One of Lynchburg’s largest employers, Richmond-based Genworth Financial, on Thursday reported a loss of $258 million for the third quarter of 2008.
Genworth Financial Quarterly Earnings
Q3 2008: $258 million
Q2 2008: $109 million
Q1 2008: $116 millionGenworth Common Stock (NYSE):
Thursday: $4.70
Six Months Ago: $23.27
One Year ago: $25.68
Brought on by mounting fore-closures and investment losses, the third quarter loss was more than double the loss the company suffered in the second quarter.
The company suspended its dividend on common stock, a move that will save $175 million per year in capital.
Genworth also announced it would cut costs by approximately $100 million to $150 million per year, in part by shrinking the company’s focus in certain insurance product lines.
It’s too early to know whether those changes will result in layoffs in Lynchburg, a company spokesman said.
A year-old list made by the city of major employers showed that Genworth employs about 1,240 people in the Lynchburg area.
“This has been the most difficult market environment Genworth has experienced as a public company,” said Genworth CEO Michael Frazier in a conference call with investors.
Much of the drag to Genworth’s earnings is tied to the U.S. housing market. Its mortgage insurance division posted a $121 million loss in the third quarter.
When a homeowner with mortgage insurance defaults on a mortgage, the insurer pays back the lender.
Frazier said the company expects mortgage insurance trouble to continue through 2009.
Genworth also suffered $478 million of investment losses in the third quarter. The company had millions invested in Lehman Brothers, Washington Mutual and AIG, three firms that hit financial turmoil in the third quarter.
Moving forward, Frazier said Genworth’s first priority is to support the AA rating of its life insurance companies. The holding company has moved $500 million to shore up the life operating companies.
The Genworth Life and Annu-ity Company is headquartered in Lynchburg.
The life insurance division had positive operating income of $63 million in the third quarter this year, compared to $81 million in the third quarter last year.
The decrease from last year in life insurance earnings resulted from customers taking out smaller policies, according to a news release.
With the market for insurance shrinking, Genworth will de-crease what it offers, Frazier said.
“We will refine or narrow our business focus in certain product lines to preserve capital and enhance risk and profitability profiles,” he said.
“We will be selective in new sales of fixed, deferred and vari-able annuity products, as well as our institutional fixed income products.
“These actions will have Gen-worth operate on a somewhat smaller business platform going forward.”
Alfred Orendorff, Genworth spokesman, said the company is “still in a period of review” regarding exactly where to cut back.
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