Bloomberg News

Genworth Surges as Insurer Swings to Profit: New York Mover

February 05, 2012

Feb. 3 (Bloomberg) -- Genworth Financial Inc., the mortgage guarantor and life insurer, posted the biggest gain in the Standard & Poor’s 500 Index after swinging to a fourth-quarter profit on fewer claims tied to delinquent borrowers.

The insurer rose 15 percent to $9.26 at 10 a.m. in New York. Net income in the three months ended Dec. 31 was $107 million, or 22 cents a share, compared with a loss of $161 million, or 33 cents, a year earlier, Richmond, Virginia-based Genworth said late yesterday.

Chief Executive Officer Michael Fraizer, 53, has scaled back the retirement-products business to conserve capital as Genworth seeks to maintain sales of U.S. mortgage coverage. The company has no plans to add more capital to the U.S. mortgage insurance operation, Fraizer said today.

“In U.S. mortgage insurance, we saw improved financial performance over the past two quarters,” Fraizer said in a conference call today with analysts. “We continue to see adequate claims-paying ability and positive value in the business platform.”

Rival mortgage insurers Radian Group Inc. and Milwaukee- based MGIC Investment Corp. also rallied more than 7 percent today. American International Group Inc., which sells mortgage coverage in addition to life insurance and property-casualty policies, climbed 3 percent.

Genworth’s mortgage-insurance segment’s operating loss narrowed to $94 million in the fourth quarter from $352 million a year earlier, the company said. The firm, which tightened underwriting standards after the housing-market collapse, is benefitting from an increase in mortgage refinancing and a shift from Federal Housing Administration coverage to private insurance, Genworth said in a statement yesterday.

‘Very Profitable’

“Our post-2008 books of business are very profitable, significantly outperforming expectations,” Fraizer said today.

Mortgage insurers pay lenders when homeowners default and foreclosures fail to recoup costs. Competitors PMI Group Inc. and Triad Guaranty Inc. were forced by regulators to stop selling new coverage when capital fell short of required levels. Genworth has benefited from results in other businesses and outside the U.S.

Profit at the U.S. life insurance unit, which includes results from fixed annuities and long-term care coverage, gained 14 percent to $114 million. International mortgage insurance declined 20 percent to $78 million.

Genworth, which dropped by half last year, gained 23 percent from Dec. 31 through yesterday.

--With assistance from Dakin Campbell in San Francisco. Editors: Dan Kraut, Gregory Mott

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Andrea Ludtke in New York at aludtke@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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