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Genworth Financial's CEO Talks of Splitting Off Its Mortgage Insurance Business

Source: NY Times

Posted on 01 Aug 2011

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Genworth Financial Chief Executive Michael D. Fraizer on Friday said that the insurance company was getting prepared to split off its mortgage insurance business, precipitating a spike in its shares on Friday. Fraizer, cautioned, however, that there were no near-term plans for a breakup.

Shares of Genworth surged as much as 10 percent. The mortgage insurance business represents just 7 percent of Genworth’s revenue, according to Thomson Reuters data, but its losses have weighed down the company. Some investors have called on the company to shed the business.

The shares have dropped about 36 percent this year, giving the company a market value of just over $4 billion.

On Thursday, Genworth, which was spun off from General Electric in 2006, reported a second-quarter loss of $96 million, reflecting in part an additional $300 million in mortgage insurance reserves.

During an earnings conference call on Friday, Mr. Fraizer said that “we recognize the characteristics of our life insurance and wealth management business as compared with our mortgage businesses may appeal to different groups of investors.”

As a result, he said, the company was taking steps toward a possible split between these businesses “if and when it makes sense to do so.”

The time is not now, he said, “given financial synergies, capital structure considerations, market environment, valuation levels and the fact that our businesses are in various stages of recovery.”