Bloomberg News

Genworth Jumps on Plan to Sell Australia-Unit Stake, Buy Shares

November 07, 2011

Nov. 4 (Bloomberg) -- Genworth Financial Inc. posted the biggest gain in the Standard & Poor’s 500 Index after the company said it will sell a stake in its Australian mortgage- guaranty business next year and may buy back stock.

The insurer jumped 16 percent to $7.16 at 11:58 a.m. New York time, the largest jump since May, 2010. As much as 40 percent of the Australian unit may be sold in an initial public offering set for the second quarter of 2012, the Richmond, Virginia-based company said in a statement late yesterday.

“The Australian IPO means the company is making efforts to free up capital that is trapped elsewhere,” Edward Shields, an analyst at Sandler O’Neill & Partners LP, said in a telephone interview. The book value of the business is about $2 billion, Shields said. He rates Genworth a “buy.”

Chief Executive Officer Michael Fraizer, 53, has faced investor pressure to turn around the company after losses on U.S. mortgage insurance drained capital. The stock had declined 53 percent this year through yesterday.

“We have very much a clear focus on share repurchase as a priority, given our valuation,” Fraizer said in a conference call today. “We’re going to move as expeditiously as possible.”

Third-quarter operating income, which excludes some investment results, was 21 cents a share, beating the 18-cent average estimate of 12 analysts surveyed by Bloomberg, the company said late yesterday. Net income fell to $29 million from $83 million. The investment loss was $60 million, compared with a gain of $54 million a year earlier.

U.S. Mortgage Insurance

The U.S. mortgage insurer had a loss of $79 million in the quarter, better than the $152 million loss a year earlier. The retirement and protection business posted an 8 percent gain in net operating income to $120 million. The international segment had profit of $98 million, down 19 percent from last year’s third quarter, the company said.

“The U.S. mortgage-insurance business didn’t have a truly terrible quarter so the results there were better than most on the Street were expecting,” Shields said. The improvement “was due to the loss mitigation in the quarter as well as the general aging of the book.”

Genworth’s rivals including PMI Group Inc. and Triad Guaranty Inc. were forced by regulators to stop selling new mortgage insurance after capital fell short of required levels. MGIC, Radian Group Inc. and American International Group Inc. compete with Genworth guaranteeing home loans.

--With assistance from Noah Buhayar and Andrew Frye in New York. Editors: Dan Reichl, Steve Dickson

To contact the reporter on this story: Dakin Campbell in San Francisco at; Andrew Frye in New York at

To contact the editors responsible for this story: David Scheer at; Dan Kraut at

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