July 21 (Bloomberg) -- Genworth Financial Inc., the Richmond, Virginia-based insurer, fell the most since October after posting a quarterly loss on “worsening trends” in its mortgage-guarantee business.
The insurer plunged $1.15, or 12 percent, to $8.32 in 9:31 a.m. New York Stock Exchange composite trading. Genworth’s second-quarter net loss was $92 million to $112 million, the company said yesterday after the close of trading.
Genworth posted its second loss in three quarters as homeowners fell further behind on their mortgage payments. The company added to reserves as it tallied more than 39,000 insured borrowers who had slipped into default by 12 or more payments. That’s an increase of about 7,000 from a year earlier.
“The older delinquencies are up,” said Steven Schwartz, an analyst at Raymond James & Associates Inc. “The older a delinquency, the more you have to reserve against it.”
Genworth, which posted net income of $42 million a year earlier, had declined 28 percent this year through yesterday. The company also sells life insurance and retirement products and said it will use assets with a market value of $375 million to add to reserves in its U.S. mortgage-guarantee business. MGIC Investment Corp., the biggest U.S. mortgage insurer, had a second-quarter loss as fewer borrowers caught up on loans.
Genworth said the boost in reserves “was the result of worsening trends” in mortgage insurance. It also cited “continuing weakness in the U.S. residential real estate market.”
The number of so-called cures, in which insured borrowers caught up on payments, dropped to 17,908 from 25,868 a year earlier, Genworth said. New delinquencies fell to 21,272 from 26,034. Mortgage insurers reimburse lenders when homeowners stop paying and foreclosure fails to recoup costs.
Genworth, led by Chief Executive Officer Michael Fraizer, reported its first annual profit since 2007 last year as investments recovered from the credit crunch. The stock quadrupled in 2009. The company is scheduled to report complete second-quarter results on July 28.
--With assistance from Hugh Son in New York. Editors: Dan Reichl, Dan Kraut
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