Genworth Financial Inc. is in exclusive talks to sell a European unit to France's Axa SA as Chief Executive Officer Tom McInerney works to fill a capital gap at its private mortgage insurance subsidiary.
Genworth received an "irrevocable offer" for its lifestyle protection insurance business and the sale price is expected to be about $510 million, the Richmond, Va.-based insurer said in a statement Wednesday. McInerney's company said it would take a second-quarter loss of about $310 million on the plan.
U.S. mortgage insurers cover costs when borrowers are unable to meet obligations, and foreclosure fails to recover losses. The industry was hobbled in the financial crisis, and the Federal Housing Finance Agency proposed new capital rules last year to make sure the companies could better withstand another housing slump. Genworth said it will use funds from the sale to help meet the requirements and reduce debt.
The deal with Axa will be an "important step toward simplifying our business portfolio and increasing the financial flexibility and strength of Genworth," McInerney said in the statement.
Genworth's stock price shortly after the market opened was $7.52 per share, down 0.12% from Tuesday's close. The company's stock price slipped 10% this year through Tuesday after being burned by higher-than-expected costs from long-term care insurance, which pays policyholders for home health aides or nursing home stays.
The deal is expected to be completed by the end of the year,
Barclays Plc and Sidley Austin LLP are advising Genworth on the sale.
Radian Group Inc., another U.S. mortgage insurer, announced a deal in December to sell its bond guarantor to Assured Guaranty Ltd. for about $810 million to free up capital amid tighter government oversight.
