Genworth delays float plan after big payouts
The delay to the float plans, outlined in its latest financial accounts, came after the company suffered the payout jump in response to higher mortgage delinquencies, especially among self-employed borrowers.
US-listed Genworth, the country's largest provider of lenders mortgage insurance, first said it was planning to float 40 per cent of its Australian business in late 2011.
But the float, estimated to worth about $800 million, has been delayed repeatedly. In April last year the initial public offering was pushed back to the first half of this year after a spike in claims caused it to post a loss in the first quarter.
Now the most recent financial statements, filed last week, say it will occur "late" this year at the earliest.
"The ultimate parent anticipates selling up to 40 per cent of its holdings in the Australian business, and the partial sale is not expected to occur prior to late 2013, subject to market valuation and regulatory considerations," the statements say.
Lenders mortgage insurance is designed to protect banks when borrowers default on their home loans, and is a requirement for many home buyers without large deposits.
In the year to December, Genworth's Australian gross revenue from premiums jumped 37 per cent to $545 million, a trend it says was caused by increased activity in the housing market, which has been buoyed by lower interest rates.
At the same time, however, the ratio of claims to income from premiums increased sharply from 50 per cent to 71 per cent because of higher-than-expected claims from delinquencies.
The company said the losses were driven by weaker conditions in Queensland, and increased claims to cover self-employed borrowers who had signed up in 2007 and 2008.
Its US-listed parent company last month said net operating earnings from the Australian division had risen 9 per cent to $62 million in the December quarter, and mortgage delinquency rates had fallen.
Genworth's credit rating was last month downgraded by Moody's, after it found that Australian mortgage insurers would find a severe downturn in housing markets such as that experienced in the US "challenging".
The company last month announced former St George Bank boss Paul Fegan as its chief financial officer.
Frequently Asked Questions about this Article…
Genworth has delayed the planned float of up to 40% of its Australian arm because a jump in insurance payouts squeezed earnings. Higher mortgage delinquencies — particularly among self‑employed borrowers — caused increased claims, and the company’s latest statements say a partial sale is not expected prior to late 2013, with any timing subject to market valuation and regulatory considerations.
The ultimate parent anticipated selling up to 40% of its holdings in the Australian business. Earlier estimates put the float at roughly $800 million, although the timetable for that sale has been repeatedly pushed back.
Lenders mortgage insurance (LMI) protects banks if borrowers default on home loans and is often required for home buyers who don’t have large deposits. For banks it reduces the lender’s exposure, and for everyday buyers it can be a mandatory cost when borrowing with a small deposit.
In the year to December, Genworth’s Australian gross revenue from premiums rose 37% to $545 million, driven by stronger housing market activity and lower interest rates. However, the ratio of claims to premium income increased sharply from 50% to 71% because of higher-than-expected claims related to delinquencies.
The company said losses were driven by weaker conditions in Queensland and by increased claims to cover self‑employed borrowers who signed up in 2007 and 2008. A spike in mortgage delinquencies was a key factor pushing up payouts.
The US-listed parent reported that net operating earnings from the Australian division rose 9% to $62 million in the December quarter and that mortgage delinquency rates had fallen in that period, despite the earlier spike in claims.
Moody’s downgraded Genworth’s credit rating last month after warning that Australian mortgage insurers could find a severe housing market downturn challenging. For investors, a downgrade signals increased perceived credit risk for the company and could affect funding costs and investor sentiment.
Yes — the company recently announced Paul Fegan, the former St George Bank boss, as its chief financial officer. Management appointments like this can matter to investors because they influence financial strategy and market confidence.
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