Genworth Financial Inc., the insurer divesting units after posting record losses, has sold 14% of its Australian mortgage-guaranty unit, the company announced on May 11.
The insurer raised A$284.3 million ($225 million) in the sale of 92.3 million shares for A$3.08 apiece. The Richmond, Va.-based company will retain about 52% of the stock in Genworth Mortgage Insurance Australia Ltd.
"The company needs to raise a significant amount of cash," Morgan Stanley analysts Nigel Dally and Laura Sanchez said in a May 5 note to clients. "We would not be surprised to see it sell 100%" of its Australia unit, they wrote.
Chief Executive Officer Tom McInerney is reshaping Genworth after being burned by higher-than-expected costs on long-term care policies, which pay for home-health aides and nursing home stays. He is also seeking to raise capital to comply with regulatory requirements going into effect on Dec. 31 for companies that back U.S. home loans.
"This transaction advances Genworth's ability to support compliance with the Private Mortgage Insurer Eligibility Requirements and reduce debt levels," McInerney said in the statement.
Mortgage insurers cover losses for lenders when homeowners default and foreclosure fails to recoup costs. Genworth's contract with National Australia Bank Ltd. is set to expire around September or October, Kevin Schneider, head of the insurer’s global mortgage-guarantee business, said on a call with investors on April 29. That contract represents about 10 percent of new coverage written in Australia, Schneider said, and the insurer is seeking to renew the deal.
McInerney is looking for buyers for a life and annuity business, and the CEO said last month that he would consider selling the entire insurer. Genworth rose 3% to $8.53 at 9:58 a.m. in New York.
