634-9180 (outside the U.S.). To participate in the call by webcast, register at http://investor.genworth.com at least 15 minutes prior to the webcast scheduled start time.

About Genworth Financial

Genworth is a leading financial security company meeting the retirement, longevity and lifestyle protection, investment and mortgage insurance needs of more than 15 million customers, with a presence in more than 25 countries. For more information, visit http://genworth.com.

Caution Concerning Forward-Looking Statements

This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to our plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts as well as statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," or words of similar meaning. These statements are based on our current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond our control. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors, including those identified in the company's Annual Report on Form 10-K dated February 28, 2007.

Use of Non-GAAP Measures

This press release includes the non-GAAP financial measure entitled "net operating income." The company defines net operating income as net income from continuing operations excluding after-tax net investment gains (losses), which can fluctuate significantly from period to period, changes in accounting principles and infrequent or unusual non-operating items.

Management believes that analysis of net operating income enhances understanding and comparability of performance by highlighting underlying business activity and profitability drivers. However, net operating income should not be viewed as a substitute for GAAP net income. In addition, the company's definition of net operating income may differ from the definitions used by other companies. Due to the unpredictable nature of the items excluded from the company's definition of net operating income, the company is unable to reconcile its outlook for net operating income to net income presented in accordance with GAAP.

In this press release, the company also references the non-GAAP financial measure entitled "operating return on equity (ROE)." The company defines operating ROE as net operating income divided by average ending stockholders' equity excluding accumulated other comprehensive income (AOCI). Management believes that analysis of operating ROE enhances understanding of the efficiency with which the company deploys its capital. However, operating ROE as defined by the company should not be viewed as a substitute for GAAP net income divided by average stockholders' equity. Due to the unpredictable nature of net income and average stockholders' equity excluding AOCI, the company is unable to reconcile its outlook for operating ROE to GAAP.

SOURCE Genworth Financial, Inc.

CONTACT: Jean Peters,
+1-804-662-2693, or
Jean.Peters@genworth.com, or
Alicia Charity,
+1-804-662-2248, or
Alicia.Charity@genworth.com,
both of Genworth Financial, Inc.